OMNICOMMERCE:
Taking payments to
the next level
the next level
Part of the Vantiv Insight Series 2013, featuring proprietary research performed by Vantiv Inc., and Mercator Advisory Group © 2013 by Vantiv LLC. All rights reserved.
The importance of delivering a good customer experience has become increasingly clear in recent years. Experience is a key driver of increased customer loyalty and profitability—and stock market performance. From 2007 to 2012, recognized “customer experi-ence leaders” generated a total return that was three times higher than the S&P 500 Index, according to a recent study by Watermark Consulting. The ability to deliver the right customer experience is important to a wide range of companies—but it is especial-ly critical to merchants, which operate in a world where customers have tre-mendous levels of choice and control. The advent of mobile technology—and mobile payments—is introducing new opportunities and challenges for mer-chants trying to manage the customer experience. The digital revolution has been changing the face of retailing for a long time, but mobile technology is accelerating that change dramatically. As significant as they are, however, mobile devices are just part of a larger
picture. Today, mobile technology is ex-panding the number of channels used to interact with customers, and it is breaking down the traditional barriers between those channels. “Delivering the right customer experience is not a matter of adopting this mobile app or that point-of-sale system—it’s a mat-ter of doing all of it, and doing it well across channels,” says Donald Boed-ing, president of Merchant Services at Vantiv. “Merchants need to reach customers in the way they want, where and when they want—and at the same time provide them with a consistent experience across the board.” Consumers certainly recognize this. In a recent study conducted by Accenture, about half the surveyed consumers said that the best thing retailers can do to improve the shop-ping experience is to better integrate in-store, online, and mobile shopping channels. Nine out of 10 said that it is important for retailers to let them shop for products in the way that is most convenient for them, regardless of the sales channel they use.
To deliver a good customer experience, merchants will need an
integrated approach to working across a growing array of channels.
Crossing
Channels
Young adults aged 18-34 are more likely than aver-age to own a smartphone or tablet (82% of young adults vs. 61% of all con-sumers). And they are more likely to use those devices to cross traditional channel boundaries when shopping. For example, they are more likely to:
Receive coupons on their
phones while in a store (21% vs. 15% overall).
Use showrooming techniques to look in
stores, compare via mo-bile devices, and purchase either online (31% vs. 20% average) or in another store (29% vs. 17% average).
Have shopped online
and picked the product up in a store (30% vs. 25% average).
3
Getting it right can be tremendously valuable. According to a report from Shop.org, the online retail industry organization, one major pharmacy chain has found that its customers who shop both in the store and online spend more than three times as much as the average in-store-only customer. And customers who shop in the store, through mobile apps, and via online channels spend six times as much. To create the right customer experi-ence, merchants need to understand these trends and think holistically across channels. That is, they need to employ an “omnicommerce” approach that takes advantage of each individual channel while providing an appropriate customer experience across all chan-nels—“seamlessly and with as little friction as possible, so the consumer experiences your brand in a positive way,” says Boeding.
Consumer Shopping:
New Technologies, New
Behaviors
The 2013 Vantiv/Mercator Insight Series study sheds light on what consumers are thinking and doing in this evolving world—as well as on what merchants can do to succeed. The research found that while mobile pay-ments have garnered a great deal of attention in the industry, actual usage is still low and mobile payments are not likely to be widespread for some time. Nevertheless, mobile technologies are already having a profound impact on merchants.
The Vantiv research shows that the mobile revolution is combining with the broader digital revolution to drive—and accelerate—change in the way con-sumers shop, both online and in the store. The study found that for the first time, online research before purchasing products worth more than $50 (cited by 55% of respondents) has become more common than in-store shopping and purchasing with or without online research (46%). Fifteen percent of consumers said that they have at some point purchased a product in a store us-ing a coupon they had just received on their phone—a relatively new practice that is taking root rapidly. And increas-ingly, the lines between the physical and virtual retailing worlds are blurring, with shopping and payment happening via a mix of on-ground and online channels. That blurring of the lines is perhaps most evident in “showrooming”—the practice of finding a product in a store and then using a mobile phone to look online for the cheapest price and buying it online or in another store. Twenty-eight percent of consumers said that they have used this technique when shopping for higher-priced items. In a separate Roper/Vantiv study con-ducted during the past holiday season, 35% said they have used this tech-nique at least once to purchase online and 38% said they used this technique while looking in one store and then ended up purchasing in another store. As these activities show, the mobile channel is not replacing traditional channels—it is being added to them.
0% 20% 40% 60% 80% 55% 57% 46% 61% 46% 50% 25% 17% 20% 35% 50%
Usually shop Have shopped
38%
Researched online before entering store, purchased it there
Saw product and purchased in that store without online research
Researched and purchased online
Researched and purchased online; picked up in store
Saw product, checked prices on phone, purchased online
Saw product, checked prices on phone, bought in another store
HOW CONSUMERS SHOP
CROSSING BOUNDARIES
Many consumers use in-store, mobile, and online interactions as they shop, which means that merchants need to create a seamless experience across all channels.
The net result: a growing range of shopping, purchase, and payment channels that merchants have to understand and use. For example, m-commerce—the use of mobile de-vices to make online purchases— is now quite common. Mercator estimates that as much as $23 billion worth of payments a year are made via m-commerce. “E-commerce al-lows you to make a purchase without leaving your home,” says Dean Seif-ert, senior vice president of Product Strategy at Vantiv. “M-commerce allows you to make a purchase without going home. You see people making purchases while watching their kids’ soccer practice or waiting in line at the post office.” Thus, the combination of these two channels is driving new consumer behaviors.
Such cross-channel activity even encompasses traditional low-tech processes. “It’s not at all uncommon for consumers to cut coupons or go online and print out a QR coupon, and then take that with them to the brick-and-mortar store to make a purchase,” says Seifert. “Merchants have to support all these channels to reach consumers with different preferences and differ-ent levels of sophistication.”
With all these channels, Seifert con-tinues, “merchants are beginning to be in constant contact with customers.” That makes the delivery of the right customer experience through an array of channels a critical necessity. And
while each channel has its own nu-ances, the overall experience should be consistent to avoid creating effort and frustration for the customer. “Consis-tency weighs heavily on the consumer experience,” notes a 2013 report from Accenture, which found that 73% of consumers expect a retailer’s online pricing to be the same as its in-store pricing and 61% expect a retailer’s online promotions to be the same as its in-store promotions.
When customer expectations are not met, the consequences can be seri-ous. According to a recent study by the Temkin Group, more than 60% of con-sumers who had a bad experience with a fast food chain, credit card issuer, rental car agency, or hotel reduced the amount they spent with that compa-ny—and many of them stopped doing business with it altogether.
Understanding Consumer
Expectations
Delivering the omnicommerce custom-er expcustom-erience will require new methods and new uses of technology, as well as an integrated perspective of the vari-ous components of the customer ex-perience. Merchants will need to weave a variety of traditional and emerging payment options into those channels— in-store, online, person-to-person, cloud-based mobile, card-reader at-tachments, and so on. And they will all need to work together seamlessly and transparently. 0 5 10 15 20 1% 2% 17% 19% 5% 6% 4% 2% 2% 2012 2013 7%
Swipe credit/debit card through reader on clerk’s tablet
Pay for services such as landscape/plumbing by swiping card on contractor’s phone Tap/wave mobile phone at checkout to pay
Pay at POS using app on smartphone
Pay at online retailer using mobile web or app on smartphone
ACTUAL USAGE OF MOBILE PAYMENTS
HANDS-ON EXPERIENCE LAGS
Consumers are increasingly aware of mobile payments and more interested in using them, but relatively few have had any actual
expe-rience using them due to low merchant acceptance.
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What’s more, omnicommerce will require merchants to look beyond payments to provide a variety of tools and functions, such as coupons, budgeting applica-tions, and loyalty programs—and again, do it all seamlessly across channels. In the Vantiv research, consumers made it clear that they value these additional features and see them as important to the overall value proposition for emerg-ing payment platforms.
Merchants will need to understand consumer attitudes and expectations on a number of payment-related fronts and apply that understanding to create the omnicommerce customer experi-ence. The Vantiv research explored several of these key areas:
Mobile payments. In spite of today’s
relatively low usage, consumers expect mobile payments to be part of their lives in the near future. Two-thirds ex-pect mobile payments to be common in five years, and 39% see themselves using such payment methods in that time frame—with both figures rep-resenting an increase over last year’s study. A fair number—19%—have al-ready used retailers’ in-store tablets to make payments. Looking ahead, 27% said they are interested in using tablets to pay at restaurants, and many expect to use mobile payments for every-thing from small in-store purchases to household services.
Mobile wallets. In a world of
con-stant contact, “the wallet is the
point through which the merchant is connected to the consumer,” says Elizabeth Rector, senior vice president and general manager of Mobile and eCommerce at Vantiv. However, many consumers are overwhelmed and con-fused by the array of wallet options in the marketplace. The industry needs to make the value of mobile wallets clear to consumers and provide them with the capabilities they want, such as the ability to handle a variety of payment options at a broad range of retailers. Consumers are also looking for other wallet features—such as coupons, pro-motions, loyalty programs, and budget-ing tools—that complement payment capabilities. “Consumers feel that if they can carry and track electronic coupons in a wallet, that’s a real value-add to them,” says Rector. “When you think of a physi-cal wallet, a lot of the space is taken up by disparate pieces of paper that are unrelated to payments. Consumers like the idea of making all that more conve-nient and usable.”
Security. Consumers expect security
in all channels, including mobile and online—because it is a source of deep worry for them. The Vantiv research found that consumers today feel slightly less secure with most pay-ment methods, compared to last year. In general, they consider emerging payment forms to be less secure than traditional methods. Many consumers have experienced some type of pay-ment fraud, and 46% of those said that
0 10 20 30 40 50 44%
42%
42%
24%
Earning added rewards for another payment type
Merchant charges a fee for current payment type
Discount on a purchase for using another payment type
If my card had a breach/unauthorized charges
MOTIVATION FOR CHANGING PAYMENT METHODS
OPEN TO CHANGE
The lure of discounts and rewards would be enough to get many consumers to switch payment methods —more than would leave because of a data breach.
they now think about security with ev-ery transaction. In the age of omnicom-merce, says Rector, “people need to know that if they put their credentials in that mobile wallet, they’re not going to be compromised. And if they lose their phone, that doesn’t mean that all of their card data is compromised.” Security is a complex topic that is of-ten misunderstood by consumers. The industry can help them better under-stand the realities of security—such as the fact that encryption, tokenization,
Oversight: More to Come
Like merchants, financial institutions are now interacting with customers through a growing range of channels. And as consumers become more fa-miliar with the retail omnicommerce customer experience, says Ed O’Brien, director, Banking Channels, at Mercator Advisory Group, “many will soon expect more from their banking providers in the form of instantaneous and coordinated information and higher levels of customer service.” To deliver, financial institutions will need to take an omnichannel approach that mirrors merchants’ omnicommerce models. “Whether it’s the branch, the ATM, the Web, the call center, or the mobile banking platform, they’ll need to give customers a consistent experience and the same levels of services and capabilities across channels,” says Royal Cole, president of Financial Institution Services at Vantiv.
Many banks are working to do just that by having all their systems tied in across channels in real time. “This interoperability of systems can help the institution increase its knowledge of customer-interaction preferences and enable it to engage the customer on the customer’s terms,” Cole says. “All of this contributes to a superior overall customer experience. So for financial institutions today, moving beyond a view of channels as silos of information is key,” says O’Brien.
What’s more, as merchants pursue omnicommerce and mobile payments, financial institutions are in a good position to play a key role in that trend. When Vantiv researchers asked consumers what type of mobile wallet provider they would prefer, 50% said banks and credit unions, putting these financial institutions at the top of the list—well ahead of organiza-tions such as Google and Apple, as well as retailers and card networks. “The trust and relationships that financial institutions have with cus-tomers can set them apart in the evolving payments space,” says Cole. “That’s something they can really leverage as they extend themselves into more mobile capabilities.”
multifactor authentication, and “device fingerprinting” have the potential to make mobile devices more secure than traditional cards, or that cloud-based mobile payments mean that they won’t have to keep sensitive payment information on the phone. The industry will also need to align policies with their customers’ attitudes, because 69% percent of consumers expect that the “zero liability” that comes with their credit cards will be offered in mobile channels as well.
Rewards. Consumers have long liked
and expected discounts, promotions, and other rewards, and they are car-rying that attitude into the omnicom-merce world. From the merchant’s perspective, rewards can be effective in modifying consumer purchasing behavior. About 4 out of 10 respon-dents in the Vantiv research said they would switch from their current pre-ferred payment type to another type if it meant getting a discount.
But the research puts a caveat on these rewards. While consumers appreciate them, they also have reservations about the collection and usage of the con-sumer data that is used to drive rewards programs. When looking at mobile pay-ments, for example, 76% said that they worry about getting too many inappro-priate or irrelevant offers or messages via email or text, while 53% worry about not receiving coupons that they have signed up for. All of this underscores the need to use customer data and
geoloca-7
tion capabilities to target relevant offers to customers—and to do so accurately and consistently across channels, in sup-port of the right customer experience.
Developing the
Omnicommerce Strategy
Merchants need to formulate strate-gies for omnicommerce and delivering the right customer experience in all channels. There are short-term actions that they can consider. For example, as consumers bring more mobile devices into stores, merchants can essentially do the same. In-store point-of-sale tablets can enable salespeople to per-form payment transactions out on the floor and cut down on checkout lines. Just as important, they can let sales-people work more effectively to en-gage customers, find products, check inventory, compare product features, and so forth—and then quickly con-clude the sale by taking a payment. The result: increased efficiency and a richer, better customer experience.
That kind of approach could help counter the tendency toward show-rooming. “The concept is to have store associates armed with mobile devices to keep customers from having to look at their own devices and shop around. This can help keep their purchase in the store,” says Seifert. The tablet-equipped employee can help a custom-er locate items quickly, provide recom-mendations tailored to the customer, and, if a desired item is not in the store,
quickly find it at the merchant’s site online. “The associate can capture the sale and perhaps waive shipping costs or do something similar in order to keep that purchase within the organization,” says Seifert. “You can even swipe the card in-store to cut out a little bit of the e-commerce cost for the retailer.” On a more strategic level, the fact that merchants are in constant contact with consumers opens up new avenues for interaction. “You can be in touch through the whole shopping lifecycle, before, during, and after the sale,” says Seifert. “Before, that opportunity came primarily when a customer came into the store and started looking at products. But with omnicommerce, you can communicate when they’re do-ing research online, when they’re in the store using their mobile device, when they make the purchase, and when they post something on Twitter or Facebook about what they’ve bought. It creates extraordinary opportunities for interac-tions to take place across a broad range of time and locations. The merchant’s brand can become more interwoven into the lifestyle of the consumer.” At the same time, omnicommerce will mean that merchants have more infor-mation about consumer behavior—a fuller view of the customer that can be used to target marketing efforts, pro-vide tailored interactions, and ultimate-ly, drive a good customer experience while encouraging more sales. “If I buy a flat-screen TV with a Blu-ray player,
Executive Views:
Channel Challenges
“We are seeing more people com-ing into our stores after uscom-ing our website, qualifying their purchas-es. We’re seeing more crossover between our website and retail shops.” —Apparel retailer “Consumers are buying mobile devices and using smartphones in more ways. There are applica-tions that enable them to scan the SKU code on the merchandise and search the Web for the best price.” —Discount retailer “We would also like fixed-place kiosks with tablets to connect to our e-commerce website so that if customers are in our store but can’t find the color or size in stock, they won’t have to leave without buying it. “—Footwear retailer “We are replacing our POS system with new hardware and software with far more digital and mobile capabilities. Once we have the new system, we will have more mobile apps and can evaluate digital couponing, etc.”
Vantiv Corporate Headquarters
8500 Governors Hill Drive, Cincinnati, OH 45249 | www.vantiv.com For more on the Vantiv Insight Series: www.vantiv.com/research
About Vantiv
Vantiv is one of the leading integrated payment processors in the United States. Known as Fifth Third Processing Solutions since 1971, the company, headquartered in Cincinnati, Ohio, changed its name to Vantiv in 2011, and became a public company in 2012. Vantiv’s credit, debit, prepaid, and mobile solutions help businesses and financial institutions of all sizes get the most out of payment activities.
TL0002 6/13 the merchant can send me a mobile
advertisement for a Blu-ray disk set, so that as I’m setting up the TV, I’m motivated to go back and buy that set,” says Boeding. “The merchant can deliver messages that are relevant to that customer based on the purchases that they’ve made, and keep evolving the experience for that customer.” Merchants will need to create strate-gies for gathering and mining this data, determining how they will strike a balance between understanding their customers and being too intrusive in data collection and usage. They will also need to think about how they will maintain control of purchase data and avoid being disintermediated by non-bank wallet providers—such as Google and Apple—interested in using POS data for their own marketing efforts. A key challenge with the fast-moving world of omnicommerce is “remain-ing innovative, rather than wait“remain-ing for competitors to do something and then following suit,” says Ken Paterson, vice president, Research Operations, at Mercator Advisory Group. There is a real opportunity for retailers to estab-lish new, competitive differentiators with mobile and other technologies.” Indeed, the industry is already seeing numerous examples of mobile-based innovations. These include letting consumers enter their shopping lists on their phones and then guiding them
to the appropriate aisles in the store to find their items quickly and efficiently; enabling customers to renew prescrip-tions by scanning bottle labels at home; and letting customers scan and bag items while shopping. In this and many other scenarios, the scanned or geolo-cated items can be automatically added to virtual shopping bags, with payment made seamlessly as the shopper exits. To keep pace with such innovations, merchants can take incremental steps— testing mobile applications, piloting new approaches, and finding out what cus-tomers expect in terms of experience. At the same time, they will need to keep integration and the big omnicommerce picture in mind—and look for partners that can help them navigate the land-scape. “No one in the marketplace is go-ing to have a solution for all of this—it’s too multifaceted, the market is moving too quickly, the pace of innovation is too fast,” says Boeding. “It’s going to require collaboration that brings together many different solutions to create the right customer experience.”
The technology will continue to evolve, and merchants and their partner ecosystems will need to track that evolution closely. But in the long run, says Boeding, “the key will be to keep the focus on evolving customer needs and preferences and on engaging the customer through consistently good experiences.”
