The seamless vs. guaranteed payment dilemma

In our recently published paper In-Store Payments Reimagined we detailed that we are entering an exciting era of innovation and disruption in the field of retail. Retailers are more than ever exploring and experimenting. They try to offer customers new journeys, focusing on providing an unprecedented seamless experience.

In many cases, the focus is on removing any possible blocker on the customer’s path. In trying to prevent any friction, they try to avoid queues, out-of-stock products and issues that need help from the staff. Retailers also work on empowering the customer to promote autonomous journeys. Some of these journeys seem easier than others to implement, such as self-scanning using the client's smartphone.

Other initiatives, like Amazon Go, involve a big portfolio of technologies: collecting data from systems based on RFID, sensors and image processing, processed thanks to AI and sensor fusion algorithms.

In all these new customer journeys, the payment is redesigned to make it as seamless as possible, even invisible in some cases. Let’s deep dive on this new user experience (UX), with the payment eXperience (PX) also in mind.

In-store self-scanning experiences, using a small device you borrow from the store, has grown in recent years. With the outbreak of the pandemic crisis, most retailers disabled this possibility to avoid the sanitary management of the devices. Therefore, the alternative option, which consists of empowering customers to scan products with their own smartphone, has become quite mainstream nowadays. They can even pay directly with it, avoiding queuing at the checkout and contact with staff. This solution is already available in Worldline's product portfolio with Scan & Pay.

Still, some customers are reluctant to pay online when they are in a store. They are more used to chip and PIN or contactless payments. Thus Worldline provides the possibility to transfer the transaction information, including the amount, to the unattended payment terminal just by scanning a QR-Code displayed on the terminal’s screen. The payment can then take place using a physical card.

More advanced than self-scan solutions, are unattended stores, such as container stores provided by Boxy or Monop Black Box in France, LIFVS in Sweden, Neste in Finland, and many more. The general principle is similar in each case. The customers enrol themselves on a dedicated mobile app. The mobile app is both a key to open the store door and a wallet to manage identity and payment. During the enrolment, the customers create a secured account and attach a payment means to the wallet. Most of the time, it’s a payment card, but it could also be their bank account using PSD2 APIs. In some of the above examples, Worldline is already providing the payment solutions, for example for Casino Group.

When the customers want to shop, they use their wallet to identify themselves and open the door. Then, inside the store, they pick up the needed products after which they simply leave the store. Thus, the payment is literally invisible. They just receive a digital receipt few minutes later.

A few years ago, Amazon Go stores were viewed with wonder. People were taking selfies in the stores or in front of them. Now, with more and more retailers exploring this new trend, we are probably entering the “crossing the chasm principle” explained by Geoffrey Moore in his book Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers.

But how does an invisible payment actually work?

One approach is that, before letting the customer enter the store, a payment pre-authorization is performed for a predetermined amount. This amount is arbitrarily defined. Why is it arbitrary? Because, at this stage, the merchant does not know yet the real amount of the purchase. But no doubt, with the help of customer knowledge and thanks to AI, this amount might be adjusted according to the customer, the place, the time or even the weather.

When the customer leaves the store, the real transaction amount is known and the actual payment takes place. If the real amount is lower than the authorized amount, then all is fine: the payment is guaranteed thanks to the authorization granted in the first place. It’s exactly the same as an online order when the merchant can deliver only part of the order. On the other hand, if the customer collects products for a higher amount than the amount pre-authorized, then a new payment authorization is done. But this second authorization could be declined for any number of reasons (e.g. balance, number of transactions per period, etc.). The payment will then fail.

Here comes the tricky part.

In general, the merchant is supposed to do the authorization once the amount is known. Only in very specific occasions can the pre-authorization amount be arbitrary, for example in gas station, where the amount is based on the maximum plausible transaction value. It could be as much as 120€ to fill-up an empty tank. But for invisible payments at a retail store there is no such maximum plausible amount, so the merchant has no guarantee anymore. The customer has already left the store with the products. The merchant can only ask repeatedly for a new authorization during the following seven days, hoping for a positive reply.

Many merchants have already had to face such problems. For example, if the payment for your Uber ride fails for whatever reason, they will ask you to validate this payment before being able to book any other trip. Here comes the importance of the perceived value and the urge to use the service. The same kind of pattern applies to Open Payments in Transport: the best moment to ask you to pay an outstanding bill is when you need a new ride.

We spoke to some merchants who provide such unattended services and they confirmed that the act of blocking a customer from using the service is a smart lever to reduce this issue.

In the case of Amazon Go, there is no authorization when you enter the store. All the payment processes take place after the customer has left the store. Here, the account the customer uses is linked with their regular Amazon account. By coupling Amazon Go with the rest of the Amazon ecosystem, Amazon is able to assume this risk. Who wants to be “banned” from Amazon’s ecosystem? It’s even easier for Amazon to on-board new customers. They can reuse the payment means already enrolled with their existing account making the process even more seamless.

Retailers can rely on Worldline to make these new journeys a reality whilst keeping them safe and secure. Worldline provides platforms that enable the reconciliation between online and in-store payments. In concordance with KYC, the unified payment platform makes it possible to create a link between a customer and their payment card at each card interaction (payment or pre-authorization). This matching capability could be seen as a step forward for implementing payment in seamless customer journeys.

For more about new instore journeys listen to our podcast and read our in-depth paper
In-Store Payments Re-imagined (worldline.com)