The seismic shift in consumer payment habits that began last year is far from over.
Even now, fears about spreading the coronavirus are driving merchants to keep adding contactless technology that can not only transform the point of sale, but eliminate it altogether.
This trend is furthered by the deployment of technologies such as 5G wireless networks, which allow more elements of the payment process to run in the cloud instead of on dedicated hardware at the point of sale.
One of the most significant new trends is consumers' strong interest in checkout-free retail, in which payments are handled almost invisibly, according to new research from Arizent, the parent company of American Banker. This stands in contrast to the backlash against checkout-free retail prior to the pandemic, when the concept was seen as
Sixty-eight percent of adults surveyed in May said they would be interested in the kind of invisible payments experience pioneered by
Mobile wallet usage, which had been slowly expanding prior to the crisis, also accelerated as consumers found it to be a cleaner, more convenient way to shop online and in stores. Survey data from Arizent’s new
Before the pandemic, less than 40% of consumers routinely used mobile wallets. Millions more consumers are now seeking retailers that accept wallets, and loading payment cards and coupons into their wallets for online and in-store payment, the data indicates.
Now that consumer demand for mobile wallets has risen, the challenge payments industry players face is fighting to be the default choice within that wallet, said Aaron McPherson, an independent consultant with AFM Consulting.
When a consumer signs up with a new digital wallet and assigns a primary payment method, that card tends to stay in place unless there's a strong incentive — like a compelling rewards program — to switch, according to McPherson.
"Wallets do allow users to change the funding source, but obviously the default card is going to get most of the transaction volume," he said.
Network effect
The internet of things is another area of development for mobile wallets and invisible payments, and the rise of 5G technology will drive this trend forward, according to Mastercard, which recently announced a strategic 5G partnership with Verizon Business.
According to Mastercard, the heavier bandwidth of 5G will reduce latency and enable a richer pipe for sending payments data. Combined with artificial intelligence, 5G opens new horizons for shopping via voice and video, and making approved purchases for travel, entertainment and health care happen in the background, Mastercard said in its July announcement.
Verizon caught Mastercard's attention with the demonstration of a portable "Nanostore" the wireless carrier set up last May at the Indianapolis Motor Speedway for the Indy 500.
Spectators, volunteers, staff and race car drivers purchased snacks and memorabilia simply by grabbing the items they wanted and walking away, with technology based on Verizon 5G and AiFi, a Santa Clara, California-based company that specializes in AI and computer vision.
"Retailers are looking to 5G to accelerate digital transformation, increase productivity and improve the customer experience," said Sampath Sowmyanarayan, Verizon's chief revenue officer, in an emailed statement.
Mastercard and Verizon are now working at Mastercard's New York-based innovation lab to develop technology that will shift many hardware-based transactions to the cloud, reducing friction and the risk of abandoned e-commerce purchases by making purchases faster and more secure in diverse environments, the card network said.
Mastercard is also piloting 5G-powered Tap on Phone technology that turns smartphones into payment terminals.
Retail reimagined
Venture capital funding is pouring into autonomous, or checkout-free, retail for several reasons. With payments happening invisibly in the background, such systems enable consumers to build on the habit of streamlined, contactless purchases established during the pandemic. Autonomous checkout also generates useful customer data that merchants can use to refine marketing and operations while eliminating lines and waiting. The technology also potentially reduces retailers’ personnel and overhead costs, after the initial investment.
Retailers can now license Amazon Go's underlying technology, now branded as Just Walk Out, which uses a combination of cameras and sensors in stores to detect when a shopper removes an item from a shelf. The system adds items to a virtual cart for automatic checkout. The consumer scans the retailer's app upon entry, and is tracked through the store until leaving, when the store charges the shopper's account for any items taken.
Amazon typically applied its concept to newly built, convenience store-sized locations. A rival provider, Berkeley, Calif.-based startup Grabango, aims to convert many existing larger grocery stores into checkout-free formats. A prototype GetGo convenience store owned by supermarket chain Giant Eagle went live last year in Pennsylvania. After evaluating the performance of the prototype store, Giant Eagle agreed to add Grabango’s technology to four more GetGo locations before the end of this year.
Grabango has signed contracts with four other large retail partners, whose names it hasn’t disclosed, to convert several more stores to a checkout-free mode over the next year. In June Grabango raised another $39 million in Series B — bringing its total funding to more than $70 million — to accelerate that growth.
Shoppers at stores equipped with Grabango’s technology must first download the Grabango app to their phones and link a credit or debit card to the account. Using computer vision technology located throughout the store, Grabango tracks shopper’s selections. Shoppers exiting the store scan a QR code within the Grabango app to complete the purchase. The app then provides an itemized receipt.
Standard, a San Francisco-based startup that also has been developing AI-driven checkout-free technology, this year
Consumers also showed continuing interest in the more routine process of scanning their own items for purchase at self-checkout points in stores, according to Arizent’s research. Thirty-six percent of respondents reported using self-checkout kiosks more often since COVID-19 struck, while about half said they didn’t change their use of self-checkout kiosks during the pandemic.
Retailers continue to expand self-checkout options within supermarkets, and while most are keeping some manned checkout lanes open, Walmart is exploring a store concept that relies almost completely on self-checkout.
At a store in Plano, Texas, Walmart this month began testing a fully self-checkout experience with 32 lanes. There are no cashiers, but “customer hosts” hover nearby to guide shoppers to available registers and assist in scanning items where necessary.
Walmart is also promoting a different do-it-yourself checkout method with Walmart+, a $98-a-year service that includes free shipping and local grocery delivery plus the ability to scan items one by one while shopping inside Walmart. Users can bypass the physical checkout process as long as they pay with Walmart Pay, the retail giant’s own mobile app. Walmart's Scan & Go service is available only through Walmart+.
