An unintentional test of frictionless payment over two weeks, on two continents, without a wallet
My bags were packed and I was about to walk out the door for a business trip—a week in Minneapolis followed by a week in London—and I did the classic phone-keys-wallet pat down. The wallet wasn’t there, and the car was already downstairs. Without time to look around, seeing as I was already cutting it close to my flight, I had to make a quick decision: cancel an important trip, or rely on Apple Pay for two weeks. I quickly redefined necessity; I had my phone and my passport, so I locked the door behind me and hopped in the back seat.
Over the next two weeks, my only option was to patronize retailers that supported next generation payment technology, like Whole Foods and Walgreens. These retailers recognize that, despite the fact that the vast majority of their transactions use traditional payment methods, it’s beneficial to bet on the future—and each month more retailers arrive at that realization. Most customers aren’t exclusively using Apple Pay (or another platform solution like Android Pay or Samsung Pay), but the tide is turning. In September 2016 alone, there were more transactions made with Apple Pay than all of 2015 combined, and with a 75% share of the contactless payments market and over 35% of retailers now accepting them, this train shows no signs of slowing.
I learned the hard way that while plenty of retailers had the hardware to accept contactless payments, many of them disabled the functionality because they wanted to maintain control over their data and build their own systems. (It was actually much easier to get by in London, as contactless payments are more popular in Europe than the United States.) Major retailers that made the decision to opt out of seamless NFC solutions like Apple Pay have instead tried forcing their customers into poorly-designed and failing solutions that make good old-fashioned plastic feel effortless by comparison.
Is the investment in contactless payment worth it for retailers?
The fundamental question here is whether it’s valuable to invest in technology that, at this point in the game, relatively few customers are using. However, despite the fact that 92% of commerce—or possibly higher—still happens in physical stores, the allure of e-commerce is always growing. One way to match the convenience of online shopping? Making the payment process as simple and seamless as possible, and that means becoming an early adopter of cutting-edge technology. Not only are Apple Pay and its ilk more efficient, they’re also more secure as card numbers and identities are anonymized.
So, it’s clear that for the customer, the latest payment technologies are a huge upgrade. From a business perspective, the answer is less cut and dry. Customer card numbers are used to build spookily accurate customer profiles, which are a goldmine for targeted advertising; these contactless payment solutions deny them access to customer data by design. Then there’s the benefit of a proprietary system to dodge credit card fees. But at the end of the day, retailers’ core competency isn’t building technology, it’s selling products.
In the short term, it might be cheaper and less risky to build an in-house solution, but it hurts customers, and not just those of us who forget our wallets. Customers are already innovating faster than the industry can keep up. In fact, of active Apple Pay users, 80% are paying with the Apple Watch. In the long run it’s more valuable to think about the end user’s experience and rely on partners already living and iterating on the cutting edge to build the retail technology of the future.
Retailers should focus on creating the happiest path from intent to purchase, and the apex of that flow is the transaction itself. If a technology partner can help make every transaction better for the user (the customer), the only rational choice for retailers is to collaborate with them to create more modernized shopper experiences.