John Kolthof, Chief Commercial Officer at CCV GmbH

The Evolution of Contactless Payments

John Kolthof, Chief Commercial Officer at CCV GmbH explores the evolution in online payment technology – from RFID to Android

For some in the payments industry, talking about “life after contactless” might seem a little presumptuous given that Juniper Research has estimated contactless payments will reach $2.7 trillion in 2021. We have come a long way in payments technology since the first electronic card machine from Visa in 1979, but the last 18 months has seen a dramatic increase in the use of contactless, which is here to stay. Indeed, as the recent “State of Contactless Payments 2021 Report” states, contactless payments are an asset to retailers with 57% of respondents saying they will choose where to shop based on the availability of contactless checkout. Elsewhere, the National Retail Federation issued a stark warning in its research with 97% of respondents saying they did not complete a purchase because of a lack of convenience to complete the transaction.

The challenge for merchants is knowing which of the many technologies and methods of payment for contactless are worth investing in. Juniper’s research suggests that card payments will retain the “majority share” of payments this year, but the pace of technology change is significant. Consumers are demanding ever more choice and convenience when it comes to payment, so merchants must move quickly to avoid being left behind. Technologies such as QR codes and Near Field Communications (NFC) may need to operate alongside embedded payment systems and mobile wallets. Non-fungible tokens (NFT) and Bitcoin are even being talked about as a viable payment method, while the growth in e-commerce via speech should not be underestimated – one estimate from Business Insider Research suggests conversational payments will be adopted by 77.9 million users by 2022.

New terminal generation – Android on the rise
In this ever-changing world of payment innovations, it is clear that one underlying technology is on the rise: Android. Android is enhancing processes at the point of sale in ways that were previously not possible on classic payment terminals, because security regulations and certifications did not allow installations beyond pure payment functions. We have already become accustomed to a world of apps, which accompany, enrich, and also facilitate our lives. Their potential in the payments sector is significant, as they will enable new levels of convenience for consumers and help retailers to enrich the service they offer to customers.

The new generation of payment terminals working with an Android operating system already benefits from excellent battery management and highly efficient performance, thanks to constant updates available through smartphone platforms. More importantly though, merchants and service providers can start to experiment with installing their own apps on a payment terminal. Prices, new products or services can be transferred to the POS in real time, which could have a significant impact on how consumers shop. Retailers have the opportunity to optimise their checkout peripherals quickly and on-demand using apps without investing in additional hardware. Trial versions of app-based POS systems, for example, can be used to experiment to identify the right application and increase user familiarity without incurring significant implementation costs. New business models or – as was the case during the Covid-19 pandemic – new requirements can be quickly integration into Android-based apps, such as switching on a delivery service or linking a traditional bricks and mortar business to an ecommerce platform.

Payment technology must evolve to support a different customer journey.

Why is it important to have such an agile technology underpinning your retail payment environment?
Because the classic customer journey has changed, as has our understanding of convenience. According to the Worldpay Global Payments Report, in China almost half of in-store purchases are made via a mobile phone compared 25% in Germany and 24% in the US. That percentage is only going to increase as the technology improves and smart retailers will recognise the significant opportunities this presents. Consumers will no longer go to the supermarket just to do their weekly shopping. They may also go to refuel their electric or hybrid vehicle. Cashless payment at the charging station and at the checkout in the supermarket should be identical in type and convenience and optimally interlinked: one hour of refuelling includes a free coffee to go, or a free electricity charge for the duration of the purchase.

This modern type of cross-selling must be supported by modern payment systems and combined in the background for the retailer or operator into homogeneous systems that can be integrated quickly – an easy exercise using Android-based management tools. In the self-service sector, payment terminals with Android technology herald a significant milestone in the evolution of retail. Even sales at vending machines (vending, parking, public transport or ticketing), which have been static up to now, are becoming more dynamic and increasing customer loyalty. On state-of-the-art devices, prices can be configured on an hourly basis and interactive service apps can be activated via camera, to name just a few of the functions.

Whatever technology and payment services are adopted, the end goal for merchants must be seamless payment and services at the point of sale. This will create a comprehensively convenient shopping experience that does not stop at the checkout zone. Clearly, there are still concerns among consumers about contactless payments such as security and data protection, systems malfunctioning and a lack of understanding of the technology. However, the value that Android technology offers is that developers are already comfortable using it and it has been widely adopted across many mobile devices, which means there are standards and governance models that make its implementation more reliable. And for many consumers it also is very recognisable and easy-to-use. So, while contactless will clearly be around for many years to come, Android offers a technology framework that could see payments evolving from simply being a transaction to becoming a central mechanism for managing customer relationships, engendering loyalty and spotting new trends.

To remain competitive, retailers must recognise that how customers pay for products or services has the potential to be far more than a transaction, and they will need to gain more understanding technologies such as Android. This can appear daunting but those who understand that a payment terminal is a source of insight and intelligence will gain a significant advantage over those who do not adapt.

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