The point-of-sale has long been a battleground for retailers. Retailers want control over the payment process, but card networks and banks call the shots. This puts retailers in a third-party relationship with their customers, which not only inhibits them from delivering an integrated customer experience; it also impacts their bottom line.
The rise of mobile payments should have leveled the playing field, but it hasn’t. The field is now littered with mobile wallet providers. Android Pay and Samsung Pay have joined Apple Pay in promising consumers a simplified, fast, card-less point-of-sale (POS) experience. But, currently, all fall short of the type of integrated, omnichannel, omnidevice experience retailers want, and consumers deserve. Rather than focus on a customer-centric experience, these contenders largely focus on a device- and platform-centric agenda. Notably, these solutions do nothing to cut costs for retailers.
Today’s customers want across-the-board device and channel support. No matter how much device manufacturers want customers to adopt a single platform, customers have made their shopping habits and preferences clear. They want to shop in a variety of ways – by phone, laptop and tablet – in-store, online and in-app. When they hit “the order” button, they want the same, consistent experience regardless of device or channel.
The problem with Apple Pay is – it doesn’t solve retailers’ key issues. Apple has made some positive moves with its iOS 9 upgrade, including promising future Apple Pay support of select store credit cards and reward cards. Nevertheless it’s not enough. Here, I outline what retailers want, and the 5 reasons that Apple Pay falls short when it comes to retailers’ must-have list:
Reduced transaction costs
Retailers have historically paid hefty transaction fees to credit card companies. In spite of the supreme court decisions and legislative bills passed, the card networks still control the payment systems so the banks, and now Apple, make money. While 2-3% might not seem like a big piece of the pie; for a large retailer, that levy equates to hundreds of millions of dollars a year in lost revenue. What retailers need is a payment system that allows them to reap the benefits of legal mandates, whose outcomes were designed to significantly reduce retailer transaction costs. With Apple Pay, retailers are overlooked and get no reduction in transaction costs.
Retailers want a mobile payment solution that shoppers can use in any physical store, as well as in e-commerce and in-app transactions. Apple Pay can only be used for in-app purchases, or those made in physical stores with NFC-equipped (Near Field Communications) checkout terminals installed. To-date, those terminals are installed in less than a quarter of U.S. stores, meaning three-quarters of U.S. merchants don’t have access to Apple Pay. Apple Pay also cannot support e-commerce transactions, which, according to the U.S. Census Bureau, make up roughly 7% of total retail sales.
Retailers want a mobile payment solution that is accessible to the critical mass of their customers. Apple Pay supports only the newer iPhone 6 (not earlier versions), Apple Watch and iPad. That’s it. This negates a huge portion of retailers’ audiences. Apple represents approximately 44% of the U.S. smartphone platform market share, with the iPhone 6 and 6+ making up 18% of that. Clearly, retailers want a mobile payment solution that addresses the vast majority of shoppers, no matter which devices they carry and use.
An integrated mobile loyalty and rewards program
Retailers and consumers want seamless integration of payments with rewards, loyalty and discounts, on a personalized basis, without the salesperson or shopper having to do anything more. Apple Pay is promising to incorporate store credit cards and reward cards in its latest iOS upgrade. While this is a great concept, the type of integration Apple can do is still rather limited. As a result, shoppers will still need to search for coupons, hold them up for the salesperson to scan, etc. Apple Pay will only come into play once all rewards, gift cards, vouchers, loyalty points and discounts are applied, putting the onus on the customer. For retailers, this clunky sales process reduces the redemption of loyalty and rewards, negatively impacting sales.
A Private Label Solution
Whether it be Apple Pay, Samsung Pay, Android Pay, Visa or MasterCard, retailers don’t want third-parties coming between them and their customers. When a shopper makes a purchase over Apple Pay, Apple’s brand is front and center, and the retailer brand takes a back-seat. Retailers want a private-label branding approach where they remain top-of-mind with shoppers throughout the checkout process.
Retailers are scrambling to find a payment platform that serves their needs. The credit card companies still “own” the customer; mobile wallet providers share in the profits; and retailers sit on the sidelines.
The good news is, there are solutions coming to market that put retailers at the forefront of mobile transactions. These emerging, private-label solutions enable retailers to promote their preferred payment types and to automatically serve up promotions, rewards and discounts to customers – over any channel and device.
According to eMarketer, the number of Americans making point of sale transactions using a mobile device will increase nearly four-fold in just three years, to 57 million people, with 27% of smartphone users using their phones to pay for items by 2018.
Clearly, this market is ripe to take off, and retailers finally have a voice in how it rolls out. It remains to be seen whether retailers will take the reins, or let the credit card companies and digital wallet providers gallop away with their customer relationships.
Ashok Narasimhan,is the Co-Founder and CEO of OmnyPay