Payment Roadmap For Merchants in Today's Digital World

Payment Roadmap For Merchants in Today's Digital World

EDC Team
November 4, 2016

In today’s digital world where everything happens in an instant, convenience is no longer a luxury but the expectation. Every day, new forms of payments are being developed – mobile, apps, e-wallet, contactless, online banking, virtual currencies, wearables, you name it, it probably already exists. All of which are being developed to meet the customers’ need for a simple, clear and frictionless purchase experience. However, the myriad of options available to merchants often exceeds an individual merchant’s capability to implement and raises questions about how to determine what is mission critical and what may not have enough lasting power to merit implementation. In conversations with merchants, I am frequently asked the following questions:

How can I reduce cash?

It is not surprising that many merchants are moving away from cash. It can be difficult and costly to manage cash. Yet more importantly, consumers prefer the convenience of other payment options available to them, especially for high ticket items. Many merchants have successfully reduced cash acceptance. The travel sector has had significant success, reducing cash to less than 5% of transactions. For example, most airplane tickets are purchased online, and there are very few cash transactions at the airport counters where consumers pay for checked in bags, flight upgrade, etc. Some airlines, such as United, don’t accept cash at the airport or on the plane. However, merchants in other sectors may view cash as King. These merchants tend to have a higher percentage of lower transaction sizes where many consumers prefer to use cash for in store transactions. We at Edgar, Dunn do not believe that cash will disappear from the payments landscape anytime soon. However, for those merchants who want to reduce cash , there are vendors who provide products that can be used in place of cash, including prepaid programs and vouchers that are designed for the cash segments. Additionally, loyalty programs and incentives have been successfully deployed to reduce cash usage.

What payment types should I accept?

Most merchants recognize that it is no longer a question of just accepting cash and the global card payment brands. Consumers have many additional options available, some from online channels that are moving to point of sale and others that are popular in their local markets but not generally accepted outside those markets. The options available to many of these merchants are limited by their payment platforms. For those with legacy platforms it is often difficult and time consuming to add new payment types, putting them at a disadvantage compared to more nimble competitors. For those who have already modernized their platforms, often accepting new payment types is not a difficult task, although selecting the relevant payment types often remains daunting.

How can I streamline the customer journey across all my channels?

Increasingly, consumers expect that they should be able to use the same payment type online, on their mobile devices as well as at point of sale. There has been much written about the importance of the digital channel in reaching millennials, who often view it as their primary interface. Customer-oriented merchants across all industries understand the need to adopt an omni-channel approach and digitize their operations in order to meet their customers’ increasingly high expectations. Merchants, depending on their size, industry and business objectives, may have different strategies for the development of an omni-channel experience. Some may focus on developing their own mobile apps to promote loyalty, build stronger relationships with their customers and enhance their customers’ entire purchase journey, before, during and after the purchase. For example, most mid-to-high end hotels are spending a lot of time and resources to build their proprietary mobile apps to improve their customer experience when they make their reservation, when they check in, if they request amenities, when they pay their bill and keeping them informed about reward points. According to a large retailer who we interviewed, “payments should not be looked at as an independent thing. It is important to integrate and tie everything (payments, loyalty programs, promotions, etc.) together with mobile app and make it easy for consumers to use. Customer experience always comes first! The increasing availability of phone and tablet based POS devices is enabling some merchants to focus on the digital experience across all channels, eliminating many historical silos.

Another component of this question is whether to accept third party wallets and/or invest in proprietary wallets. For many, accepting third party wallets (i.e., ApplePay, SamsungPay, “fill-in-the-blank” Pay) is no different than accepting the major payment brands. Many large merchants already have in-store terminals that are 100% NFC enabled and can easily accept mobile wallet payments if they choose to. While there is a lot of hype about third party wallets, many of the merchants we spoke to reported that less than 2% of their revenue comes from third party wallets. However, proprietary wallets/apps are often viewed by many retailers as a tool to provide superior communication with their most loyal customers and thus is important to help nurture those relationships, and increase sales.

Overall, merchants’ core goals have always been to attract and retain customers. To achieve those goals, they must meet their consumers’ expectations or become obsolete. It is becoming increasingly important for merchants who want to improve their customers’ experience to include enhanced payments options in their planning and roadmap development.

About the authors:

Jane Cloninger is a Director in Edgar, Dunn & Company’s San Francisco office. Her focus is competitive strategy and product development within the payments sector. Tue To is a Senior Consultant in our San Francisco office. They work with merchants in the development of their payments roadmap, helping them address the issues raised in this article. They can be reached at: and

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