The vision of the "connected consumer" who purchases whatever and wherever they want inspires retailers and brand marketers, but several roadblocks are standing in the way of making this vision a reality. While progress has been made in making in-store payments more secure in recent years, many U.S. consumers are still wary about the security of online payments.
A panel session at CES in Las Vegas titled "Payments Deconstructed" explored the challenges of payments technology. Such challenges include the high level of friction that exists with online payments, glitches in online payment systems, the lack of retail locations that accept mobile payments and problems specific to cross-border payments.
The promise versus the reality
The promise of frictionless, secure transactions in real time from any payment device (be it a kiosk, smartphone, computer or payment terminal) is one that gives the consumer complete control over their purchasing experience, noted panel moderator Thad Peterson, senior analyst at Aite Group, a research and advisory firm for the financial services industry.
However, ecommerce presently accounts for just 9 percent of total retail sales, observed Edward Glassman, executive vice president of account management at Mastercard. While some see this as a sizable number, it only increased by one percentage point in the past year.
Mobile purchasing is growing slightly faster than overall ecommerce, Glassman said, but it, too, is not growing as rapidly as many had hoped. To his point, Peterson noted that only 1 percent of in-store sales are made with mobile wallets.
"What's it really going to take to turbocharge this?" Glassman asked.
The number one factor is the need to reduce friction for the customer, the panelists agreed.
In-store purchases more secure
The payments industry has made progress providing data security in the physical retail space thanks to EMV, the panelists noted, but this level of security needs to extend to the online space as well. While the EMV transition continues in brick-and-mortar retail locations, the online customer is less secure.
"Right now, (online) customers don't feel secure," Glassman said. "If you get your data compromised, it's a pain in the neck. As an industry, we have not gotten it done."
While several mobile wallets have been introduced to encourage mobile buying, the multitude of options in this space has created a challenge for consumers, observed Nana Murugesan, vice president and general manager of services and new business for Samsung Electronics America.
What's to be done?
For mobile payments to take hold, Murugesan said there are still glitches in the systems that have to be removed, and the acceptance points have to be ubiquitous, meaning locations that accept mobile payments have to be pervasive across the retail landscape.
Murugesan noted the technology Samsung Pay uses called "Magnetic Secure Transmission" that enables most card readers to accept mobile payments. MST emits a magnetic signal that mimics the magnetic strip on a traditional payment card, according to Samsung's website. MST sends a magnetic signal from the customer's device to the payment terminal's card reader. The technology emulates swiping a physical card without having to upgrade the terminal's hardware or software.
Samsung has also created new rewards incentives for customers and merchants to adopt mobile wallets that doubled usage in the past year, he said. Customers known as "power users" quadrupled their mobile payments.
Companies are also finding online cross-border payments are more difficult than many expected, noted Beric Farmer, co-founder of XE.com, which provides currency conversion and cross-border payment services.
Farmer said there is an inherent financial risk in cross-border payments due to changing currency exchange rates.
Government regulations also pose another risk to cross-border payments, Farmer said. In June of 2016, when the British voted to leave the European Union, many people found they could not make cross-border payments to the U.K.
He noted the General Data Protection Regulation will affect many people making cross-border payments. Designed to protect consumers within the European Union, the GDPR applies to the export of personal data outside the EU, according to Wikipedia. It becomes enforceable on May 25, 2018.
"It's very exciting, but there are some challenges," Farmer said with respect to cross-border commerce.
Nevertheless, the panelists agreed that the challenges will be overcome and online commerce will become pervasive.
Sih Lee, senior vice president of payments technology and innovation at Synchrony Financial, said retailers must understand how customers use personal electronic payment devices and they must reduce distractions in the retail environment.
"The customer will have more options with how they access and receive products," Lee said.
Elliot Maras Elliot Maras is the editor of KioskMarketplace.com and FoodTruckOperator.com.