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Checkout-less payments could leapfrog many new POS technologies.

Checkout-less payments could leapfrog many new POS technologies.
Posted: Dec 22, 2016
Comments: 0
Author: Tom Davis

Cloud-based solutions provide convenience to consumers and cost-savings for merchants.

With the release of Apple Pay back in 2014, mobile wallets at the point of sale (POS) have been all the buzz.  Apple, Samsung, and Android have swallowed up the headlines with their POS payment innovations.  However, the next wave of POS payment innovations have dramatic changes in store.  In fact, it could be said that mobile wallets are about to be leapfrogged by a new and better way to pay.  Several checkout-less shopping technologies are starting to show up in the marketplace leveraging “cloud-based payments”.  With checkout-less shopping, consumers can walk into a retail establishment and take whatever products they want off the shelves and walk right out of the store.  No lines, no hassle, and the payment happens automatically and is mostly invisible.  Sounds too real to be true?  It isn’t!  In fact there are several examples in market across many different retailers utilizing several different technologies.

Scan and go...no waiting in line!

Order-ahead at Chipotle, Taco Bell and other quick service restaurants (QSRs) allow customers to have their order prepared for them before they enter the restaurant.  The customer can then quickly go into the restaurant and pick up their meal while the payment happens in the cloud.  Sam’s Club’s “Scan and Go” app allows a customer to shop in store, pay via the cloud, and by-pass the checkout.  If you have ever shopped at Sam’s Club, you can certainly appreciate the time savings that can be had by skipping the lines.  Google Hands Free, which is in trials with over a dozen merchants, allows a consumer to walk into a restaurant, order their food, and simply say “I would like to pay with Google”.  Amazon recently unveiled a checkout-less brick and mortar grocery store that could be a vision of the grocery store of the future.  Amazon’s 1,800 square foot grocery store is completely designed around a checkout-less shopping experience.

Using Bluetooth Low Energy (BTLE) and Wi-Fi technologies, merchants can connect with the customer’s smart devices to initiate and authenticate payments in the cloud.  These “cloud-based payments” are really just an extension of “card on file”.  However, when paired with smart devices in brick and mortar stores several benefits can be had.  Layer on Visa Checkout and Master Pass which provide tokenization to these payment experiences and they may be safer than inserting a chip card into a physical terminal at checkout.

Payments via the internet of things.

It isn’t just at the POS.  Cloud-based payments are prevalent when purchasing with the internet of things (IoT).  IoT devices like Amazon Echo and Google Home, which have been flying off the shelves this holiday season, leverage cloud-based payments.  Amazon Dash, the button you can place anywhere throughout your house to reorder a specific product works on the same principles.  As payment within IoT proliferates as expected, cloud-based payments should increase dramatically.

Other benefits provided with these shopping and payment experiences revolve around ubiquity.  Our current dominant payment technologies have separation between the shopping experience and the payment experience.  Since these newer forms of checkout-less shopping can happen within merchant controlled environments, in-store experiences can be blended with online and mobile experiences.  This not only has advantages for loyalty, but can provide valuable data for several other purposes including target marketing and reducing shopping cart abandonment to name a few.

So why does this matter to issuers? 

First and foremost, most of these technologies still ride on our existing rails.  That is the good news for issuers since it protects current revenue streams.  That said, issuer branding can be pushed in the background.  Although not all is lost.  With the advent of push notifications to mobile apps and mobile card controls, consumers are more involved with their payment products on a more frequent, transactional basis.  Issuers that use notifications, as opposed to SMS, to notify their cardholders of payment activity will be able to find new and maybe even better branding opportunities than current payment technologies provide.  It is also important that issuers tokenize their payment products.  Not just for security, but also to makes sure the issuers cards can be used in these new payment forms, since non-tokenized payment products may not work in some use cases going forward.  Also important to issuers are services like “Visa Account Updater” and “MasterCard’s “Automatic Billing Updater”.  These services automatically update card on file merchants in the event of reissue.  This keeps the payment products working and prevent disruption.

Like most payment innovations, there are still some hurdles.  Many of these implementations require a consumer to download and install an app and enter their payment credentials.  Having multiple apps for shopping and payments can be a hassle for many consumers.  Also, there is still concerns with security, although the vulnerabilities are moving to identity.  Usernames and passwords are becoming more valuable to fraudsters as we protect our payment data at the POS.  Innovations with identity are booming, and it there is no reason to think it will slow down any time soon.

We have seen payment innovations come and go in the past. Some solutions faced too many hurdles.  Some  recently introduced payment technologies have yet to provide enough benefit to issuers, merchants, or consumers, to gain traction in the marketplace.  However, checkout-less shopping is different.  The benefits are more widespread, significant, and impactful.  Consumers save time from skipping checkout lines while merchants can see significant cost reductions in POS equipment, retail space, and wages.

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Tom Davis

Tom DavisTom Davis

Tom is President & COO of CSCU. He joined CSCU in 2004 and today wears many hats as highly respected executive and tireless evangelist on new payment technologies and innovations and how they will positively impact the success and growth of credit unions.

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