We have already seen that e-commerce changed the way consumers find and buy products and m-commerce brought that functionality to consumers via the smartphone or tablet. Both e-commerce and m-commerce have demonstrated strong growth as consumers become more comfortable with these channels and sale volumes increase for merchants. There is yet a third wave of growth in remote payments which is expected to be v-commerce (voice-commerce). V-commerce will allow consumers to buy products by just using their voice. Edgar, Dunn & Company (EDC) has recently assessed the trends, challenges and opportunities that merchants should take into consideration before launching themselves into the new voice channel.
The voice trend is enabled by digital voice assistants, which are predicted to grow to nearly 8 billion by 2023 compared to 1.5 billion devices of today, according to Juniper Research. These assistants are being embedded in a wide range of devices, including smartphones, smart speakers, self-service kiosks, televisions, home appliances and even cars. As a result, the tech giants that aim to own the future of v-commerce are thinking about a ubiquitous presence across all these devices.
Smart speakers, such as Amazon’s Echo, Google Home and Apple’s HomePod, are the fastest-growing consumer technologies since the smartphone. These smart speakers can be very convenient to check the weather, the traffic or remind yourself who holds the fastest 100m sprint. However, this is only the tip of the iceberg when it comes to their true potential. According to the Adobe Digital Insights report, 30% of smart speaker owners use them to shop online in 2018. Also, in 2018, the management consultants OC&C, predicted that the growing popularity of smart speakers would lead to an explosion in voice commerce, expanding to over $40 billion in 2022 for the UK and US markets, up from about $2 billion. If correct, this growth would outstrip e-commerce and m-commerce growth over the same period. Meanwhile, China’s smart speaker market has overtaken the US this year. Already in 2018, DuerOS, Baidu’s answer to Amazon’s Alexa, reached over 200 million devices compared to 100 million devices pre-installed with Alexa.
While Apple’s Siri may be considered to be the first voice assistant for the mass market in 2011, Amazon’s Alexa was the first to clarify how voice-first computing powered by artificial intelligence (AI) technology would enable commerce at scale. However, Amazon Pay recently conducted a consumer survey and found that half of the respondents said the safety of their personal and financial information was their most pressing concern, while 34% of respondents said they would not trust voice services to accurately select the product they needed. I can already imagine my daughter ordering 100 tubs of mint-choc-chip ice cream from Amazon Fresh.
Manufacturers of voice-assisted IoT devices still have a long way to go to reduce consumer fears regarding security and data privacy. Amazon, for example, sent 1,700 Alexa voice recordings to the wrong person by mistake following a data request in 2018. Clearly, data breaches do not help in building trust. Cybercriminals could target these devices to harvest personally identifiable information to sell on the dark web. For this reason, smart speakers should feature multiple security mechanisms, including authorisation, virus protection, and remote access management. Finally, the best way to preserve the privacy of voice data exchanges is with end-to-end encryption.
Now, let’s examine the payment methods in a voice ecosystem. The big players are engaged in very different strategies. Amazon, with Echo, takes the client’s standard payment method, which is usually a credit or a debit card. In comparison, Apple and Google signed strategic partnerships with PayPal. The main challenge lies in voice payment authentication, where currently the prevalent modes consist of either a biometric authentication (e.g. fingerprint of Apple’s TouchID) or a four-digit PIN code to be read out loud. However, even if the newest devices support biometric authentication, they suffer from cases of false acceptance and rejection rates.
The new Strong Customer Authentication (SCA) requirements could pose a challenge for merchants enabling voice payments (but not limited to this payment method) in the European Union. Indeed, their customers’ payments could be declined due to stricter authentication measures that will be enforced by 31 December 2020 (new migration deadline set by the European Banking Authority (EBA)). While harmonisation in Europe remains to be a challenge for SCA, voice-commerce may be put on mute for some time until security can be adequately addressed in a fully SCA compliant environment.
The smart devices are still learning how to recognise the vocal characteristics of a person as well as the cadence and accent. This does remind me of the TV comedy show with two Scottish businessmen standing in a voice-activated elevator requesting the 11 floor. The joke was that the elevator just didn’t understand the Scottish accent – even when they attempted different accents. Very funny but it could become a very frustrating customer experience. By adding a second layer of authentication will increase security and prevent fraud, but it could affect the seamless promise of voice-payments and increase more checkout friction for the consumers. As a result, communicating clear messages about security features and the use of data will help to mitigate shopper apprehension and potential frustration in the future.
Meanwhile, most credit card payment networks have developed their own v-commerce strategies. American Express allows Echo device owners to verbally inquire about account balances and pay bills, thanks to an integration with Alexa. The vice-chairman at Mastercard, Ann Cairns, said that v-commerce through voice assistants like Amazon’s Alexa or Google Assistant will “become very big” in the future. For this reason, Mastercard demonstrated early this year its ‘sonic brand’ identity to engage with consumers with a distinct Mastercard sonic melody. Like the musical signature for Intel Inside, the Mastercard sonic melody is expected to become commonly associated with an accepted payment transaction. Click the link to hear Mastercard’s sonic brand.
There are some emerging case studies for Quick Service Restaurants (QSRs) and other food and beverage sectors. It might not be long before you can place a McDonald’s drive-through order by talking to a machine. The company has recently acquired Apprente, a start-up which has been developing technology in taking orders at the drive-through window. Another example is Diageo, one of the leading beverage companies, with its voice app “The bar” that teaches you fancy cocktail-making and lets you order ingredients via Amazon Prime. Or LG, that has developed a smart refrigerator that uses Alexa to order food items. Although the connected refrigerator has been around for about 20 years – it has yet to find its customer segment. Not surprisingly, there are also in-vehicle voice payment developments. Since 2016, Honda has been working with Visa to enhance in-vehicle payments and partnering with many retailers (such as Amazon, Walmart and Target to name a few) to provide easy access to immediate in-car purchases. Now, Honda is expanding its collaboration to include Mastercard and PayPal. The possibility of shopping in your car while driving to the shops is only just around the corner – literally.
To conclude, v-commerce offers a new sales channel for brands and merchants who want to sell goods and services, notwithstanding the security challenges. Merchants should not miss this opportunity, indeed, while shoppers are interested in checking out via the voice channel, there is a limited number of brands currently offering this experience. It is important to mention that merchants do not have to build an entire ecosystem, but they just need to develop in partnership with existing voice ecosystems. Take the example of Amazon Pay for Alexa, merchants can sell through the voice assistant goods or services like event tickets, transportation, flower delivery, and more. Amazon Pay already integrates with leading customer and order management solutions.
Merchants should primarily focus on four key areas to create a successful voice commerce experience:
- Know your customer: Every business should know how their customers shop and what channels they prefer. Users of voice-assisted devices are mostly millennials and younger consumers, especially in households with children and combined income higher than $150,000.
- Distinguish conversational research and search: All e-commerce businesses should focus on voice user experience by starting with the implementation of the search engine optimization of the voice channel. In v-commerce, customers tend to be more specific in their intent, speaking with longer sentences compared to short phrases and keywords when typing the queries. For example, the written query for finding a restaurant in Paris would be something like “Paris restaurants” while its counterpart voice research could be “I am looking for well-priced restaurants in central Paris”.
- Align with the omnichannel strategy: V-commerce should be aligned with the merchant’s existing omnichannel strategy and allow versatility in the customer experience. As a consequence, the customer should be able to switch between devices, e.g. starting the process with their voices and then check-out through their mobile or web, and vice versa. This sounds simple but it is one of the hardest areas of the customer experience design, especially, when it comes to the checkout.
- Build trust through security: The concept of consumer trust in v-commerce must be supported with a clear solution to address privacy and security, from the consumer viewpoint. Especially when it comes to the emotive element of consumer payment. This will serve as the building block for further improvement of customer trust in the v-commerce channel.
Long term market success in v-commerce will involve innovation and keeping up with the latest technology and trends in consumer adoption. Voice commerce offers a totally hand-free touchpoint in the consumer’s home or even on the shop floor. Now, this is an opportunity for reaching consumers in a simple and convenient way. For the merchant, v-commerce might enable you to differentiate in the challenging environment of customer experience both online and in-store.
Mark Beresford wrote this article with the support of Manuel Cigala (Consultant, London).
The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).