Reducing friction improves the customer experience, resulting in higher profits. Find out how several companies eliminated the Payments Experience altogether.
Electronic commerce was implemented on a basic level in the 1970s, when a small number of people began using Electronic Fund Transfers (EFT) and Electronic Data Interchange (EDI) to move money. Over the next 50 years, e-commerce became a preferred shopping method, with no fewer than 79% of all US shoppers making purchases online, and over 75% of them preferring to shop on Amazon. Why do so many people prefer to shop online? Let’s start by examining how Amazon and other companies have reduced friction in the payments experience.
Eliminating the payments experience is common for subscription services, where customers provide payment information once, and get auto-billed periodically using a card-on-file. Invisible checkouts are also successful for mobile app-driven services like Uber that eliminate the pain points associated with traditional car services, such as a flawed payment experience where costs are not always transparent. Uber customers enter their billing information into the app once, know the costs up front, and can finalize a transaction with a few taps on a smartphone.
On e-commerce websites, frictionless payments generally result from prepopulating billing and shipping information, either by pulling internet browser data, or by using an existing customer’s information from the website database upon login. Should the user decide to use a third-party payment processor such as PayPal, the payments process can be simplified by enabling an embedded payment flow, where users complete their transactions without leaving the website.
Amazon Go eliminates the payments experience in their flagship store in Seattle, plus additional stores opening in Seattle, San Francisco and Chicago. At these locations, you swipe your smartphone at the door, pick items off the shelf, and swipe out to leave. Using artificial intelligence, facial recognition, weight sensors, special packaging and a slew of cameras, Amazon tracks the items you pick up, put down, and leave with.
Ultimately, Amazon is using technology to eliminate the greatest source of friction in a shopping experience: the checkout line. Competitors like Walmart are also testing ways to eliminate the checkout process in stores, and it’s been speculated that invisible payments will account for over 25% of all e-payments by 2021.
Previous technology includes subscription payments and RFID-based toll road systems including E-ZPass. Next-generation technology is already popular, utilizing smartphone apps, IoT (Internet of Things) and frictionless user interfaces. This includes in-home smart speakers like Amazon Echo and Google Home in 39 million American households.
With this widespread adoption of technology, it’s no wonder that online shopping has evolved to rely more heavily on conversational commerce. Up until recently, this has referred to embedding AI-powered chatbots into e-commerce websites, as well as interacting with customer service representatives and virtual assistants to shop through messaging apps like Facebook Messenger and WhatsApp. Amazon Echo and other voice technology is replacing these applications by eliminating even more of the payments experience, but there is even newer technology to consider.
Imagine IoT-enabled printers that automatically orders new ink cartridges when they sense low levels, or air conditioners that order new filters, or even visual sensors that track your consumption of paper towels, soap and various toiletries, replacing them automatically so that you never run out. All these possibilities can be achieved with technology that exists today, and based on the widespread use of mobile applications, users will voluntarily opt-in to such services, for the convenience that comes with frictionless, automated payments. While such technology is desirable, it does raise questions about potential regulations, fraud and other issues.
One way to mitigate risk when eliminating the payments experience is through tokenization. By 2020, Cisco estimates that there will be 50 billion devices connected to the internet. Visa plans to bring secure payments to the Internet of Things, starting with wearables and cars. To make this possible, they will partner with technology companies like Samsung, using tokens to represent user accounts and payment information. For example, tokenized payments may be utilized in retail stores, gas stations and restaurants.