Stephen Peters offers advice to the payments industry at large, and it’s a message based on removing friction from the commerce process.

The daily torrent of announcements touting some new advance in the payment industry has grown so large that lately I’ve given up trying to track them all. New technology for contactless payments, POS, m-POS, biometric authentication, mobile payment apps, and a flood of mobile wallets from tech giants, banks and merchants.

Some of these announcements are genuinely interesting and disruptive, so they will pique my interest, but in most of them, I’ve detected an underlying problem in most of the announcements. And that problem is … it’s not about the payment. Let me explain.

I believe commerce is in the early stages of a huge transition. We’re moving from a world where commerce consists of a series of loosely connected ‘actions’ that end up in a customer getting some product or service, to a world where customers focus on product discovery (the most enjoyable part of the process), and the rest of the ‘transaction’ is invisible.

Most of our commercial transactions (aka shopping) today look like this:

  1. Discovery: Find the merchant and select what you’re looking for (usually fun!).
  2. Checkout: Order and pay (online or in-store, really not fun).
  3. Fulfilment: Take possession of whatever you purchased (mostly not fun).

But the future of commerce will just be:

  1. Discovery: (Fun!).

The steps of Checkout and Fulfilment are still present, but are either invisible or friction-free. The transition won’t happen overnight, but the shift is under way. So my advice to the payments industry at large is: transform your products in order to make payments invisible. I don’t think enough payment innovators are looking at the entire shopping experience. Now I understand that’s controversial advice for many, but consider the following truth:

Consumers don’t shop with a merchant because they enjoy paying (well OK, except for the 2.5% of Apple Pay super-early adopters). They shop with a merchant because they wanted whatever product or service the merchant was offering. Payment is a necessary evil. Everything else after discovery is second order. In other words, consumers suffer through a checkout phase only to get to the fulfilment stage, where more often than not, more suffering ensues.

My typical supermarket experience:

  • Drive to the store.
  • Get a shopping cart.
  • Wander around the store.
  • Put things in the cart.
  • Get to the checkout.
  • Stand in line.
  • Put things from the cart onto the belt.
  • Get out my credit card.
  • Enter PIN.
  • Wait while the card is authorised.
  • Transfer goods from belt to bags.
  • Carry bags to car.
  • Drive home.
  • Unpack car.
  • Place goods in pantry.

That’s a truly dreadful experience. Some of you will point out that I could make it simpler by ordering online, and I do this sometimes. It’s marginally simpler, but often the product selection and payment steps are worse. 3DS anyone? Ugh.

Need more proof? Here are some well-known companies that have transformed the shopping experience into something where the payment and fulfilment steps are either invisible or vastly streamlined.

Uber – Order the car, track its location, get in and get out at the end of the journey. No payment step required (unless you choose cash).

Airbnb – Search for a property, book and pay online. At the end, just leave the keys on the way out. No waiting in a line to check out of the hotel.

Amazon – Famous for its patented 1-click checkout, discovery is often a curated experience, and the checkout and fulfilment process is as simple as just clicking one button. Everything else, including fulfilment, can be automatic. Amazon is now working on the ‘no checkout supermarket’.

iTunes – Apple has something like more than 800 million cards on file. Its recent devices and software allow iTunes purchases with just a single fingerprint authorisation, and if you use Safari, this same experience can be extended to more ecommerce transactions.

Starbucks – Order ahead and pay using the Starbucks app, and collect your coffee that’s waiting for you. No more morning queues to order and pay. And normally you will get some shopping rewards as well.

Removing friction

In all of these examples, the checkout and fulfilment process is either invisible or extremely low-friction. You set it up once and rarely revisit it. Removing friction from the commerce process is transformative, leaving merchants to focus on making the discovery awesome. Now, these companies are also successful because of their innovations in both discovery and fulfilment, but this is a message for payment innovators.

Instead of just accepting “that’s just the way it is”, these companies set out to transform the entire shopping experience.

Payments innovators must look to make themselves invisible. The best way for them to do this is paradoxically by making themselves visible. By partnering with merchants and finding ways to help those merchants eliminate the checkout process; by partnering with logistics firms to streamline fulfilment; above all by removing friction from the shopping process. Don’t assume a shiny new technology like say Apple Pay will solve the problem, because the stats are in and it’s not the solution. And anyway, GAFA are all diligently working to disrupt the payments business anyway, so there’s no sense sitting around waiting, because one of them will eventually get it right.

So what does this all means for those of us working in payments? It’s not about the payment, it’s about the experience.

READ NEXT: Frictionless finance with fintech

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Image by Irina Shatilova,

About the author

Stephen Peters

Stephen Peters is director at Aluna Pte in Singapore, helping enterprises undertake payments innovation and transformation journeys. He is also VP business development at the ai Corporation. He believes the intersection of banking with AI, blockchain, cloud, data and mobile, coupled with worldwide regulatory initiatives to introduce faster payment schemes, will define the future of banking and financial services.

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