How retailers adapt to payments innovation
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The rise of online and mobile commerce is forcing merchants to rapidly re-engineer their checkout options, while keeping an eye on emerging models that leverage artificial intelligence to streamline shopping — or bypass the store checkout process altogether, like Amazon Go.

Recent surveys demonstrate how retailers are working to keep up with innovation by expanding mobile and digital wallet support, as well as expand financing and payment options at in-store and online checkouts.
Chart: How consumers pay
The largest share of U.S. retailers’ sales still takes place in stores, followed by online channels.

While mobile devices currently represent a smaller share of the total, the growth rate for both e-commerce and mobile commerce is strong. Online lender Vyze in January 2018 polled 100 executives at retailers that offer credit to gain fresh insights about consumer payment trends and the checkout experience.

More than a third of customers making purchases at credit-offering retailers opt for cash, debit or check (36%), with an equal amount using a general-purpose credit card. Twenty-eight percent use private-label retail credit or financing for purchases, according to Vyze.
Chart: Alternative payments get a foothold
Just four years ago, PayPal was the only alternative payment option major retailers were likely to support. But since Apple Pay made its debut in October 2014, merchants have steadily added it and other alternatives to in-store and online checkouts, with third-party mobile payment wallets gaining traction along with bank-issued wallets.

New research from Boston Retail Partners suggests Apple Pay now has parity with PayPal as a checkout option, and Android Pay (recently rebranded as Google Pay) isn’t far behind. The researchers conducted their survey online in November and December 2017 among 500 retailers spanning all major retail segments.
Chart: Changes at the checkout
Most merchants plan to invest in upgrades to their consumer checkout experience in 2018, according to Vyze’s survey. Half of merchants said they will concentrate on improving the credit application process, with many retailers looking to speed up credit approvals and move the credit application process from paper-based methods to the web and mobile apps.

Forty-six percent of credit-offering retailers also plan to improve the overall shopping and checkout experience on their mobile apps, 45% will aim to increase financing options, and 41% said they plan to add mobile or contactless payment acceptance at the point of sale, according to Vyze.
Chart: Deals are the top draw
Promotions and incentives are the top methods for driving repeat sales from consumers, according to Vyze. Half of retailers said offering promotions and discounts is the most effective way to build customer loyalty, followed by 48% who said incentive programs drive loyalty and 45% who said exclusive offers and benefits are the most effective tools for encouraging repeat sales.

Forty-two percent of retailers said offering a loyalty program is the best way to get repeat business from shoppers, followed by offering multiple finance or credit options (36%) and having a short checkout process (also 36%). Thirty-five percent said having high credit approval rates drives sales.
Chart: The pain of credit declines
One in five times a customer's purchase was declined at the point of sale stemmed from the shopper being unable to qualify for credit or financing. This, in turn, hurts customer loyalty, Vyze’s retailer survey indicates. When a customer’s purchase is declined for lack of credit or inability to qualify for financing, they’re less likely to seek out other payment options at that store or website, respondents said.

Fifty-one percent of retailers said when customers experience a credit decline at checkout, it has a somewhat negative effect on customer loyalty, while 12% said credit declines have a very negative effect. More than a third, or 37%, said credit declines at the checkout have no measurable effect on customer loyalty.
Chart: Why consumers are turned away
Consumers and merchants may have different views of why payment card transactions are declined at the checkout. To gain further insight, surveyed 1,047 U.S. adults online between Jan. 12 and Jan. 17, 2018 to explore the reasons shoppers believe their credit or debit card transactions were declined by merchants over the past year.

A shortage of funds—either exceeding a credit limit (40%) or not having enough money in a debit card account (32%)—was the top reason consumers cited for why their cards were declined at the checkout over the past year, according to the survey.

Surprisingly, many consumers report they were improperly declined over the last year because overzealous fraud-blocking measures made it impossible to complete a transaction—29% of consumers gave that reason for why their credit card was declined and 17% said so for debit cards.

Other reasons consumers' card transactions were declined within the last year were for account issues, such as missing a credit card payment (15%) or overdrawing debit funds (10%). Technology issues with websites or mobile devices also foiled 15% of consumers’ credit transactions within the last year, while 9% of consumers complained of similar technology issues with debit cards.
Chart: The Amazon effect
Merchants looking to retool the checkout experience are feeling growing pressure to cut the cost of shipping, in part because of expectations set by Amazon, which offers two-day shipping to more than 90 million U.S. consumers who pay extra for the online giant’s Amazon Prime service.

Younger consumers show a markedly stronger tendency to expect free two-day shipping now from all merchants, according to a survey the National Retail Federation conducted among 3,172 consumers from Nov. 11 to Dec. 1, 2017. This is a challenge merchants will likely grapple with throughout 2018, as other giants including Walmart step up free 2-day shipping for many orders and same-day shipping for others.

Merchants are finding creative ways to align with the standard set by Amazon’s shipping policies. Macy’s, for example, introduced a new loyalty program in October 2017 that provides free shipping for customers who spend at least $500 annually using a Macy’s private-label credit account.