With consumer spending showing more declines over the last month, retailers need no reminding that the most important part of their business is taking money from customers.
The actual ways of taking payments are becoming more diverse and complicated to manage however as technology multiplies and slowly evolves the way people spend their money.
Traders are faced with a not so straight forward decision of where to put their money and as the recent IT investment by the UK’s leading retailer Tesco shows; technology improvements very rarely come cheap.
For established retailers the question is whether to take the relatively small gamble on being one of the first wave embracing contactless and new prepaid technologies, but for smaller and growing businesses the decision of which payment systems partners to trust can be hugely important to future success.
Jennie Knight, E-commerce Manager at payment systems firm EPOS Partners, warns: “We know how critical the early stages can be in the success of a new store and why choosing the right equipment is important.
“With the retail industry how it is at the present time, retailers need to ensure they are fully prepared to take on the tough problems that may arise and need to have the right measures in place.”
A major concern for any new business is compliance with PCI DSS, the security standard that all firms which handle cardholder information for major debit, credit, prepaid, e-purse, ATM or POS cards must meet.
Version 2.0 of PCI DSS went live at the end of last year and Bill Farmer, CEO of payment services company Mako, admits that the rules are “notoriously complicated”.
Farmer added: “PCI DSS compliance becomes more complicated as payments advance. For retailers, compliance is an onerous process anyway, but it becomes far more difficult when electronic point of sale (EPOS) systems integrate with servers and accounting systems.”
Integration has become more complicated with the number of payment services being offered by retailers, as advances in online, mobile and near-field communications (NFC) expand the possibilities for retailers and consumers alike.
MD for transaction specialists Epay Paul Bartholomew-Keen argued at the Prepaid – 2011 Conference and Expo earlier this year, that the growing pervasiveness of payments like those made via London Underground’s Oyster Card is not fully appreciated by some.
Bartholomew-Keen said: “In future, payment will be made by embedded chips and pressing buttons, not using cards or cash, in fact one day I think we’ll all be using e-wallets, first in cash dominated environments but eventually the adoption will spread wider.”
Contactless payments systems are already visible on the high street, and recent research by Visa Europe suggests that despite its limited roll-out it is already proving popular with customers engaging with the service.
According to its Contactless Barometer, 90 per cent of those who have used the system thinks it has made life simpler and 85 per cent would recommend it to a friend.
Barclaycard has already rolled out its contactless tap payment technology to outlets such as Little Chef, Subway and Wilkinson, telecoms giants Everything Everywhere, O2 and Vodafone have joined forces to promote mobile NFC payments and Google Wallet, a similar service from the internet behemoth, is currently being rolled-out worldwide.
All of this would suggest that we are on the verge of a revolution in payment habits but Farmer told Retail Gazette that there are still hurdles to clear before all transactions are made through prepay, mobile and online.
“A cashless society is very achievable, though perhaps not in the immediate future,” the Mako boss said.
“NFC technology appears to hold a great deal of promise to help us get there, but for now, the widespread adoption of NFC and the costs to consumers need to be sorted first.”
The public do seem to need convincing of the benefits of these easier and more convenient paying methods, with concerns over fraud a major stumbling block.
In Visa’s study only 28 per cent of people thought there should be more retail outlets offering contactless payment whilst 44 per cent expressed concern about security if their card gets stolen.
Mark Austin, Head of Contactless at Visa Europe, argues that this is proof that banks and card companies need to educate customers more about the protection offered to users of the service.
“Contactless cards are subject to the same level of consumer protection as all Visa cards, which means that if you are a victim of fraud you can get your money back,” Austin explained.
“The cards also have in-built security functionality which mean they can only be used a certain number of times before a pin is required.”
There is a danger it seems of a vicious circle by which retailers remain reluctant to roll-out new systems because customers remain unsure about using them, and consumers remain wary of using the new technologies because they are not ubiquitous.
Most agree that mobile, prepaid and NFC payments will sooner rather than later become a common site on the high street but for cash strapped retailers that does not make the decision of when to invest in updating their EPOS offering any easier.