TAMPA, Fla.—Look for 2017 to bring some big changes in payments, most especially “checkout-less shopping” and a fintech bank. But also watch for consumers to start pushing back against all the changes.
Those are just some of the predictions Tom Davis, CSCU’s senior vice president of finance and technology, and Lou Grilli, director of payments strategy, shared with CUToday.info as they analyze the year ahead in payments.
In the first of a two-part series, here’s what they see ahead:
Checkout-Less Shopping Will Proliferate.
With checkout-less shopping, consumers walk into a retail establishment and take whatever products they want off the shelves, scan the price with their phone, and walk right out of the store. No lines, no hassle, and the payment happens automatically in the cloud, mostly invisible to the consumer, explained Davis. The payment is made via a person’s smartphone via a downloaded app that essentially functions as an extension of card-on-file online payments, he said. (See related story in CUToday.info’s The boost).
“Merchants like Chipotle and Taco Bell have already released their order ahead and checkout-less shopping apps. Sam’s Club joined the party when they released their Scan and Go app in 2016,” said Davis.
Amazon’s new checkout-less grocery store is taking all of this a step further, said Davis.
Tom Davis
“These apps and shopping experiences provide real conveniences that consumers value. Not only can consumers benefit from the time savings, but merchants gain valuable data and knowledge of their consumers,” Davis said. “These benefits have significant advantages over the ‘Pays’ (Apple Pay, Samsung Pay . . .) and may very well leapfrog the ‘Pays’ all together as the preferred way to pay at the point of sale. And when combined with loyalty rewards, look out.”
Davis said the only downside he currently sees with this buying process is consumers having to download an app for each store, which he said many may not want to do.
Prediction: “I expect more than a handful of top 100 retailers will jump into the checkout-less shopping game in 2017 and they will see increased sales volume due to their new payment/shopping strategy,” said Davis.
CU implications: These transactions are processed like card not present transactions. “Unfortunately, EMV does not help with fraud on these transactions, so credit unions need to look at strategies like card controls and alerts to help keep the cost of fraud down,” Davis said. “Visa and Mastercard’s efforts to tokenize these transactions should provide some fraud cost relief if merchants are on board.”
The U.S. Will Enter The Era Of The Personal Assistant
Amazon Echo and Google Home devices flew off the shelves during the 2016 holiday season. Microsoft is jumping into the game with a Cortana-based home smart hub that should hit the market sometime in 2017, explained Davis.
“It seems like everyone will now have their own personal assistant—or maybe more than one. Now we get to see how these devices will make a difference in our lives,” said Davis. “Most of these devices will be used to answer questions or to play music.”
Davis said that this year should indicate if these devices can be valuable assets in commerce.
“Will merchants begin investing in development of skills, apps, and tools to be used by these devices to leverage their capabilities to grow their sales volume?” said Davis. “Will consumers feel comfortable and safe using these devices for shopping?”
Prediction: “Eventually these devices will become a valuable companion asset in the commerce ecosystem,” said Davis. “In fact, in 2017 I predict that sales volumes on purchases initiated from an Amazon Echo will grow faster than Apple Pay sales volumes at the point of sale. In the end, I believe the real winner here are smart home device manufacturers.”
CU implications: As people set up their new smart hubs, they will be adding payment credentials and attaching already existing services to their personal assistants. “These transactions are processed like card not present transactions, raising the concerns about security I previously shared,” said Davis.
Payments Will Become Increasingly Complex And Inconsistent
Paying used to mean cash, check or card swipe. Today consumers face a vast array of options depending on the merchant—insert a chip card at some places but continue to swipe at others; tap the phone or smartwatch at some terminals but not others; or use an app to scan a bar code or hold up your phone with the bar code to be scanned by the terminal, noted Grilli.
“Only a select few of these methods offer any benefits to the consumer, and then only to those consumers who are in a loyalty program or who carefully track offers and coupons,” Grilli said.
Lou Grilli
Prediction: “We will see a backlash this year from consumers against emerging payments. They will revolt to harken back to simpler days, forcing emerging payments providers to provide benefits and consistency in years to come,” said Grilli.
CU implications: “Usage of mobile wallets at the POS has been notoriously disappointing. Credit unions should seriously consider holding off on offering a credit union branded payment app that does not offer significant member benefits,” said Grilli.
2017 Will See A Dramatic Shift In The Regulatory And Legislative Environment
The new administration has its sights set on repealing or stripping several initiatives put into place by the prior administration, noted Davis, saying that Net neutrality, the CFPB, and the Durbin Amendment are in Washington’s crosshairs.
“Changes in Net neutrality could turn the Internet into a ‘pay-to-play’ domain and, some claim, ultimately stunt innovation,” said Davis. “Portions of the Durbin Amendment could be stripped, especially debit swipe fee reform, and the CFPB’s powers could be curtailed, or possibly completely dismantled.”
Prediction: “I expect the new administration will be successful in reforming, but not repealing Net neutrality, the CFPB and the Durbin Amendment in 2017.”
CU implications: “As regulations reduce, the compliance burden should decrease as well. Credit unions with healthy balance sheets, great marketing plans, good brands, and strong product offerings should benefit and grow in an environment that is less restrictive,” said Davis.