Andrew Fraser, specialist in commercial contracts and terms and condition with Harper Macleod
Is cash set to become a collector’s item?
No is the short answer. At least, not yet anyway.
However, the retail environment is constantly evolving and it is worth considering how your customers will want to pay you in the future.
Over recent years we have seen the growth of plastic as the preferred method of payment for retail purchases.
Most retailers have introduced ‘chip and pin’ technology and handheld terminals for processing card payments are commonplace.
However, technology does not stand still. Cards are now being equipped with ‘Near Field Communications’ technology that allows customers to simply hold their card near a receiver and then enter a PIN to make a payment. But will plastic cards be made redundant too?
The ready availability of smart phones and the prospect of Britain upgrading to a ‘4G’ network (allowing much faster internet speeds when roaming) means that, according to some, cash and cards will be a thing of the past by the year 2025.
Indeed, one US study suggests that by 2017, payments made via mobile devices will be expected to reach $1.3 trillion.
Google Wallet, iWallet, PayPal, Vodafone/VISA, O2, LevelUp, Venmo the list of ‘mobile money’ providers goes on and on.
This industry has grown so much that, in tech-savvy San Francisco, you can venture into a restaurant, call up a menu using the QR code on your table, order your food, pay for it and collect it without ever speaking to a human being. This is completely unnecessary, not at all efficient and removes any aspect of customer service – but it is “cool” and that’s the point.
It is important to note that this restaurant still has old-fashioned menus and boring cash registers handy (only around 30 per cent of their customers bother with the QR codes). However, they undoubtedly distinguish themselves from the competition by adopting this hi-tech approach.
Much like retailers are going ‘omnichannel’ in terms of where they sell their products, perhaps we will see more taking an ‘omnichannel’ approach to payments too. We are yet to see a large shift in retailers moving towards a mobile payment method, however, if you are looking in to it I would recommend the following:
1) Ensure Security
This should go without saying. However, the recent breach of security at ‘Lush’ which occurred between October 2010 and January 2011, meant that hackers were able to access the payment details of 5,000 customers who had previously shopped on the company’s website.
This goes to show that retailers should be very cautious about the security of any data they gather from their customers.
Ideally, retailers could look to “outsource” the collection and storage of customer data by using a third party provider of ‘mobile wallets’ such as those mentioned above. By doing this, security and (more importantly) liability for security will remain with that provider.
2) Check your Terms & Conditions
Your standard Terms and Conditions should tell your customers in plain English precisely what information will be taken, where it will be stored and how it will be used.
3) Make sure your system is resilient.
At the start of their Christmas sale season last year, the websites owned by ‘Dixons’ (including retailers ‘Currys’ and ‘PC World’) crashed. This was allegedly due to simple volume of traffic. It was thought that the following three day outage cost the company in the region of £15million in lost sales. This serves as a lesson that if you want to employ technology in your retail business you have to ensure that it is able to deal comfortably with demand.
In summary, mobile money is still very much in its infancy and is predominantly the domain of the “iGeneration”.
At the moment it appears to suffer from an element of mistrust. Even fans of technology have their doubts over security. The general consensus appears to be that most users would be happy to pay for a coffee via an app, but would be much more cautious when it comes to making larger purchases.
Until the ‘man on the street’ can be convinced, traditional forms of payment still have a long future.
Andrew Fraser is a specialist in commercial contracts and terms & condition with Harper Macleod