The Logic Group Blog

“The death of the high street” has been bandied about over the last eighteen months, and clearly makes for good headlines. So, it was no surprise to see the Centre for Retail Research make headlines (yet again!) with a research that claimed ‘one in five of Britain's high street shops could close by 2018 as more customers turn to the internet for their shopping’. The internet, especially mobile internet, is a driving force that is necessitating a business model rethink for some of the most established multinationals (!) – the message is clear: Innovate and adapt, or perish.

As a payment service provider and a customer interaction, loyalty and insight specialist, here are some ideas to help retailers fight back – bolster your high street presence.

2012 has been a tough year for the high street, with retailers struggling to drive sales and many high street stores shutting their doors permanently. By contrast, the online high street saw resilient growth. In fact, the latest figures of the annual IMRG e-Retail Sales Index have revealed that online sales in November are up 18 per cent from last year, as the festive rush has encouraged consumers to reach into their digital pockets. So, 2012 was a year of “Bricks vs. Clicks”, but what will drive retail in 2013?

Here are some of my thoughts for starters, or perhaps predictions for 2013.

There has been a lot of momentum behind mobile payments, NFC-enabled PoS terminals and wallet services in 2012. Technology providers, retailers and merchants, as well as payment service providers are now quite openly supporting the case for multichannel customer experience management. Consumers too have shown some appetite for mobile payments and NFC-enabled cards, although they appear to have even bigger willingness to shop online.

However, for consumers to readily adopt and widely embrace the new technology-enabled payment and interaction experience, the retailer, merchant, technology and payment provider ecosystem needs to understand consumer expectations from multichannel customer interaction systems and instil the confidence to trust new payment technologies to protect their identity credentials in any environment.

Over 50% of adults in the UK [1] already have contactless credit/debit cards, yet how many of them know what they have in their pockets? And how many would be willing to use contactless payment cards, even in an existing enabled environment? A survey from Which showed that only 54% of 158 Londoners surveyed would be willing to use contactless cards as opposed to Oyster cards, even if it gave them the same benefits [2]. Combine that with the fact that many people feel they are not protected in case of fraudulent use, and one could be forgiven for thinking that contactless cards stand no chance. Is this just a case of lack of consumer awareness and trust?

On Monday (12th November) I was alerted by a colleague to a You Tube video going viral; if you haven’t seen it already it’s titled ‘The Risk inside your credit card’ and suggests that fraudsters can electronically pick pocket your contactless cards - so it’s not surprising it’s had over 5.5 million hits.

The video stipulates that armed with a contactless card reader, fraudsters can gather sufficient card information to clone the card and use it at retailers to make purchases, which isn’t that compelling until the video shows it being done.

The Logic Group was delighted to attend and present at the second FStech/Retail Systems Payments Technology Conference last week. Bringing together leading figures from retail and financial services, the event showcased the latest developments, services and products in trending areas such as contactless cards, payment security, online payments, the future of cash, and social payments.

Jonathon Solomons, Solution Partner Manager at The Logic Group summarises the key messages.

The iPhone 5 went on sale on Friday but there was something missing that many in retail and the payments space thought was guaranteed – NFC. When the launch was announced the week before, the exclusion of NFC was somewhat surprising. It was thought that on the back of Apple unveiling Passbook (a service that pulls together loyalty cards, tickets and coupons) in June, embedding NFC would be the next natural step to complete their mobile wallet offering. Mobile wallets bring together credit and debit cards, bank accounts, loyalty cards, rewards and coupons in one place, letting shoppers pay for purchases online and in physical stores too.

NFC-enabled mobile payments only scratch the surface in terms of the services mobile technology can offer to retailers. For the true value to be recognised, businesses need to understand that it isn’t in the ability to just offer a payment service – it is in the customer interaction opportunities it creates.

 

Focusing on the mobile wallet from a pure payments perspective massively undervalues the impact mobiles can have. It could be said that tapping a phone is as useful as tapping a card, and as such, there’s no real benefit to the customer. However, if a consumer is tapping a phone for payment and simultaneously providing loyalty details and/or redeeming a money-off voucher, while using it to get additional in-store services, it is a bigger incentive for customers and retailers alike.

 

Two news stories this week have really made the retail sector in the UK stand up and take notice. The first is Tesco’s introduction of an “interactive virtual grocery store” at London’s Gatwick airport, the first seen in the UK. Meanwhile, over in the US, Starbucks has announced a deal with Square, the company behind the same-named card payment reader, which will see Starbucks invest $25 million and switch its processing of debit and credit card payments to mobile payments.

 

I am always weary of consumer surveys, and this week I have seen countless examples of how the questions can be worded in favour of a desired outcome!  The latest was looking at the security of the mobile as a payment vehicle, and just under half showed that “lack of security” as a concern.

 

As an example of “leading a witness”, compare the following sets of questions, and decide if they take you to a different answer:

• Are you worried about the personal impact of payment fraud on your life?
• Do you think that more should be done to secure your payment information?
• Would you be concerned about all your payment details being sent over the air, and stored in your phone?
• Have you thought what you would do if you lost your phone containing all this sensitive information?
• Do you think that the lack of security is too big a risk to using your phone to make a payment?

 

Alternatively:

• Were you aware that payment fraud has decreased over the last year?
• Do you think that this was due to all the improved security measures?
• Would you be keen on maintaining the level of security, yet making payment faster and more convenient?
• Would you like to securely transfer your card details over the air so that you only have to carry your phone with you?
• Would you be in favour of improving the payment experience through use of your mobile phone?

 

This is a poor imitation on a “Yes Prime Minister” sketch from 1986 (regarding conscription), but looks to highlight how a survey can lead to a differing conclusion on the same question.  I am not suggesting that this was the case with the mobile survey, but it always makes me think twice about the results.

The big news this month is that Apple has chosen not to include NFC support in the new iPhone 4S. So what does this mean to the advancement of NFC customer loyalty interactions at point of sale?

 

Right now there are a number of NFC loyalty initiatives in the UK and Europe but penetration of these so far is low. There just isn’t a clear business case for an NFC based loyalty solution in a large retail estate, yet. What will tip the balance is the convergence of other interactions around the mobile device; payment, customer loyalty, couponing, marketing alerts etc. We all see this just around the corner with the likes of Google wallet and other operator led initiatives hitting the news every day. So why aren’t these leading to widespread NFC adoption and why didn’t Apple see the need to jump on the band wagon?

We recently hosted a webinar on Mobile Payments (you can register to view the webinar recording here), and how for us, mobile is more about “Mobile Interactions”, rather than just payment.  Many cross channel payment methods are moving in store.  Combining multiple services such as loyalty and couponing will add further value to the checkout experience through the use of NFC Mobile phones.

 

During the webinar, the attendees were asked to contribute questions for both clarification on specific areas, as well as general industry concerns.  Due to time constraints, we were unable to answer all the questions during the session, so I wanted to spend some time outlining my answers in this blog.

Working in the multichannel payments industry and having responsibility for the Point of Interaction, including the customer journey, I am always interested in improving the retail experience through new and existing technology. I have been in a number of meetings where retailers have asked if they could replicate the experience received from a certain fruit based store!

As we have seen, contactless payments are beginning to move into the mainstream. As my colleague Mark Carpenter noted in his blog, support for contactless transactions is moving out from the metropolis, even to the rarefied environs of his country retreat.

Will mobile phones replace the card?

 

More people leave their wallet at home, than their phone. In the past, this may have caused the shopper some difficulty as they search their pockets at a checkout. This situation is set to change with the introduction of NFC contactless technology coupled with your mobile phone. The exact form factor is evolving from bank issued stickers attached to any item, NFC enabled SIM cards, to contactless enabled handsets. The timelines for mass adoption are still unclear, but we are firmly on the journey!

In keeping with things at this time of year I’ve been thinking about a few predictions for 2011.

 

First off, I think we’ll see more coordinated fraud attacks. As the take-up of PCI DSS compliance continues, fraudsters will be forced to focus more strongly on specific targets. With PCI DSS compliant environments it is clearly harder for would be fraudsters to illicitly obtain card numbers and personal data, meaning would be fraudsters will have to take a more structured and planned approach to their activities, as a “scattergun” strategies will begin to pay less of a dividend.

Contactless payment technology continues to develop; it is a hot topic of discussion as Barclaycard rolls out an update to its TV advert demonstrating the ease of contactless technology – but will its implementation become a rollercoaster ride for retailers and will hard currency become harder to find in the future?