Check out: retail in the fast lane

Retail payments are transforming rapidly with the development of contactless, NFC, mobile wallet and cash management system technologies growing in popularity, prompted by faster transaction speeds and increased customer loyalty options. But real challenges to widespread adoption remain, writes Leo King

Contactless payments are increasingly abundant. They allow consumers to buy items under a £20 limit by simply touching a radio frequency identification (RFID) card on a reader at the checkout, and can be found in more and more retail and hospitality outlets. 
Over one in four Visa cards are now contactless, and the processor has said payments in the first quarter of 2013 hit 5.3 million transactions, an increase of 22% in a year. 
Retailers often also introduce contactless when they come to renew their payment terminals. Last August, discount food retailer Lidl rolled out contactless across its stores, and competitor Aldi is conducting a trial. Elsewhere, Marks & Spencer has said it processes over 230,000 such transactions per week following an extensive overhaul of instore systems.
Gilles Ubaghs, senior analyst at Ovum, described the growing take-up of contactless as “one of the biggest payment developments in retail technology in the UK”. He noted it is particularly useful where transaction speed is a main driver, such as serving customers quickly and efficiently at busy times in pubs and bars.
But a number of concerns may be hindering growth. “There has been ridiculous hyperbole around just how much contactless would replace existing transactions,” he added, “and the reality has been a much slower burn”. One of the major problems has been the transaction limit, in spite of its security benefits.
There is also a ‘chicken or egg’ dilemma for retailers around investment, according to Luca Bonacina, senior research analyst at IDC Retail Insights. “Shops only want to adopt contactless when they know it’s something customers are going to use, but the customers are reluctant to use the card until many of the places they shop offer this method of payment.” 
In spite of this, Bonacina said: “The UK is far ahead of many other European nations with regards to contactless adoption.”
Scaling technology to grow adoption
High Street pharmaceutical and beauty retailer Boots is one of the many UK companies that has decided to adopt contactless on a large scale, and it sees clear benefits in terms of reduced queue times from “speeding up traditional card payments,” according to Ben Perdue, assistant project manager of store operations at Boots.
In a pilot during 2010, at a time when the technology was really “in its infancy,” Perdue said Boots rolled out contactless to 32 of its stores. It then “took time to monitor the growth and get feedback”.  
Boots now has contactless technology across the country, but chooses carefully exactly which stores to concentrate on. “We have found contactless payments are a great benefit to some of our stores, in particular those located within train station complexes,” he added. But again, its use comes down to time, because in such stores he said, “customers often need to make purchases in a rush”.
Perdue attributed the growth of contactless in Boots’ stores to “a combination of increased customer awareness and a higher volume of cards in circulation”.
Near field communication (NFC), a niche form of contactless technology that allows consumers to pay or discover information by touching their NFC-enabled mobile phone on a reader is also of increasing interest to a number of shops in the UK.
But it has met with mixed reviews, and customers not only need the right phone but the incentive to use it in this way, when they may already have a contactless card that offers the same fast transaction capability. “The business models are a real problem here,” Ubaghs said. “Retailers need to invest a lot to take on the technology, at a time when there are other options out there.”
NFC deployments have often been more about engagement than payment. A recent scheme, called Purple Flag Week, saw Costa Coffee, Odeon, Lush, Pizza Express and other brands run a treasure hunt, with NFC tags on posters that offered consumers games and store discounts. Another project at sandwich shop chain Eat in 2012 saw the cafe chain offer discounts and free coffees, from a ‘Wheel of Fortune’ type mobile game.
In spite of the challenges facing NFC adoption, global sales of appropriately equipped smartphones grew 300% to 140 million units in 2012, according to a report from analysts at Berg Insight. But Apple does not yet support NFC in its iPhones.
Next-generation mobile wallet development
Mobile wallets may prove a better option when it comes to the ever-growing area of smartphone related payments.
“Instead of NFC, I expect to see the real strength in mobile to come from barcode scanners, QR [quick response] codes, and mobile wallets,” Ubaghs predicted. “As mobile banking grows, people are increasingly used to making transactions onscreen on their phones.”
Indeed, consumer awareness of mobile wallets is increasing and vendors are fighting for prime position. The technology allows customers to store and manage their debit and credit cards, as well as loyalty cards, on their smartphones, ready for payment.
Payment processors are active in this space. Visa has stepped in with the V.me service, used by Marks & Spencer, Greggs and other chains. And MasterCard with its MasterPass scheme, used by retailers including Argos, Boots and House of Fraser. PayPal is also highly active in developing its mobile app with the likes of PizzaExpress (PizzaExpress reaps mobile success,  Retail Technology November/December 2012 magazine, p26).
In addition, technology giants are investing extensively in the area, with the emergence of the Apple Passbook, Google Wallet and Samsung Wallet.
Using mobile wallets, customers can make a payment with their smartphones, instore. But it remains to be seen whether consumers prefer them as a loyalty device that can also alert them to local offers, rather than for payment. Recent research by mobile payments firm MPayMe found that less than 10% of smartphone users have made an instore mobile transaction.
“Where the market actually goes depends on the impact the technology has with the shopping experience for the customer,” said analyst Ubaghs.
Nevertheless, as customers increasingly use mobiles in store to research prices, and buy on their devices from retailers such as Amazon, mobile payments are becoming more normal and accepted. And many customers already trust certain companies to hold their credit card details, saving them from having to re-enter credit card information online. Apple retail stores already allow customers to download an app for instance, which can also be used to scan and buy items instore without a shop assistant.
There is other fascinating and cutting-edge work in this area, even on a local scale. Cook & Garcia, a sandwich shop and fresh food restaurant in the London Borough of Richmond, has adopted a different sort of mobile wallet system.
The technology, supplied by PayPal, allows customers to check into the shop on the vendor’s mobile app and pay without any physical card or cash. When a user does this, their name and photo appears on the shop’s payments system and they can automatically be charged an agreed amount by the shop assistant. The customer then receives a receipt to their phone.
As part of the roll out, 12 other Richmond businesses, including restaurants, shops and a hotel, are also offering this payment method.
Focusing on improved customer service
Richard Garcia, co-founder at Cook & Garcia, explained that the “real appeal” of the technology is that “it cuts queue times, because payment is so fast”. 
“Many of our clients are aged under 35, and like technology,” he added. “We are keen to give customers choice, so that they can pay via PayPal, contactless, or regular card and cash payments.”
Cook & Garcia began the pilot in April last year, alongside the other Richmond stores. By July, the system was fully implemented. “It’s been a great experience for us, and we would encourage other businesses to consider using this technology, because it makes transactions much quicker,” he explained.
“Another benefit is that it makes the experience more personal. We get to learn the names of our regular customers and that can make it a better experience for everyone.”
With so much happening in the digital payments space, it could be easy to also miss the innovation around cash, a method of payment still preferred by many consumers.
Tesco recently adopted a brand new automated cash management system. The SMARTtill technology, supplied by specialist provider Cash Bases, is being integrated into 10,000 of the supermarket giant’s tills.
SMARTtill enables Tesco to monitor cash levels at every checkout, and to be alerted when they reach certain high or low levels. Load cell weighting technology within the till automatically counts the money each time the drawer is closed.
Tesco has not commented in detail on the project, but a spokesperson revealed at the start of the scheme that “many” of its customers “still use cash as their main method of payment”. Additionally, the new system is expected to give staff “more time” to assist people at the checkout.
SMARTtill is equally designed to provide higher accountability for cashiers, improving accuracy and reducing the risk of mistakes or fraud - any losses can be pinpointed to an exact time. The potential benefits to Tesco, of managing cash and monitoring its handling, are evident.
The retail payments space is becoming ever more complex, and a heated technology battle is taking place. In terms of digital transactions, it remains to be seen whether contactless, NFC or mobile wallets will win, or whether they will all have to coexist. But one thing is for sure: if the technology is affordable to the retailer, and if it offers a clear and genuine benefit to the consumer, then adoption will grow. In the meantime, retailer experimentation will be the norm. 

CASE STUDY - FAIRFIELD STORES
Fairfield Stores is leading the independent convenience store sector in its roll out of an integrated PayPoint and electronic point-of-sale (EPoS) system.
A partnership of three technology specialists in the convenience retail sector recently detailed the first EPoS deployment using the point-of-sale integration tool from payments provider PayPoint, called PPoS.
The integrated system is the first to be supplied to Fairfield Stores, one of its independent clients. Fairfield Stores in the centre of Bath has successfully rolled out the combined system from SPEDI, Norcon and AURES Technologies UK (formerly J2 Retail Systems) to streamline its business and improve customer service.
Yellow PayPoint terminals are a familiar sight across convenience and news retail, where they are used for utility and other bill payments. Today, PayPoint services are also available through the ‘virtual terminal’ PPoS integrates its payment services directly into the retailer’s own EPoS system. 
As one of the first independent stores to deploy this combined system, Fairfield Stores is now using new integration designed by its EPoS software provider, SPEDI, installed by its systems partner, Norcon Limited, and accessed via the J2 touchscreen terminals supplied by AURES.
David Mendus, SPEDI managing director, explained: “We felt PPoS integration was important, as our aim has always been to help customers run better and more profitable businesses. PayPoint’s new PPoS technology enables us to achieve this aim, as it offers the retailer a number of benefits including faster transactions, easier reconciliation and greater customer convenience.”
Wayne Graves, Norcon sales director, said: “By integrating its terminal with EPoS hardware and software providers such as Norcon Computers and our software partner SPEDI, PayPoint is enabling independent retailers to benefit from the same significant advantages of its PPoS system that multiples and members of symbol groups enjoy.” 
Norcon has deployed the new system on PC-based J2 615 touchscreen terminals. “The J2 615 is the ideal hardware platform to run this new solution,” added Graves. “It’s a very cost-effective model and has all the attributes required for our new EPoS solution.”
Enhancing the customer experience
Hari Lohano, owner of Fairfield Stores, commented: “My customers can now do their PayPoint transactions at any of our counter tills when they pay for their groceries, rather than have to go to a different counter to use PayPoint. It’s much quicker and smoother. It makes my business look more professional and customers prefer it.” He also thinks this improved process may well encourage customers to do more PayPoint transactions.
For Fairfield Stores’ staff, the PayPoint transaction process is much more efficient. “Tapping the PayPoint logo on our till calls up a menu identical to the PayPoint terminal screen. We enter the customer’s PayPoint payment then check out his or her basket of items in the normal way. The receipt we give the customer shows both the PayPoint transaction and other purchases.”
In sectors such as convenience, where space is often very limited and at an absolute premium, removal of the traditional PayPoint terminal has a value too. “The PPoS terminal is a quarter the size of the PayPoint terminal,” added Lohano. “This space saving has a monetary value for me.”
The new integrated system generates consolidated accounts and management information. By capturing and reporting on PayPoint and non-PayPoint transactions, this new payment integration development offers retailers business-wide visibility that is both instant and accurate. 
CASE STUDY - Wagamama
The pan-Asian restaurant chain wagamama recently joined 4,000 merchants now using V.me by Visa to give customers a fast and safe online payment experience.
Wagamama is working with Visa Europe and WorldPay to soon enable its customers to make purchases online using the V.me by Visa digital wallet service.
The restaurant chain has over 100 restaurants in the UK. In addition to restaurant dining, wagamama also offers take-out services available via phone, online, in person and, more recently, via the wagamama iPhone app. This additional payment option means customers buying online will now be able to pay using V.me by Visa.
UK consumers spend £3,488 online with Visa every second at UK-based merchants, totalling £110 billion in the year to September 2013, according to figures from Visa Europe. V.me by Visa, the digital wallet service developed by Visa Europe, offers consumers simplified, secure online payments. It is designed to further increase consumers’ confidence in shopping online by enabling them to make purchases without sharing their card details with the retailer.
Richard Tallboy, director of business development for wagamama, said: “The launch of V.me by Visa marks an important development to our e-commerce platform. 
“Our customers are increasingly ordering their wagamama take-out online and we are confident that V.me by Visa offers complete reassurance that payments are handled safely and securely. 
Established and trusted brand recognition
“As consumers become ever reliant on their digital wallets, we feel it is important to be partnering with an established and trusted brand like Visa. It is essential to us that our loyal customers enjoy a hassle-free and seamless take-out experience.” 
Wendy Martin, V.me by Visa director at Visa Europe, added: “The explosion of smartphones and tablets has changed the face of commerce, and V.me by Visa allows merchants of all sizes to take advantage of the multichannel opportunities this creates, offering a safe, secure service with a pan-European reach.”
An in-depth new report by WorldPay, providing global insight into alternative payment methods, found that by 2017, online payments via e-wallets such as V.me by Visa will equal credit and debit cards in popularity. Floris de Kort, chief executive of WorldPay’s e-commerce division, commented: “Shoppers are increasingly demanding more payment options; as an early adopter of V.me, wagamama is gaining an edge over competitors by ensuring it is ready for this shift in consumer purchasing behaviour.”
V.me by Visa began a phased launch of its digital wallet services in November 2013, with Nationwide Building Society becoming the first issuer to offer the service in the UK. The payments organisation said other major issuers will launch this year.