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MAG Sponsor Spotlight: Forecasting 2019 Payment Trends Based on Consumer and Merchant Feedback (MAG Quarterly- Volume Six, Issue Three)

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By Joe Ferguson, Fortiva Retail Credit

December 6, 2018

As retailers respond to customers’ evolving demands for a great omnichannel experience at every point of the shopping journey, tech-savvy payment vendors and innovative fintech providers will continue evolving in 2019 to make it easy for merchants to provide a personalized customer experience, including with more POS financing approvals for customers across the credit spectrum with frictionless, simple applications. Fortiva Retail Credit’s Joe Ferguson, along with input from Robert Mau from the payment practice of consulting firm Oliver Wyman, highlight the trends that will empower credit payments to move quicker and more effectively across mobile, web and all other channels the customer will engage.

Retailers are responding to customers’ evolving demands for an omnichannel experience at every point of the shopping journey. With the help of the fintech boom, improving payment solutions to create and nurture more satisfied shoppers will be increasingly prevalent in 2019. A recent study by Adyen found that 55% of shoppers will spend less or go elsewhere when a merchant doesn’t accept their preferred payment method – showcasing that responsive retailers will continue to benefit as long as they keep up with innovation.

As Merchant Advisory Group CEO Mark Horwedel and JPMorgan President Kim Fitzsimmons noted during their keynote address at the 2018 Annual Conference in September, customers increasingly embrace tech solutions in every aspect of their lives. This article will highlight the next steps for payment innovation to engage shoppers via personalization and drive purchase loyalty across channels.

Personalized Customer Experience
Retailers can improve customer engagement and sales by offering personalized promotional communications throughout the payment process. A study by SalesForce found personalized recommendations yield a 500% increase in customer spending for every visit. Tech-savvy payment vendors and a boom of innovative fintech providers are making it easy for merchants to bring all of the latest and greatest solutions onto their omnichannel platforms – allowing for a more integrated, frictionless and time-saving customer experience. 

Different customer profiles require different financial needs to maximize their purchases. To accommodate this, multi-channel points of sale must incorporate a broad spectrum of payment methods. Retailers can achieve success by keeping their systems up to date with new payment application capabilities, offering credit options with varying terms to pair with a customer’s individual payment needs and having alternative financing programs to extend funding to customers across the credit spectrum. Through these stages, personalized communications targeted to each shopper should be number one on the to-do list.

It doesn’t get more personal than one’s mobile phone these days, and Robert Mau, partner in the payment practice at consulting firm Oliver Wyman, notes the next big shift in POS lending is the onset of direct-to-consumer or retailer-curated mobile lending platforms. “This allows a person to discretely get approval for a purchase on their own phone and load a one-time use token into a pay app for tap-and-pay payments,” Mr. Mau explains. “This is great for a shopper, yet starts to disintermediate the merchant and captive lender from the process. It’s important for merchants to provide this type of service if they want to maintain control over the lending product choice.” 

As customer data becomes more ubiquitous every day, retailers are also better able to send personalized promotional materials to shoppers after they’ve made a purchase. More retailers will leverage the data afforded to them in new ways this coming year, such as direct emails or mobile notifications letting customers know the balance of their store-branded line of credit and encouraging them to return for more purchases.

Greater POS Financing Approvals
Look no further than point of sale financing for a concrete example of how tech innovation is empowering retailers to provide a convenient, frictionless customer experience by offering a suite of payment options across their various channels.

While store-branded credit cards and their applications are commonplace these days, retailers are increasingly leveraging alternative financing solutions that can extend credit to customers whose FICO scores do not qualify for a prime-issued card. By offering a store-branded credit card or line of credit payment solution to less-than-prime consumers (those declined by the prime credit programs), retailers can close more sales by meeting the needs of customers with credit challenges – all without sacrificing quality.

To balance the need for personalized financing options with the importance of a frictionless check-out experience, it’s essential for payment platforms to provide a seamless transition between prime credit applications and similar financing programs for consumers with less-than-prime credit. “Access, simplicity and security are the really important factors to a customer when applying for store credit,” says Mr. Mau. “They want to make sure they can get access to the credit line required for the purchase and do that in a way that protects their credit score, doesn’t create an embarrassing turn-down and works fast and easy.”

To accomplish this, prime and second look financing providers are working together to ensure an instant transition between applications without additional input from the customer for the second application. Furthermore, the market of technology providers specializing in this hand off continues to grow, with more providers bringing financing solutions together to empower automatic applications flowing between multiple lending programs.

“Ideally, there’s never even a feel of turn-down from one lender to the next,” Mr. Mau explains, adding that it is important to strive towards this goal even though product, disclosure and notification requirements make it impossible to completely eliminate the turn-down. 

The result of this tech integration is (1) customers can qualify for financing that fits their specific credit profile to help make larger-ticket purchases, and (2) they enjoy a seamless checkout experience with the same application process as prime credit customers. With leading second look financing providers, they can also receive a credit card that looks the same as the prime-issued card, and their financing approval will earn them a revolving line of credit, which allows them to return for years to come. 

Payment Urgency
Customers today expect immediacy in every aspect of their shopping experience, which has been the driving force behind the instant, one-stop application process for different financing options highlighted in the previous section. Retailers are also getting more expediency moving forward as the Electronic Payments Association (NACHA) continues to enhance Same Day ACH capabilities. 

After two years of rolling out provisions to move payments from financial institutions to retailers and other recipients more quickly, NACHA has announced three enhancements planned for the next two years that will expand access to and benefits of Same Day ACH transactions, including:
 
  1. Sooner – Beginning Sept. 20, 2019, funds from Same Day and traditional ACH may be made available earlier in the day.
  2. Larger – Effective March 20, 2020, the dollar limit per Same Day ACH transaction will increase to $100,000.
  3. Later – After September 18, 2020, Same Day ACH transactions may be submitted two hours later every business day. 

Conclusion
Shopper personalization has catalyzed innovation into the omnichannel payments space, including expanded credit options and a boom in tech solutions to encourage broad offerings with a frictionless customer experience. With consumer demand and industry trade groups driving improvements to breed speed and expand convenient payments to ALL users, 2019 will be the year for retailers to grow their revenue via omnichannel payment solutions.

Joseph Ferguson is the Director of New Business Development at Fortiva Retail Credit, the only second look consumer financing program serviced by a publicly traded company with decades of experience servicing credit-challenged consumers (issued by The Bank of Missouri). He may be contacted at joe.ferguson@fortivafinancial.com.