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Optimising your OmniPayments:
Consumers, payments and the future
TR UST & SECURITY
RISE OF ECOMMERCE SMARTPHONES EV
ERYWHER E
BL URRING
TH E CHAN
NE LS
GLO BA
LISATIO N
BIG DATA
MOBILISING STAFF
REDEFINING STO RES
TRANSACTIONS
CONTENTS
Introduction 3
Key headline findings 4
A payments explosion 5
A consumer-led perspective 6
Consumer payment behaviours 7
1. Reflex pay 7
2. Speed aware 8
3. Cash-amnesia 9
4. Transact-firmation 10
5. Loyalty at a price 11
6. Security outweighs hyper-convenience 12
7. Return rewards 13
8. Independence pay 14
9. Contactless in store 15
10. Smartphoned enough to pay? 16
Payments in the future 18
Rating new payment innovations 19
An OmniPayment future? 20
When will the OmniPayment future be here? 21 How imminent is the OmniPayment future then? 21
1. Fragmented payment future 21
Introduction
In a world where new payment options and technologies are appearing every day, it can be all too easy for retailers to jump on the latest technology bandwagon.
Whilst the business media is constantly reporting on the next big thing in payment technology, the tendency can be to assume that consumers are adopting these new payment types at the same pace. The reality is, as many businesses have discovered, very different indeed.
The popularity of new technologies, especially with smartphones and social media, is changing how we seek and digest information, and undertake even the most basic of everyday household tasks.
Yet despite love of the latest new ‘shiny things’
consumers remain slow to adopt new payment technologies, and consider security and privacy to be just as important as speed and convenience – in many cases even more so.
Catering to the consumers of today means helping them pay how they want to. Yet with the plethora of options available in the market, it is vital for businesses to find the optimum time to implement new payment options. Developing a wider Omni- channel strategy can help retailers deliver on the overall shopping experience that the consumers of today and tomorrow expect e.g. loyalty, returns and refunds.
As the only payment services provider to offer a truly one stop shop for those wanting to offer the ability to accept payments in-store, online, by telephone or mail order, by kiosk or mobile, WorldPay is in the unique position to offer its customers a flexible payments service, along with a distinctive perspective on when to adopt new payment solutions in various business models.
This report, the culmination of months of research into consumer payment behaviours, has been created to provide a helping hand to anyone looking to take advantage of the new payment technology options at the optimum time for their business.
In these challenging economic times it is vital for businesses of all sizes to ensure their investment in new technologies matches their consumers’
demands for these payment types – in order to secure an appropriate return.
Over the next few pages, we provide you with the views and advice on which payment types are currently most popular with UK consumers, and an insight into their payment habits, and opinions on future payment trends. We hope you find it useful.
Ian Rutland
Head of Proposition and Marketing, WorldPay
Key headline findings
Payments are not a high interest topic for consumers. Many do not think about paying for goods and services: they behave automatically and use cash and card.
Consumers are speed aware and many think new payment technologies do not provide clear payment confirmation or a receipt.
Security is just as important as speed, 78%
keep a receipt for everything they buy.
1 in 2 would like to use biometric payments, such as fingerprint, palm or iris scanners, over other emerging mobile technology options e.g.
PIN based smartphone, online wallets, SMS, and social media.
60% recognise the contactless symbol but only 10% have ever used contactless (of those 93%
found it quick and efficient).
London leads in contactless payments with 17% having used the payment method, compared to only 4% in Bristol and 5% in Norwich.
33% of shoppers regularly use self service kiosks, and 1 in 5 favour self service kiosks because 'they don't have to talk to people'.
75% would like a loyalty scheme linked to their payment card.
The majority would rather use smartphones as a weapon of the high-street: for
‘show-rooming’, checking prices or downloading coupons rather than to pay.
Chip and PIN is still considered the most secure payment technology.
A payments explosion
SMARTPHONE
ONLINE PAYMENT
VIRTUAL CURRENCY
BIOMETRICS
SELF-SERVICE CHECKOUT Mobile
Payments
Contactless Smart
Data QR
Codes
Pre-paid
Vouchers &
Coupons CONTACTLESS
PAYMENTS
Contactless Card
Vouchers and coupons – by post, smart- phone app, text, online search, at point of sale and through aggregators (e.g.
Vouchercloud).
Pre-paid – whether by payment card, virtual currency (e.g. Bitcoin), Ukash or PayPoint machines.
Self-service checkout – Deployed exten- sively in supermarkets and newsagents.
All in all, the world of payments is becoming increasingly fragmented, with multiple options, and hence, complexity.
How will consumers react to these innovations?
What should retailers and businesses invest in, and what should they ignore?
Contactless – rolled out in fast-food operators, major retailers, convenience stores, pubs and on public transport.
Smartphone – smartphone payments are already possible using contactless technology and will soon be widely available in the UK. Formats include Quick Response (QR) code scanners or person-to-person payments by app and mobile number.
Mobile banking – smartphone banking apps enable consumers to pay bills and others while on the move.
Smart data-linked – organisations are linking payments to streamline or improve their services such as ordering a taxi, where location-based information can help pick up customers safely and quickly.
Biometric – trials of Iris, fingerprint and other biometric payments.
Online – as shopping on the web grows, consum- ers are using payment cards, wallets and methods like PayPal to pay.
An explosion in payment options, functionality and complexity is underway:
A consumer-led perspective
It’s time to ‘take the temperature’ of new payment systems with consumers. Insiders in the payments industry have said you can’t ask consumers about which payment systems they will choose to use in the future: their predictions are unreliable.
However, the WorldPay view is that:
1. We live in a consumer-driven world, where the supply of most products and services far outstrips demand and it is the public that decides who and what succeeds. Collaboration with consumers is key to developing new services; Sir Terry Leahy summed it up when talking about turning Tesco around in the 1990s:
‘In simple terms, we reversed the flow of the company: instead of our work ending with the customer, it started with the customer…. When the customer spoke we listened.’
2. Consumers are using new ways of paying – today, they have real experience. Years of expensive trials using mocked-up payment technology have been replaced by contactless cards, smartphone apps and virtual money such as Bitcoin.
3. Consumers are tech-savvy – increasingly, the public are sophisticated users of the technology that underpins new payment systems:
• 80% of consumers are online
• 60% of online consumers have smartphones
• 19% of online consumers use mobile banking
• 8% use an Oyster card
• biometric identification is growing The consumer perspective can inform and support the understanding of government, industry leaders and experts, all of whom are trying to predict payment futures.
WorldPay completed extensive research with consumers to understand the future of payments. In addition to in-depth qualitative research, an online survey of 2,159 consumers was completed to understand payment behaviours and needs.
Because payments are about behaviours rather
than attitudes, we linked the research to the fast-
emerging application of Behavioural Economics to
business.
Consumer payment behaviours
Glacial change
Apart from a handful of enthusiasts, no one
suggests that payments are a high interest topic for consumers. Leading busy lives in tight economic times, consumers spend perhaps only a few seconds every day thinking about how they are buying products and services.
However, our research uncovered clear trends in consumer payment behaviours that have implications for the likely success of new payment systems. These are transparent tendencies that have emerged from observing and interviewing consumers, and can be further understood by applying well-known behavioural and cognitive biases.
1. Reflex pay
Consumers have established payment routines, which are difficult to change
Payments are made ‘automatically’ based on repetition and past judgements about speed and security.
This links strongly to Behavioural Economics theory.
Daniel Kahneman’s recent book, Thinking, Fast and Slow, explains that people have automatic behaviours which they don’t think about, that they are emotionally wedded to, and that they don’t change without effort. Payment routines fall into this category: short-cut actions which help people navigate their complex and busy lives.
Human behaviour develops at a much slower pace than technology. It is less rational and only changes when an individual is presented with options which better meet their needs. With new payment methods, this means there needs to be a desire for adoption by consumers married to a willingness to invest by retailers in making these new methods available.
Opportunity: Changing the public’s payment behaviours will need strong benefits and compelling marketing. The introduction of Chip and PIN by dictate in 2006 is an example of the effort needed to achieve mass consumer behavioural change.
However, it is not the role of Government to try and force change through legislation, as more industry standards may only stifle innovation. Payment innovations need to develop in more local and consumer-led ways to speed up adoption of new payment technologies.
“9 times out of 10 I use my debit card”
Female, 45-54, Northern England
Only 7% vary the way they pay for groceries
3:4 Agree they tend to pay for things in the
same way
Consumer payment behaviours
2. Speed aware
When prompted to think about their experience, consumers want current payment systems to be quicker
Consumers take for granted recent payment improvements such as online checkouts or Chip and PIN. When they are encouraged to think about payments, they can identify opportunities for change and identify impatience in their existing behaviours:
Consumers say the following have fast Chip and PIN terminals:
Innovation is needed particularly in mobile commerce where payment options are still slower than Chip and PIN, and in high value near field communications (NFC) transactions.
Demonstrating a behaviour known as recency bias there is a tendency for consumers observing current situations, not to acknowledge earlier changes and improvements, which explains their desire for faster payments.
Opportunity: Continual improvement is necessary to impress and retain customers.
Speedier transactions would be welcomed if payment confirmation and security was clear, particularly for smartphone and mobile banking app users.
There are more than 200,000 dial-up terminals still in use in the UK. If retailers were to replace these with broadband terminals they would see significant improvements in the speed of transactions. Yet in direct contradiction with home internet usage, both inertia, a ‘hassle-factor’ and an irrational lack of trust in broadband seems to prohibit retailers from having done so.
“I notice the different amount of times it takes to process [Chip and PIN]”
Male, 35-44, Southern England
57% Say verifying online payments is slow
31% Often irritated by how long it takes to pay in shops
57% Think there are too many steps to make online payments by card
Supermarkets 32%
20%
15%
11%
8%
8%
6%
Petrol stations Clothes stores Fast food Train stations Local shops Cafes and restaurants
Consumer payment behaviours
3. Cash-amnesia
Many consumers are using cash less often, partly because they forget, or don’t draw enough of it out of an ATM
Despite the fact there are more than 65,000 ATMs in use in the UK, consumers often don’t have enough cash and instead are relying more heavily on payment cards. The only category where cash is the most popular is paying for a cleaner/gardener, coffee and snacks, take-away food and top-up groceries. And although 37% say cash helps them budget better, the majority find replenishing cash supplies to be cumbersome.
The fact that 38% say they often don’t have enough cash when it’s the only way to pay, links to a well- known behaviour: planning fallacy. People often underestimate the time needed or number of tasks involved in a particular activity, so running short of cash is not surprising. Consumers no longer feel paying by card for low value items is unacceptable to retailers.
Opportunity: New payment systems can remove the ‘getting cash out’ step to daily life, making transacting simpler, avoiding losing a sale and improving consumer convenience. Industry stakeholders could take greater advantage of this
‘cash amnesia’ trend by exploiting the technical CHIP capability found on most payment cards, to include consumer data on store loyalty and purchasing history. This kind of initiative would not only make card payments more attractive for consumers but spur the industry to innovate with other new card-centric services.
“I don’t often have that much cash…”
Male, 25-34, Wales
“I have to remember to get cash-back”
Female, 25-34, London
27% Often forget to get cash from the ATM or cash-back from check-outs
42% Using credit and debit card more than last
year for amounts of less than £10
Consumer payment behaviours
4. Transact-firmation
Consumers want payment confirmation and try to keep a record of the amount they spend The public use receipts, displays and staff to check payments. However, consumers say that some new payment systems are too fast, provide unclear confirmation or no receipt. Examples quoted during qualitative research included having to keep track of an Oyster Card balance and not receiving a receipt when paying using contactless technology.
When paying by contactless, consumers also said they were unsure when the payment ‘went through’
as confirmation was unclear.
In academic trials, it is true that consumers often show a preference for things they are familiar with, known as Mere-Exposure effect. This means they can be ‘closed’ to new ways of operating; however the research also shows consumers experience problems with existing confirmation methods:
Opportunities: Retailers’ payment systems need to confirm transactions in ways which consumers find reassuring, as any deficiency here will raise questions of security in many consumers’
minds. A consumer should never need to ask for a receipt, it should just arrive.
There are a multitude of options when it comes to confirming transactions in ways consumers find reassuring. New innovative payment methods such as WorldPay Zinc, iZettle and Square all offer an alternative method of providing a receipt, compared to the traditional paper option.
“You can’t lose the receipt which you may need”
Male, 45-54, Northern England
“You want to be sure its gone through before you leave”
Female, 45-54, Northern England
78% Keep a receipt for everything they buy
48% Say, “I always end up with too many receipts”
29% Would like it if receipts were emailed to
them
Consumer payment behaviours
5. Loyalty at a price
Consumers actively use loyalty schemes but often forget their card or find schemes difficult to manage
UK consumers are active users of loyalty schemes, but these require a high degree of effort from the public if they are used as designed:
The high effort involved prevents loyalty schemes, and now online vouchers, from achieving their full potential. One consumer commented:
Opportunity: Card-linked loyalty schemes and payments would improve usage and overall customer experience. Ultimately, some of the public would like a unified loyalty scheme across different brands however at this stage both competition and cost appears to be stifling innovation in the industry.
Synchronised loyalty schemes also necessitate collaborative working between different retailers and their partners, and until the benefits of doing so are clear to all parties it is unlikely to precipitate rapid change.
“My partner uses them but it’s a big lot of work to do it”
Male, 25-34, Northern England
“Why the hell do I have to carry so many loyalty cards?”
Female, 45-54, Northern England
“If I go to X, I’ve refused to give them my data”
Male, 45-54, Northern England
“I don’t use coupons because I can’t stand the stream of emails…”
Male, 35-44, Southern England
42% Say supermarkets, newsagents, etc. give too many paper vouchers with receipts
92% Use a loyalty scheme at least once a month
1:3 Forget to bring their loyalty card when
purchasing
Consumer payment behaviours
6. Security outweighs hyper-convenience
Consumers react cautiously towards very convenient payment methods
Speed is valued by consumers, but so is security.
The public generally see a negative correlation between the two. New payment methods, however simple, need to reassure consumers that payment security is high while providing some real benefit.
The high effort involved prevents loyalty schemes, and now online vouchers, from achieving their full potential. One consumer commented:
Psychologists might explain this behaviour in terms of an illusory correleation; the tendancy to inaccurately attribute a relationship between two events. However, in the case of contactless payments, some consumers perceive the speed of the payment as a negative indicator: “It’s almost too quick (contactless)”, Female, 25-34, Wales.
This is particularly the case if levels of security are uncertain to consumers.
Opportunity: Security should always be emphasised in new payment methods, particularly when promoting convenience. 91% say online payments are secure - a transformation arising from the industry’s efforts to address initial consumer uncertainty around payment security.
“Anyone could pick up my [contactless] card…”
Male, 45-54, Northern England
1 in 4 who don’t use contactless payments believe such payments are insecure
68% Don’t like giving their debit card details
and 65% don’t like giving their credit card
details on the web
Consumer payment behaviours
7. Return rewards
Consumers favour retailers and brands that have seamless returns and refunds
Consumers are often frustrated by the different ways that retailers handle payments, returns and refunds. With time pressure, hundreds of purchases each year and expectations of fluidity in preferences, the public want to expend less effort:
63% Buy more from retailers with no quibbles returns
40% Say it is difficult to return products to stores even if bought from their website
39% Say it is inconvenient to have to get refunds on the same card with which the purchase was made
47% Say it takes too long for refunds to my bank or credit card after I return something
Consumer loyalty is heavily impacted by The Peak End Rule, which says that people disproportionally judge an experience by how it finishes. The consumer shopping experience must be closely aligned, whether it is in-store or online, as when each brand has its own process for returns the result can be confusing for consumers. Given the high proportion of returns – up to 40% for some fashion brands – making the process of refunds seamless is important, and further, doesn’t mean the sale is missed. Rather it can result in another sale.
Opportunity: Most consumers will reward faster
refunds and easier returns; even though some
may take advantage, the majority will respect
and trust this approach. Although it might seem
unreasonable to many retailers, our research found
some consumers were frustrated by having to re-
pack unwanted products to complete their return.
Consumer payment behaviours
8. Independence pay
Self-service is winning customers, changing the role of frontline staff
Consumers are using self-service scanners more and more and they are looking for different, supporting behaviours from frontline staff:
Equally online customers increasingly look to web-chat and phone service for support.
72% Say sales assistants often tell me to remove my card [from Chip and PIN terminals]
when I know to do it
33% Would like to use self-service scanners in supermarkets regularly
“There’s never anyone there to help you just at the right moment”
Male, 45-54, Northern England
The ‘backfire effect’ says that people react to an inadequate experience as evidence that
strengthens their beliefs. If consumers are sceptical of new payment experiences, and have a poor experience, they are less likely to adopt the new methods. With both self-service kiosks and contactless payments, consumers complained that staff were slow to help.
Opportunity: Introducing new ways of paying and loyalty schemes need front-line staff to overcome the ‘backfire effect’ through education, empathy and support. Underestimating the
guidance consumers need to try new payments for the first time will delay adoption.
Time and money will be crucial to overcoming this
backfire effect. That means primarily investment
in staff, which is a challenge in industries such as
retail with high staff turnover. Educating consumers
and staff is important here. There needs to be a
clear message about the benefits – speed, security
and convenience – and why a new payment
alternative is better than traditional ways of paying.
Those that do, are very positive about the experience and see more opportunities for contactless payments:
Consumer payment behaviours –
9. Contactless in store
Consumers are slowly taking up contactless payments, but users experience benefits
Consumers are aware of contactless but only 10%
of the public have used it. The rate of adoption is affected by a number of factors:
63% Of non-users say they don’t have a contactless card
88% Say it is quick and efficient
61% Say it feels secure
60% Recognise the contactless symbol
10% Use contactless payments Only 22% say contactless is insecure
“The guy said it was the first time anybody’s used it… [contactless]”
Female, 45-54, Northern England “X – why can’t all their machines be
contactless? You have to queue up, you have to enter your pin number, and it takes a long time to print….”
Male, 35-44, Northern England
Consumer payment behaviours
Pessimism bias is the tendency for some people to overestimate negative things happening. This may explain some of the negativity towards smartphone payments, which appears to be extensive, and where the following barriers are cited:
10. Smartphoned enough to pay?
Smartphones and shopping go hand in hand; but for browsing rather than paying
60% of online consumers have a smartphone and often use it for the following:
To check prices in store (45%)
Would like to use smartphones to make contactless payments (8%)
‘Show-rooming’ (looking at products in-store, buying online) (46%)
60% Are happy using existing payment cards
57% Would worry their phone might be stolen
45% Would be concerned about security
45% Would be concerned that they couldn’t make payments if their battery was flat
44% Might need Wi-Fi or network coverage Commenting about experience on
social media (32%)
Consumer payment behaviours
One in 5 online consumers use a mobile banking app, the public is getting used to payments with smartphones through secure accounts.
Opportunities: Smartphone payments offer the opportunity to integrate loyalty schemes, and remove wallets and purses, but removal of barriers such as battery life, and integration with electronic point of sale systems is needed to overcome current negative attitudes.
Smartphones on the High Street 2013
Used smartphone in store to check prices Showrooming Comment about experience on social media Downloaded vouchers and coupons in store Shared your location with companies for offers Used an App to manage tickets and loyalty cards Used a QR code to get information
17% 27%
31%
19%
19%
16%
14%
14%
14%
12%
7%
7%
Often Sometimes
5%
5%
Ubiquity is key when it comes to paying with a smartphone – because people don’t like it if they cannot pay by their preferred method. Wallet systems are likely to take greater hold because shopping cart abandonment on mobile remains quite high – due in part to slow adoption of mobile payment pages on websites, and other perceived consumer barriers such as battery life and security concerns.
To see rapid changes in mobile commerce, the
industry needs to better co-ordinate the ecosystem,
ensuring card issuers or other payment providers
and acquirers are moving in the same technology
innovation direction.
2. Awareness does not lead to action
When consumers are made aware of new payment options, they seem unconvinced of the benefits of many innovations. Although they recognised there could be improvements in payments, many feel that existing methods work well: the need for change is not perceived to be great. This does not mean that innovation will not occur, but it does suggest that suppliers will need to drive change.
3. Benefits need to outweigh security concerns
Keeping money secure is an important priority for consumers. Once a payment system is trusted, it requires a significant incentive to change behaviour. Currently consumers perceive the most trusted payment mechanism to be Chip and PIN, by a significant margin.
Payments in the future
Search Youtube.com and videos marketing new payment options abound, together with enthusiasm from promoters and experts alike. Much on offer uses smartphones and with nearly 60% of the online population having one, the question remains:
which new payment systems will succeed?
The research with consumers highlighted attitudes that will influence the success of new payment technologies:
1. New payment systems have a very low public profile
Consumers have very low awareness of new payment options. Pingit, Google Wallet and Hailo had some recognition, but Chirpify payments were almost unknown. However, consumers were not surprised that new payment options were being developed;
their expectation is one of change driven by technology, even if it’s not always regarded positively.
Chip and PIN payment Cash machine transactions Web payments from a secure network
Phone payments to UK call centres Payments using a self-service kiosk
51% 27%
27%
22%
18%
30%
30%
27%
Most Secure 2nd Most Secure
10%
7%
Most secure payment technologies
The low levels of interest in new payment innovations overall vary by group:
• Contactless and mobile banking users – Generally showed higher interest in new payment innovations.
For example:
› Of contactless users, 28% would like to use biometric payments and 23% Hailo › Of mobile banking users, 13% would like
to use an online wallet where you can store cards on a Smartphone app.
• Younger consumers – Showed higher interest in payment innovation. For example:
› Of 16-24 year olds, 17% would like to use Pingit and 20% a smartphone to make contactless payments.
• Older consumers – Most were less interested in payment innovations, except:
› 55-64 year olds would like to have a payment card which combines with a loyalty scheme.
Rating new payment innovations
The quantitative research with 2,159 consumers tested their interest in 10 payment innovations. By far the most popular was the linking of payment cards to loyalty cards. This was also popular in the qualitative research, where consumers commented on convenience factors:
The potential of ‘big data’, in being able to tie together payments and loyalty points, was the other benefit and part of the second most popular option whereby retailers kept records of expenditures using payment cards and then offered vouchers.
Segment variation: early adopters of new payments are most positive
“The amount of times I have gone to a shop and paid and gone damn! I should have given them the voucher It would be great if it scanned your clubcard and took the money off.”
Female, 25-34, London
“A bit frustrating when you get to the till you have to give your card over. The X one is really annoying – you have to put it in first to read the chip.”
Male, 25-34, Wales
I would like to use Nice to have
Link payment card to loyalty scheme
34% 41%
Retailers kept record of expenditure using payment card to offer you vouchers
20% 43%
Fingerprint, Iris scanner
18% 31%
Using your smartphone to make payments but still with a PIN
9% 21%
Using your smartphone to make contactless payments to £20
8% 21%
Supermarket poster in railway station to scan for later deliveries/pick up
6% 21%
SMS payments (e.g.) Pingit
6% 17%
An online wallet where you can store cards a smartphone (e.g. Google Wallet)
5% 20%
Chirpify or direct social media payments
2% 10%
An OmniPayment future?
Consumer enthusiasm for new payment systems is restrained, although key segments show more interest. The public can be unimpressed by innovations that in the future are adopted widely;
the mobile phone being an often-quoted example.
However, new payment systems currently on offer are not as revolutionary as the mobile phone has proven to be.
The sheer volume of new ways to pay, the additions to the payment process of vouchers, loyalty
schemes and self-service, means that consumers will begin to be aware of innovation: contactless payment by smartphone has arrived.
Already niche groups of consumers are using online vouchers, contactless, smartphone apps and mobile banking. The transition from the simple dominance of cash, cheque and card is underway.
Segments of consumers will expect different payments and we are set for an OmniPayment future in which the public will expect to pay however they choose. As one consumer remarked of contactless cards:
Making new payments successful for retailers
What are the lessons for successful implementation of new systems?
1. Offer real benefit and a strong proposition – Developers and users of new payment systems have to ask ‘how will this innovation benefit consumers?’ ‘How does it address consumer payment behaviours and needs?’ Collaborating with consumers to develop new systems is more likely to ensure success, as this method takes into account consumer behaviours and needs. As one consumer remarked:
› “Why would you change what you currently do?”
Female, 25-34, Wales
