Just as the holiday season was getting in gear, CVS Pharmacy offered a glimpse at the future of payments in the food retail world and beyond.
The drug store chain launched a service enabling customers to check out touch-free using PayPal and Venmo QR codes at 8,200 stores. These codes allow customers to securely pay for their items without needing to touch a keypad or sign a receipt, while also being able to access multiple payment methods available in PayPal and Venmo wallets.
According to CVS, this made it the first national retailer to integrate PayPal and Venmo QR code technology in its point-of-sale experience at all stand-alone locations across the country. The touch-free experience will be available to existing PayPal and Venmo customers, while new customers can sign up and link their preferred payment method, usually within minutes.
“Putting our customers’ safety at the forefront of our innovations, we’ve focused resources on finding new ways to make customers’ lives easier and more convenient,” said Jon Roberts, EVP and COO at Woonsocket, R.I.-based CVS Health, at the time of the launch. “Introducing more digital options, including touch-free payments at the register, is in step with changing consumer preferences.”
Fueled by the pandemic and the associated spike in grocery e-commerce, food retailers are embracing new forms of payment. While the main thread linking these innovations is contactless technology, that doesn’t mean that one size will fit all — or that the acceptance of PayPal, Venmo or the myriad other cutting-edge payment forms will guarantee success as transactions become an ever more important part of the overall consumer experience.
“Amazon Go has proven that people want to shop a cashier-less shopping experience,” says Joe Lampertius, president of ChaseDesign, a Skaneateles, N.Y.-based company that helps retailers build better commerce experiences, including through payments.
Now, Lampetius adds, other food retailers — along with banks, credit card companies and other players in the payment space — will have to figure out how to keep up, or come up with other transaction innovations to satisfy consumers, including relatively young digital natives. “It’s going to be an interesting race to who will help expand that technology,” he notes.
Make no mistake, though: Cash isn’t disappearing, especially in the food retail space, even as merchants work to eliminate friction. While the number of U.S. consumers without traditional bank accounts continues to decline — it reached a record low of 5.4% in 2019, according to the FDIC — many consumers still like cash, especially when it comes to some of the smaller purchases made inside grocery stores. Food retailers have no reason to make life more difficult for such shoppers.
Within the larger food and beverage world, those operations — such as quick-service restaurants — that tried to implement no-cash policies have often failed. Consumer backlash has been severe, even in large urban cores, and as John Helmle, EVP and president, financial technology for Winston-Salem, N.C.-based Inmar Intelligence, pointed out, at least 21 local governments and states now require businesses to accept cash.
Even so, the move toward more digital payments in retail continues to gain speed during the pandemic, a trend that will keep affecting grocery commerce. According to Inmar, the most preferred forms of contactless checkout options among shoppers include curbside pickup (57%) and buy online and pick up in store (57%), followed by contactless, in-store self-checkout (56%).
All of that matters because if a retailer doesn’t have contactless payment options, Helmle observes, 28% of shoppers will avoid that retailer and choose an alternative one that offers contactless payment options. Also, 33% say that loyalty to regular, everyday stores has changed since the beginning of the pandemic — further highlighting the opportunity for food retailers to gain ground via payments and the experiences that they foster.
Recent data from Dublin-based global information services company Experian underscores that point. It found 60% of consumers have higher expectations of their digital experience than before COVID-19. More specifically, 61% of people surveyed now regularly order groceries or food delivery online, a seven-point increase in this type of online payment since July. Further, most shoppers (55%) have also been avoiding using cash in general since the beginning of the pandemic.
Not only that, but the Experian study discovered that one in three consumers are only willing to wait 30 seconds or less before abandoning an online transaction, specifically when accessing their financial accounts. You can bet that what happens in that area will help set consumer expectations for food and other types of retail: Consumers, over time, tend not to differentiate among discrete digital and mobile experiences.
Yet it’s unclear whether all food retailers have heeded that message, even as the new year looms. While half of the businesses surveyed have either mostly or completely resumed operations since COVID-19 began, only 24% are deliberately making changes to the digital customer journey.
Such hesitation may not only risk consumer loyalty, but also cost retailers. That’s because interchange is a significant expense for food retailers, and failing to embrace and promote cheaper forms of digital payments — often, transactions made via apps, or certain types of debit — can eat into margins while also failing to hook shoppers.
“Not only have more consumers embraced digital transactions out of necessity during the pandemic, they’re having a positive experience, and their needs and expectations are rapidly growing,” says Steve Wagner, global managing director of decision analytics for Experian, whose North American headquarters is in Costa Mesa, Calif. “To win, businesses must invest now in their digital experience. The cost of doing nothing is greater than investing in the customer journey.”