Optimizing payments for omni-channel commerce - 5 best practices - Adyen
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Optimizing payments for
omni-channel commerce
5 best practices
1 www.adyen.com
Foreword
Adyen, the payments technology leader, commissioned Edgar,
Dunn & Company (EDC), an independent global financial
services and payments consultancy, to undertake this white
paper. The white paper would not have been possible without
valuable input from key merchants that shared insights into
their advanced omni-channel payments strategies. Adyen and
EDC would like to thank Dave Redmond of Inditex, Virginie
Melaine-Christensen of Burberry, Derk Busser of de Bijenkorf,
Martijn Cornelissen of Rituals, Frans Jonker of ticketscript, and
Jan van der Holst, for contributing their time and knowledge to
this research.
2
Contents
Executive Summary 4
Introduction Omni–channel from buzzword to reality 6
Section 1 What are the main use cases that merchants are focusing on, and their benefits? 8
Use case 1 Endless aisle 9
Use case 2 Click and collect (buy online, pick up in-store) 10
Use case 3 “One–click” in an omni–channel environment 12
Use case 4 Omni–channel returns 14
Use case 5 Future use cases 16
Section 2 What are the best practices to ensure that payments can support these omni-channel use cases? 18
Best practice 1 Make the payment step as frictionless as possible 19
Best practice 2 Three Ts: Test, Train, and Top champions 21
Best practice 3 Centralize payments management 22
Best practice 4 Leverage authorization capture delay 23
Best practice 5 Adjust fraud prevention approaches 24
Adyen: Payments as a key driver of omni-channel commerce 26
Appendix What are the three main drivers of change in favor of omni-channel? 30
Driver 1 Changes in consumer expectations and behavior 30
Driver 2 New technologies 31
Driver 3 Regulatory changes and emerging standards 33
Conclusion and next steps 34
3
Executive
Summary
Location, location, location. This has
been the mantra in both real estate
and retail for decades. The origin of
this famous mantra was apparently
a 1926 real estate classified ad in the
Chicago Tribune: “Attention salesmen,
sales managers: location, location,
location, close to Rogers Park1.”
However, times are changing. The
emergence of “omni-channel” is driving
major restructuring within the retail Section 1 overview - use cases
sector as merchants seek to serve the
omni-channel shopper, who is keen to Use case High–level description Benefits for merchants
buy whenever, wherever and however
they want. This white paper undertaken 1. Endless aisle Consumers can make Helps address OOS issues
by Edgar, Dunn & Company (EDC) an online purchase that result in 4% loss in
demonstrates that “omni-channel” is no while in-store for out-of- category sales. Adyen’s
longer just a buzzword, and provides stock (OOS) items via a merchants grew sales by
examples of implementations. consumer-facing tablet (or approximately +2%.
in-store kiosk) with a card-
The new guiding principle for retail accepting mPOS.
may no longer be the 1926 classified
ad’s mantra, but instead: experience, 2. Click and collect Consumers can request to 32% of consumers (UK)
experience, experience; with “payments” (Buy online, pick up their online shopping purchased an additional
as a key enabler for delivering this omni- pick up in-store) cart at a physical store item while in store, with an
channel customer experience. (sometimes same day). average extra spend of £18.
3. Omni–channel Consumers can store An Adyen merchant
This white paper does not discuss
one–click their card details during generated up to 55%
omni-channel in a generic or theoretical
an e-commerce or face- (ticketing operator)
manner, but takes a much more
to-face purchase, and incremental sales thanks
pragmatic approach involving specific
can pay via one-click to one-click.
real-life examples (based on interviews
or zero-click for future
with merchants) and tangible data
m-commerce.
about their impact. It is divided into
three sections:
4. Omni–channel Consumers can return Lower level of return fraud
returns their online purchase via (a $17.6bn per annum
Section 1: Examples of omni-channel
any physical store and issue in the US alone), plus
initiatives and their actual impacts
receive a refund on their an opportunity to cross–
card. sell.
Section 2: Payments-related best
practices for omni-channel merchants 5. Future use Deployment of mobile Typically merchants
cases wallets like Apple Pay; expect a higher
Appendix: Insights into what drives the social media payments; conversion rate (especially
emergence of omni-channel mPOS; suspended basket; among m–commerce
online view of stock transactions).
availability; faster delivery
time; Internet of Things.
1 Source: http://www.nytimes.com/2009/06/28/magazine/28FOB-onlanguage-t.html
4
Section 2 overview - best practices Appendix - drivers of
omni-channel
Best practices Key takeaways for merchants
Driver 1: Changes in consumer
1. Make the payment step a. Enable payment data storage for a seamless expectations and behavior
as frictionless as possible omni-channel customer experience Mobile devices (especially
b. Ensure the right payment acceptance policy smartphones) are changing the
for each channel consumer’s daily life, how they shop,
c. Deploy innovative in-store technologies to and how they make their purchase
address real pain points decision.
2. Three Ts - Test, Train, a. Test in the physical environment For instance, over 25% of consumers in
and Top champions (“test and fail fast”) Australia or the US changed their mind
b. Train (especially sales assistants) about an in-store purchase following
c. Identify top champions in physical stores research on their smartphone. Also
over 40% already make purchases on
3. Centralize payments Consolidate payments partners across channels
their smartphone.
management and countries, and centralize internal back-office
activities such as reporting and reconciliation.
Driver 2: New technologies
A long list of new technologies
4. Leverage authorization Authorization capture delay at the point-of-
are impacting and enabling new
capture delay sale allows merchants to receive a payment
omni-channel use cases including
authorization, but only capture it when the order
mPOS, in-store kiosks, near field
is shipped, or cancel it in case the goods cannot
communication (NFC), new mobile-
be shipped.
based wallets such as Apple Pay that
5. Adjust fraud prevention Merchants should adjust: leverage tokenization, and beacons.
approaches a. Fraud policy such as relevant velocity rules
b. Fraud tools such as dynamic use of 3D Secure Driver 3: Regulatory changes and
c. Internal organizational structure and emerging standards
fraud processes There are a large number of regulatory
d. Fraud KPIs changes that typically favor merchants,
including emerging international
standards (such as nexo) that will
enable greater agility (thereby
supporting the move towards omni-
channel), the MIF regulation and PSD2 in
Europe, and the increasing adoption of
EMV globally.
5
Introduction
Omni–channel
From buzzword to reality
Why is omni-channel such a big deal? As the retail business has evolved, merchants
have typically set up each sales channel (e.g. telephone, online) separately. This
means that the current situation for a merchant typically involves:
“As it evolves, digital retailing is quickly •• Customer service organized around each specific channel; no single view of the
morphing into something so different customer’s interactions with the different channels has been created or held
that it requires a new name: omni– centrally and made available across the whole business regardless of the function.
channel retailing. The name reflects •• An organizational structure focused on each channel: for instance, a marketing
the fact that merchants will be able team focused exclusively on the e-commerce channel, and another marketing
to interact with customers through team focused on in-store sales.
countless channels—websites, physical •• An IT infrastructure and contracts with external partners dedicated to each
stores, kiosks, direct mail and catalogs, channel; for instance, arrangements with payment service provider (PSPs) and
call centers, social media, mobile devices, acquirers focused exclusively on online payments, and another set of payment
gaming consoles, televisions, networked partners for in-store payments.
appliances, home services, and more •• Business processes and rules centered on each channel: for example, there is
(…) an entirely new perspective—one typically an e-commerce stock that is segregated from the stores’ own stock, and
that allows them to integrate disparate online sales orders can only be fulfilled from the e-commerce stock. This can
channels into a single seamless omni– generate unnecessary delays in fulfilling online orders and clumsy processes for
channel experience (…)”.2 consumers to return purchases.
2 Source: Harvard Business Review, December 2011, “The future of shopping” by Darrell Rigby
6
Burberry’s in–store iPads
Omni-channel as a key growth driver for merchants
Burberry is a luxury goods retailer with a very impressive
growth record in recent years. Its retail sales increased by
•• Merchants addressing new initiatives as isolated “projects” 15% in full year 20143. Burberry explained this growth to its
which rarely adopt any joined-up thinking across the investors by citing three key drivers, including one related to
entire business. This can result in a disjointed customer omni-channel:
experience, especially when the customer wishes to deal
with the merchant across different channels for the same “Reflecting changing consumer behavior, Burberry continued to
transaction. blur the lines between the physical and digital (or offline and
online) to enable customers to interact with the brand however
So why is it bad to have stand-alone sales channels? First, it is they choose. For example, orders taken on iPads in-store
bad for consumers because it does not support the vision of a accounted for over 25% of total digital sales - up from around
“single seamless shopping experience”. For consumers, buying 15% last year.”
across stand-alone channels is like buying from different
merchants. As this white paper will show, this fragmented Blurring the lines between physical and digital, a.k.a. omni-
customer experience results in missed sales opportunities. channel, has been a key priority and success factor for Burberry.
Second, it is bad for merchants: not only because of the missed Other merchants have now set similar priorities. Omni-channel
sales in the near term, but also because it will put merchants initiatives, i.e. integrating sales channels (e-commerce, mobile,
at a competitive disadvantage in the long term if they can not social, catalog, and stores), were highlighted by 76% of retail
deliver the type of customer experiences that omni-channel CIOs as one of their primary business priorities for 2015, an
merchants will be able to deliver. increase from 61% in 20144.
In a nutshell, many merchants remain organized around
stand-alone sales channels (with differentiated organizational
structures, separate IT systems, separate business processes,
separate partner relationships, etc.). This fragmented approach
is a barrier to delivering a seamless and integrated customer
experience across all channels.
3 Source: http://www.burberryplc.com/documents/results/2014/brby210514.pdf
4 Source: National Retail Federation/Forrester Research Inc. Report “Retail CIO Agenda 2015: Secure And Innovate” 7
Section 1
What are the main use cases
that merchants are focusing
on, and their benefits?
Rather than discussing the topic of omni-channel in a generic or
theoretical manner, the authors of this white paper decided to take a
much more pragmatic approach. EDC, as an independent consulting
firm, undertook in-depth interviews with Adyen’s merchant clients
(Burberry, de Bijenkorf, Inditex, ticketscript, and a global apparel
brand) in order to understand specific use cases. For each use case,
these interviews covered the following topics:
•• What is the problem / issue that the merchant tried to address?
•• What is the omni-channel solution that the merchant has already
deployed in order to address this problem / issue?
•• What are the benefits and the results driven by this deployment?
•• What is the roadmap of future initiatives?
8
Use case 1 de Bijenkorf kiosk
Endless aisle
The biggest nightmare for a merchant in-store. The kiosks have helped achieve So what are the benefits associated with
is to spend millions on marketing, the following: this “endless aisle” use case? A study
merchandising, sales training, and 1. The customer experience has been conducted by the Grocery Manufacturers
so on, and then be unable to fulfill a streamlined; in store, consumers with of America 5, which surveyed 71,000
shopper's order when they come into a de Bijenkorf client account (typically consumers in 661 retail outlets, found
the merchant’s store. This is especially half of consumers) are guided by a sales that the average out of stock rate6 in a
relevant for verticals such as clothing assistant at kiosks, where they can login grocery category was 7.9%, and it costs
(with each product coming in multiple simply by using their email address with retailers a 4% loss in category sales. This
sizes or colors), or for specialty no password, and can pay via one-click study confirmed the typical consumer
city center stores (e.g. outdoor if their payment credentials are stored response to OOS cases that explains this
equipment) that provide a “long tail” online. This process relies on the de 4% loss in category sales. When faced with
of products within a small retail area. Bijenkorf employee to “authenticate” the an OOS issue in one store, close to 1/3
The key challenge is how to ensure consumer, thereby avoiding the usage of (31%) of consumers buy the same item
that an out-of-stock (OOS) issue does any login passwords (online the password but at another store. In addition, nearly
not turn into a lost sale. is always requested at login). In fact, it 10% do not purchase the item at all.
could be argued that this merchant does
Let’s focus on the “endless aisle” not provide a one-click but a zero-click In the de Bijenkorf case, two key results
capability (i.e. the ability for consumers functionality, i.e. a completely frictionless were of interest:
to purchase from the merchant’s full payment experience. •• Close to 90% of in-store kiosk
product catalog, irrespective of what transactions are related to OOS cases.
is in stock within a given store) that 2. For cases when a consumer has to The other 10% corresponds to bulky
the department store de Bijenkorf has use their payment card, a mobile POS purchases whereby consumers prefer
deployed in the Netherlands to address terminal is integrated within the kiosk the convenience of home delivery.
this issue. that can handle chip & PIN transactions. •• Initial indications are that these in-store
This is a real case of “blurring the lines” kiosks have generated a significant
This department store has set up with a digital order combined with a chip incremental sales at de Bijenkorf.
in-store kiosks for consumers to make & PIN card transaction! Interestingly this merchant noted
an online order (i.e. among the full that other smaller and more
online product catalog that would 3. Consumers can request a next-day specialized merchants have achieved
include the complete range of products delivery at their home address or via a incremental sales in the range of +10%
in all sizes and colors) while shopping network of collection points. to +14% with a similar approach.
5 Source: Investigating Effects of Out-of-Stock on Consumer SKU Choice, Hai Che, Jack Chen, and Yuxin Chen
6 Defined as the percentage of SKUs that are out-of-stock in a store at a given time point. 9
Use case 2
Click and collect
(buy online,
pick up in-store)
Delivery has always been a key issue to address since
the inception of e-commerce: how can merchants deliver
efficiently (at a low cost) while providing a convenient
solution?
Initially most e-commerce merchants only provided one
delivery solution: home delivery combined with differentiated
pricing (e.g. free delivery for slower delivery vs. a fee charged to
consumers for next-day delivery). This type of delivery solution
is sub-optimal for many consumers and merchants; many
consumers find it inconvenient to wait at home over a range
of hours to receive and sign for their delivery, and it can be an
expensive cost layer for merchants.
In order to address this issue many merchants have deployed a
“click and collect” - also known as “buy online, pick-up in-store”
- option for online purchases. For instance, nearly 50% of
a sample of online UK retailers7 offers this option. Different
approaches can be applied:
•• Consumers can request to pick up their online shopping
from one of the merchant’s own physical stores (or at a
facility built by the merchant nearby their main store) at
an agreed time, such as next day, or some merchants even
enable consumers to pick up their orders within one hour.
•• Consumers can pay online and collect at the store, or some
merchants enable consumers to pay in-store at time of
collection.
•• Consumers may also pick up orders at third party providers
such as Collect+, Doddle, Yodel, etc. eBay provides a
click and collect service in partnership with Argos, the
UK electronics retailer. Example: For many Canary Wharf
workers in the UK, the convenience of receiving a parcel at
work is no longer possible. Banks including HSBC, Citi and
JP Morgan have all banned non work-related deliveries. This
is one of the reasons why Doodle has opened a new Canary
Wharf store to handle the 11,000 parcels delivered on
average every month just in the E14 postcode.
7 Source: IMRG Collect+ UK Click & Collect Review 2015 (sample of 46 online retailers)
10In the case of Zara, the e-commerce channel was set up not
as a stand-alone channel but as a support channel for the
physical stores, and click and collect was enabled from day
one. Typically click and collect is provided for free with pick-up
at any store within 2-3 days:
Examples of delivery options at Zara
“Click and collect” has proved popular in certain markets,
especially in France. For instance, one tier 1 French merchant
achieved a 30% penetration of buy online, pick up in-store
orders (vs. close to 50% via home delivery and the remaining
20% via a third party network).
Results like these show that buying online and picking up
in-store meets a clear consumer need, and the even better
news is that it helps generate incremental sales for merchants.
In Verdict’s March 2015 survey8 of 10,000 online UK shoppers,
32% said that they purchased something else on the last
occasion they bought online and picked up in-store, and the
average additional in-store spend was close to £18. As one
specific example, a global apparel brand interviewed for this
white paper indicated an expectation of incremental sales
closer to 5% for this use case.
The Jumbo supermarket chain highlighted another positive
benefit, namely that click and collect can help with customer
acquisition: in the initial phase of their implementation, 40% of
users who buy online and pick up in-store are new customers
for this merchant.
It is difficult to evaluate the overall operational cost of providing
click and collect, but it is likely to be lower (compared to providing
free home delivery) based on anecdotal evidence. Fraud levels are
also typically much lower compared to home delivery, especially
if payment is handled in-store as customer-present transactions.
Finally, it should be noted that when transactions are finalized
in-store as the shopper picks up their item, the merchant benefits
both from the EMV liability shift and Point-of-Sales interchange
fees, which are typically lower than e-commerce interchange.
All of these results indicate that there are direct and indirect
benefits associated with click and collect.
8 Source: Verdict, Patrick O’Brien, 30 June 2015
11Register card Charge registered card
Shopper purchases online, Downloads app Adds goods to Pays with
stores card and registers basket one-click
Register card
Shopper visits Registers card at POS and Downloads app Adds goods Card is charged when
the store receives login details by email and logs in to basket goods are shipped
Overview of one-click omni-channel checkouts
Use case 3
“One–click” in an
omni–channel
It is just the same with one-click that enables consumers to pay
for their online purchase without re-entering their payment
environment
credentials each time. It appears to be an obvious idea but it
was so important to Amazon’s success that Amazon obtained
a patent in 1999 in the US for this technique. It might be hard
Most of us suffer from a so called “hindsight bias” (“I knew to quantify the impact of one-click on conversion rates, and it
it all along”), and that’s why many great ideas appear to be will vary a lot by merchant sector and country, but it will most
obvious after they have been discovered. Think of wheels likely generate incremental sales. For instance, one of Adyen’s
on a suitcase. Seems like such an obviously good idea but merchants in the gaming sector conducted A/B testing to
it was only introduced in 1970. If it seems like such a “no monitor the impact of one-click and identified that it generated
brainer”, what were suitcase manufacturers thinking of 25% incremental sales. So the challenge is: how do you replicate
during the 50s and 60s? the success of one-click in an omni-channel environment?
In order to address this challenge an increasing number of
merchants are enabling new ways for consumers to save and
then re-use their payment credentials. Two typical scenarios
are emerging, that can be seen in the diagram above:
•• In the first scenario, the merchant enables consumers to
save their card details during a traditional e-commerce
purchase so that these consumers can then pay for future
purchases via the merchant's mobile app using one-click.
•• In the second scenario, the merchant enables consumers
to save their card details during an in-store face-to-face
purchase so that these consumers can pay via one-click in
future m-commerce transactions.
12citizenM check-in kiosk
For instance, citizenM, a global hotel chain, worked with Adyen For m-commerce, one-click is a must. The main reason is
to implement a solution where payment details captured that conversion rates are much lower among m-commerce
online at the booking stage are used to support a frictionless transactions, typically 1/3 of traditional e-commerce
omni-channel customer journey. When arriving at the hotel, conversation rates. One of the main reasons behind this
guests are able to bypass the traditional queue and check-in much lower m-commerce conversion rate is the additional
themselves at check-in kiosks. The RFID-enabled room card “friction” due to the need to enter the long suite of card details
that guests receive at check-in can be used in the hotel to pay into a much smaller device (compared to the traditional
for food, beverages, and services. The checkout process is also desktop or laptop). One-click is therefore likely to have a
done by guests themselves at the kiosks and the receipts can very positive impact on m-commerce conversion rates.
be emailed to them.
One large ticketing operator working with Adyen explained:
This is all possible because citizenM uses Adyen tokenization “comparing our sales six months before and six months
technology, which also makes possible for returning guests after the implementation of the one-click feature, we
to make new bookings with one-click, without having to enter benefited from a 55% increase in incremental sales. While
their payment details again. At the hotel they will even be this is due to a combination of factors, we are convinced
able to check in and out using the room card they have used that one-click played a significant role in generating these
previously in any citizenM hotel around the world. incremental sales.”
citizenM payment page
13Use case 4
Omni–channel
returns
Returns are not “sexy”, but the topic is a very important Returns are part of the “customer service” value proposition
issue for both consumers and merchants. Returns provide provided by merchants but can be a major drain on the
“peace of mind” for consumers that they can return a retailers’ financials, largely because returns represent a
purchase if it does not meet their needs (and makes it more significant proportion of total sales: 8.9% of all sales in the
likely that they will make the initial purchase). According US in 201410. Returns can be higher in certain segments, such
to a 2014 study by Accenture, 42% of shoppers said they as fashion, and in certain markets; there is a high degree of
wanted to be able to bring online orders back to a store, returns in Germany relative to other EU markets (although
and a greater number of retailers (49%) said they were able this is likely to change as a result of EU wide legislation that
to do so9. states consumers must bear the cost of returning products).
9 Source: Multichannel Merchant, Executive Summary: Returns, January 2015
14 10 Source: 2014 Consumer Returns in the Retail Industry, NRFThis ratio is even higher among online sales, where returns
were estimated to be 12% of all sales by the 2014 State of
Online Retail report from Forrester and Shop.org.
Not only is it costly for merchants to process these returns, but
fraudulent returns are also a challenge. In the US alone, the
NRF has estimated that return fraud and abuse amounted to
$17.6 billion in 2014 (6.2% of all returns).
In order to address these returns-related challenges an
increasing number of merchants are enabling omni-channel
returns. Typically this involves:
•• Enabling an additional option for returning online purchases,
whereby consumers can return their online purchase via any
of the merchant’s physical stores and get a refund on the
card that they used to make the initial purchase.
•• Replacing the existing return options (e.g. sending the
online purchase back to the merchant via traditional mail
or delivery services such as Fedex) with a single option of
returns via the merchant’s physical stores.
•• Providing the option of returning goods via third party
providers, such as Collect+, Doddle, Yodel which are located
at convenient locations, such as rail stations, where there is a
high commuter footfall.
Merchants expect the following benefits from this “omni-
channel return” use case:
Lower levels of return fraud: Consumers are less likely to
“misbehave” if they need to return their online purchase by
interacting with a sales assistant as opposed to sending it
back in a more “anonymous” manner via mail.
Opportunities to cross–sell other products to the
incoming consumer: Even if the level of cross-selling is
not likely to be as high as for “click and collect” (where UK
merchants achieve a 32% cross-sell rate11), a returning
consumer who was willing to make an initial purchase from
this brand still provides the sales assistants with another
opportunity for selling.
11 Source: Verdict, Patrick O’Brien, 30 June 2015
15Use case 5
Future use cases
Based on the merchant interviews, there are a number of
other projects aimed at enabling new or improving existing
omni-channel use cases, including:
Deployment of mobile wallets such as Apple Pay
For merchants such as Rituals, interactions via the consumer’s mobile is absolutely
essential as m-commerce already represents over 50% of customer-not-present sales,
and as mobile enables innovative types of interactions. In late 2014, Rituals launched a
mobile-based solution through which consumers in Germany and in the Netherlands
could send a gift card along with a video.
Merchants such as Rituals are very interested in accepting mobile wallets such as
Apple Pay (and/or whichever mobile wallets will be adopted by their consumers) that
Touch-ID checkout with Apple Pay can be used for convenient in-store contactless purchases and for in-app purchases.
Social media as a support channel for payments
For merchants like KLM, social media is a very important service
channel to handle large volumes of questions (over 35,000 questions
per week) via Facebook or via Twitter from customers that have
already bought a plane ticket.
A lot of these questions are related to topics such as a potential
change of flights, and therefore it was important for KLM to provide
a simple payment functionality (e.g. to pay the change fee) following
a customer request for a flight change.
KLM worked with Adyen to generate a transaction-specific “social
payment link” that can be sent to a customer wanting to make an
immediate payment following their request via social media.
Social media payment (KLM example)
Leveraging mPOS for card acceptance outside of traditional stores
ticketscript enables event organizers to sell tickets to their consumers via a
professional looking “white label” website capability along with an advanced back-
office dashboard. Initially, ticketscript focused on the online / mobile channel but
recently launched a “ticket box office kit” for face-to-face ticket sales, e.g. at the door
of the event. This kit contains a tablet, printer, and mPOS terminal to accept cards.
Thanks to ticketscript, event organizers can sell across multiple channels (including
“at the door”), provide mobile tickets, and manage their event via a single dashboard.
ticket box office kit
16“Suspended basket”
Merchants like Burberry would like to allow a consumer to start a shopping basket
in one channel (e.g. in-store or via their website), keep it open for a period of time
(e.g. 24 hours) and allow this consumer to make changes to this shopping basket and
initiate the payment via any other channel.
Online view of physical stock
availability Internet of Things (IoT)
For merchants such as de Bijenkorf, a and wearables
major improvement will be to provide There may be some
an online tool for consumers to obtain BUY ONLINE degree of hype around the
real-time information about the Internet of Things (IoT),
availability of a given product at one of but it continues to gather
their stores. This will respond to a real RESERVE IN STORE momentum. The launch of
customer need; it is currently the main the Apple Watch and health
reason for customer enquiries via this bands such as FitBit is driving
merchant’s call center. And it reinforces consumer connectivity.
the positioning of this merchant as “one Homes, cars, taxis, public
company” across all interaction points. transit, advertising
billboards and offices will
be seamlessly linked via
newly available intelligent
devices, streamlining the way
Faster delivery times, especially related to click consumers live, work and
and collect shop. The IoT might become
The next stage for merchants like Zara is to pilot a click and mainstream by the end of the
collect option that would enable consumers to pick up their decade, and it is predicted
order at a given store within four hours. In some cases, this that there will be 25 billion
could provide a competitive advantage for a merchant and it smart objects worldwide
will get nearer this vision of a “seamless” customer experience. by 202012.
EDC’s perspective
As mentioned by Sir Philip Green, Arcadia’s chairman13: “a lot of our efforts is just: how do we make the retail experience a
great one”. In other words, all of these use cases try to deliver a customer experience that will meet or exceed consumers’
expectations and that will create a sustainable competitive advantage for the merchant.
Differentiation will increasingly come from “how” a merchant sells (as opposed to “what” products they sell). There are more
opportunities to exceed the consumers’ expectations pre- and post-payment (which can be an interaction that lasts just a
few seconds). Helping customers search and find the right products, to include relevant product information and customer
reviews are vital in the buying process. After customer care, including returns, warranties, loyalty, rewards, etc. are just as
important as the actual shopping experience.
12 Source: http://www.zdnet.com/article/25-billion-connected-devices-by-2020-to-build-the-internet-of-things/
13 Source: https://www.vendhq.com/images/university/retail-survival/Retail_Survival_of_the_Fittest.pdf 17Section 2
What are the best practices to
ensure that payments can support
these omni-channel use cases?
Interviews with merchants and with Adyen’s representatives And payments is an equally important issue when making a
enabled the authors of this white paper to describe below purchase via a smart-phone or tablet:
the main best practices to ensure that the “payments”
function can support these omni-channel use cases. What stops you buying on your mobile?
‘Nothing stops me’ Reasons for not buying on mobile
At first, why is it important to think of “payments” to support
9% Difficult payment experience
omni-channel use cases? Because “payments” matters, Lack of trust related to payment
23% 29%
especially to consumers! Based on a July 2015 survey14 of 2,000 security
consumers in the UK, payments-related issues are one of the 77%
62% Other reasons
main reasons why consumers drop out from the final checkout
page when making a traditional e-commerce purchase:
Independent interviews were conducted with a number of
If you have ever left the checkout page before completing a Adyen’s merchant clients (such as Burberry, de Bijenkorf,
purchase, what was your reason for doing so? Inditex, ticketscript and a global apparel brand), and five
payments-related best practices were identified:
None - Have never abandoned a purchase at the checkout page 28.8%
Retailer charged extra fees to use my payment methods of choice 26.0%
Best practice 1: Make the payment step as frictionless
I didn't trust the site's payment security 22.8%
The payment proces was too difficult 19.8% as possible
I had to input too many payment details 18.8% Best practice 2: Three Ts (Test, Train, and Top champions)
Retailer didn't provide my payment method of choice 16.9% Best practice 3: Centralize payments management
The payment failed 16.7%
Best practice 4: Leverage authorization capture delay
I got redirected to an unknown page 11.6%
Best practice 5: Adjust fraud prevention approaches
Other 7.3%
Retailer didn't provide my currency of choice 5.7%
0% 5% 10% 15% 20% 25% 30%
14 Source: Drapers Multichannel Survey (undertaken by OnePoll in July 2015)
18Best practice 1
Make the payment step as
frictionless as possible
Merchants trying to optimize the payment experience for consumers in an omni-channel environment face many questions:
•• Will the storage of payment data via a client account enhance the omni-channel customer journey?
•• Should the selection of payment methods be adapted for each channel?
•• Which digital in-store payment technologies (e.g. kiosks, mPOS) should we deploy?
Enable payment data storage for a seamless For sectors with fairly frequent purchases such as grocery,
omni-channel customer experience fashion, travel / transportation, gaming, etc., merchants should
The number one concern of all merchants interviewed was consider providing this one-click functionality. Merchants and
the reduction of friction at the checkout phase. Recognizing their payment partners will obviously need to meet PCI DSS
shoppers across payment channels, and thereby enabling a (Payment Card Industry Data Security Standard) requirements,
faster check out regardless of location or device they are using, and take all the required steps to avoid payment card
is a clear benefit of an omni-channel approach. data security breaches. Adyen in particular offers several
implementation options enabling merchants to almost
Most interviewed merchants provide two options at time completely outsource the PCI compliance burden.
of checkout:
Ensure the right payment acceptance policy for
•• Consumers can either make a purchase as a “guest” (i.e. each channel
without setting up a client account). Merchant interviews have confirmed that consumers use
different channels at different times for different purposes,
•• Or they can set up a client account for future purchases. and therefore it makes sense to think about what payment
In this second case, consumers can typically store not only methods will be the most convenient in order to offer the
their delivery address, but also their payment credentials best experience for customers in each situation. For instance,
(e.g. credit card details). This provides the basis for the Adyen’s Mobile Payments Index 16, which tracks sales made
one-click functionality. by shoppers across different devices, shows that the average
transaction value varies significantly depending on the device
This one-click functionality clearly meets the needs of nearly used by consumers, and that the most expensive purchases
half of consumers that value the convenience of not re-entering are still made on a desktop.
payment credentials for each purchase:
Average transaction value by device
120
•• Based on a July 2015 survey15 of 2,000 consumers in the
UK, 44% of respondents want “easy and quick check-out,
80
with as few clicks as possible” when browsing a fashion
retail website.
40
•• Interviews with merchants such as department stores
confirm that about half of online orders are completed by €0
Android mobile iPhone Android tablet iPad Computer
consumers that have set up a client account.
15 Source: Drapers Multichannel Survey (undertaken by OnePoll in July 2015)
16 Source: https://www.adyen.com/home/business-intelligence/mobile-payments-index 19In any case, merchants should avoid applying a basic “cut
and paste” of the same range of payment methods across
all channels. Online merchants should use tools such as A/B
testing to fine-tune their customer-not-present channels. This
method involves presenting a random selection of customers
with a slightly different version of the checkout page (e.g. a
new payment method, a different format, etc.) to test which
permutation generates a higher conversion rate. At the point-
of-sale, adding additional payment options has been proven
to increase conversion as well. JCB and UnionPay cards in
particular are increasing the number of Asian customers at
stores where they are supported.
Deploy innovative in–store technologies to
address real pain points
Innovative in-store technologies should be able to address real
consumer pain points, and it would be wasteful to miss out on these
new opportunities due to poor planning or testing. What are the
real pain points that could be addressed via in-store technologies?
Two examples are highlighted in the July 2015 survey17:
If you have ever been in-store, wanting to purchase a product but
walked out of the store before doing so, what was the reason(s)
for this?
‘Have never done this’ Have reason(s) for walking out
23% 54% Queue too long
77%
41% Stock not in-store
5% Other reasons
For the first pain point (“queue too long”), some merchants are
leveraging mPOS technology for queue busting. The idea is to
empower each sales assistant with a device (e.g. tablet) that
equips them not only with an electronic catalog, but also with
the equipment to accept card payments. Consumers would
not need to queue up anymore for paying. It also provides
merchants with the opportunity to engage the consumer in a
post-shopping interaction and encourages future cross selling
(e.g. sending the mPOS receipt via email with an offer to buy
extended warranty for the product that the consumer just
bought in-store).
For the second pain point (“out of stock”), use case one has
demonstrated how merchants as different as Burberry,
de Bijenkorf and Zara have implemented consumer-facing
technologies (typically relying on tablets) to enable consumers
to place a digital order within the store for out-of-stock products.
The examples demonstrate that there are many moving
parts and payments play a key role in streamlining the
customer experience. However, it is unlikely that a single “big
bang” approach will work and merchants should fine-tune
the payment experience over time – which will require the
management’s attention and resources.
17 Source: Drapers Multichannel Survey (undertaken by OnePoll in July 2015)
20Best practice 2
Three Ts
Test, Train, and Top champions
Omni-channel technology is a new thing for most merchants and there are consequently few examples out
there for merchants to refer to (or benchmark against). Therefore pioneer omni-channel merchants have
adopted a “Three T” approach: Test, Train, and Top champions.
Test in the physical environment In addition, Burberry highlighted the need to train sales assistants
Even though it sounds basic, it is important to ensure that about other more payment-specific aspects such as ensuring
there is sufficient time and iterations to test out different that sales assistants are compliant with the PCI / data security
devices and/or dif ferent steps in the purchasing and requirements (e.g. closing down online sessions after each
payment processes, and to look for feedback across basic purchase, never writing down or storing CVV numbers, etc.).
requirements such as uptime, robustness, user-friendliness,
cleanliness, etc. Top champions in physical stores
Merchant interviews highlighted that there is a huge variance
Rituals mentioned that a key learning was to “test and fail in the rate of adoption of the “endless aisle” use case from one
fast”, and ticketscript confirmed that their main challenge store to another. Its success is mostly driven by the attitude of
was to test the physical interactions (especially for a pure the store manager and sales assistants. Sales assistants will
e-commerce player venturing into the physical world). only mention and promote the “endless aisle” option if they
see it as a complementary sales support tool and if they feel
At a minimum, testing should involve a group of local comfortable with this in-store technology.
employees, or ideally a control group of consumers that are
willing to participate in a test. To address this potential hurdle, de Bijenkorf has appointed
“ambassadors” for this technology in each store. These
Train staff (especially sales assistants) ambassadors tend to be technology savvy employees who
Merchant interviews highlighted two types of training that are “power users” and train other sales assistants. In addition,
are required. Obviously, sales assistants need to be trained the best-in-class merchants make sure that the compensation
about the new tools / new functionalities, as well as the package of in-store sales assistants takes into account the
overall benefits for consumers and for themselves. sales credits associated with such use cases as “endless aisle.”
21Best practice 3
Centralize payments management
Very few merchants have a truly global omni-channel set-up because traditionally channels are run
as complete separate entities. As a result, many merchants have a payments function that is set up
separately for each channel and/or each country.
Large international merchants often sign a MasterCard / Visa Merchants like Rituals highlighted the importance of choosing a
contract for their in-store sales with a local acquiring bank in small number of payment partners (PSPs and acquiring banks)
each country, and a separate contract for their online sales in order to “scale fast”. Rituals was able to deploy specific
across each region globally. enhancements across 21 countries in 11 weeks with Adyen.
The main complexities created by a “fragmented” payment citizenM explained that with Adyen, they are able to support
set-up are: multiple sales channels across different continents without
the hassle of connecting through different acquiring, routing
•• A puzzle of reporting flows with no overview due to or POS terminal providers. Furthermore, as all sales channel
different sources of data feeding internal reporting and payments go through the same system, the company benefits
reconciliation. Working with different partners means from one reconciliation and settlement flow, and all information
merchants have to reconcile payment flows from multiple is accessible through Adyen’s online back office system.
sources, which usually entails a lot of manual work.
•• A slow time-to-market and lack of flexibility for merchants As a result citizenM has a payments solution that can expand
that want to deploy changes across channels and/or across with the business geographically and technologically – all from
countries. This complexity arises with the need to deal with one provider, which reduces the complexity of their global
several contractual and technical partners and adjust to payment operations.
different systems and technologies.
•• Inability to support omni-channel use cases such as As part of their omni-channel roadmap, merchants should
handling a refund via a different channel. evaluate the business case related to a consolidation of the
•• Higher costs. For instance, merchants might have set up number of payment partners across channels and countries,
duplicate internal resources to handle multiple channels and related to the centralization of internal back-office
and/or countries, and might not have optimized fees activities such as reporting and reconciliation. A change in
related to card acceptance. corporate culture may be required and should therefore be
treated as a “change management” project.
22Best practice 4
Leverage authorization capture delay
Online pre-authorization of card payment with a delayed capture of funds, is a common practice for
businesses with a subscription model or in the travel industry. Online payment technology now
available at the point-of-sale makes it possible for merchants to use this feature to simplify
omni-channel processes.
All card transactions rely on a three-step process : When the process is handled by a Payments Service Provider
encrypting the transaction data for the merchant and using
1. Authorization: merchants send a real-time authorization tokenization technology, the process of delayed authorization
request in order to obtain an approval from the capture can be done to outsource the burden of PCI compliance
consumer’s bank (issuing bank). to the merchant’s payments partner.
2. Capture / clearing: merchants send (typically at the end of
each day) a batch file with all of the day’s card transactions Tokenization is a process by which the payment data is
and these transactions are sent for clearing via the card replaced with a surrogate value called a “token”. The major
networks. benefits for merchants are that storing tokens instead of
3. Settlement: financial value is exchanged to finally pay payment data reduces the merchant’s effort to implement
merchants. PCI DSS requirements, and limits the risk of card data security
breaches. A stolen token is useless to fraudsters because they
An authorization capture delay allows merchants to receive an have no way of linking it back to the consumer’s payment data.
authorization, but capture the payment later. For merchants
offering in-store e-commerce (endless aisle), that makes it
possible to delay the capture until the moment the order is
shipped or to cancel the transaction in case the goods cannot
be shipped.
The delayed capture functionality also makes it possible to
reduce refunds. By delaying the capture by several hours,
transactions can just be cancelled if a shopper decides to
return the goods. This also avoids that a shopper sees the
amount to be refunded blocked on his card.
23Best practice 5
Adjust fraud
prevention
approaches
An omni-channel approach to For example, ticketscript is a target for fraudsters as an event ticket bought with
payments should also include an a stolen card is essentially free money. Working with Adyen, ticketscript scores in
omni-channel approach to fraud. An real-time all transactions coming from all sales channels. Because all payment data
attack on a specific channel gives a captured is processed on the Adyen platform, Adyen leverages online, mobile and
warning for purchases through other point-of-sale data to assign a risk score to each transaction in real time. Suspicious
channels with the same card, email, transactions are either rejected or reviewed manually by the ticketscript risk team.
IP or all the other data linked to that
specific transaction. Compromised Unfortunately, when merchants do not have an omni-channel approach to payments
data is recognized across channels and different sales channels payment data are processed in silos, fraudsters can “play
and used to prevent fraud. one channel against another”, or identify potential cracks in omni-channel processes.
For instance, some travel merchants such as airlines reported that fraud rates have
been increasing among sales via their call centers. There are a number of main
reasons for this trend:
•• Some of the fraud prevention tools and customer authentication tools (e.g. 3D
Secure) are available for online sales but not for call center sales.
•• In some cases, fraudsters undertake a “clean” online transactions (i.e. with the
cardholder’s correct names and addresses), and then contact the call center a few
minutes later to request a change in the passenger name, thereby by-passing the
fraud prevention rules applied to online sales.
•• Another area is where fraudsters are sending targeted phishing emails via
the retailer or the bank to capture information about the customer. The fraud
protection vendors are most concerned about evolving methods of phone fraud,
mostly because it is the least protected of card-not-present (CNP) transactions,
and therefore, the most vulnerable means of attack in an omni-channel
environment, as found in large modern retailers.
Another example of emerging fraud patterns relates to buy online and pick up in-store.
The average fraud loss rate was relatively low for these purchases, i.e. lower than the
overall fraud for online purchases. However, the fraud loss rate varied significantly
based on the time of collection: it was 5-6 times higher in cases when consumers
(fraudsters) picked up very quickly after their online order.
24As merchants aim to serve customers across multiple channels,
the fraudsters are also using the lack of joined-up thinking by
impersonating a merchant’s service center. Fraudsters will cold
call a customer, for example, claiming that their credit card or
bank account has been subject to fraud during the transaction
with the merchant, so that the customer reveals information
about the transaction and changes the arrangements for
collection of the goods.
Merchants need to adjust their fraud prevention approach to
omni-channel commerce:
•• Having an omni-channel payments partner enables
merchants to have an omni-channel approach to fraud
prevention and link risk data across channels and countries.
•• When payments are processed by different payments
partners, internal organizational structure and processes
related to fraud prevention should be centralized, with a
team of analysts updating rules and staff and undertaking
manual reviews of suspicious orders across different
channels or geographies.
Based on merchant interviews, there does not seem to be a
“one size fits all” answer for all omni-channel merchants, but
merchants must ensure they think carefully about the best
way to set up their internal fraud prevention organization and
related processes.
Fraud KPIs
What are the new fraud KPIs (Key Performance Indicators) that
omni-channel merchants should monitor?
Once again, there is not a “one size fits all” answer, but it is
clear that merchants need to ensure that new omni-channel
use cases (e.g. endless aisle, click and collect) do not generate
abnormal decline rates or abnormal fraud rates. Tracking
consumer behavior through browsing, shopping and returns
history across different channels will help merchants design
fraud strategies to detect suspicious transactions.
Furthermore, a lot of merchants and fraud prevention vendors
commonly collect fraud statistics for payment methods such
as debit and credit cards. The more innovative merchants are
issuing and accepting mobile wallets, carrier billing, prepaid
payment products, loyalty and reward products, gift cards,
social and peer-to-peer payment products. Fraud KPIs need to
take into account these alternative forms of payment.
25Adyen: Payments
as a key driver
of omni-channel
commerce
Built from the ground up as the world’s only unified omni-
channel infrastructure, the Adyen payments platform
brings Internet technology to the point-of-sale. This
makes it possible for merchants to unify e-commerce and
in-store payments in one system, supported by one risk
management solution, and unified cross-channel reporting
in a single backoffice.
The benefits of this approach provide a significant, measurable
competitive advantage to omni-channel businesses, and have
a direct positive impact on revenue.
In this section, we explore some of the key benefits of working
with Adyen’s single omni-channel payments solution across
multiple markets.
1. A seamless shopper experience in any channel
Due to its single unified platform across the point-of-sale
and e-commerce, the Adyen payments platform gives omni-
channel businesses the ability to recognize shoppers across
these channels. This simple, powerful benefit can be utilized
in a number of ways:
Faster checkout with one-click or zero-click payments
A key way to increase conversion at the checkout stage is to
minimize the steps to make a payment. If shoppers choose
to have their payment data securely stored with Adyen’s
tokenization technology, they are able to make future
purchases either online with one-click or at the point-of-sale
without needing to enter payment details. In-store, once
the sales assistant has verified the identity of the shopper,
the Adyen payments platform is able to accept a payment
immediately – a ‘zero-click’ payment flow – removing the
barriers to making a payment, improving conversion, and
increasing customer satisfaction in the process.
The endless aisle and click and collect
With Adyen’s single solution, shoppers can order out of
stock items in-store with a tablet-assisted sales terminal that
carries the entire web-based inventory, and then have the
item delivered to their home address or other location. The
e-commerce equivalent of the endless aisle is click and collect –
where a merchant partnering with Adyen can give e-commerce
shoppers the option to pick up items in-store – removing
delivery costs for the shopper and reducing logistics costs for
the merchant.
26Shopper loyalty
Being able to recognize shoppers across channels gives
merchants a treasure trove of information for loyalty marketing
purposes with loyalty cards and personalized service.
For example, after making a number of e-commerce
purchases, a shopper later visits the bricks-and-mortar store.
At the checkout, along with the zero-click payment, the sales
assistant gives a personalized offer based on the shopper’s
previous purchases. Shoppers are also able to accrue loyalty
points across e-commerce and in-store purchases, deepening
the merchant's relationship with the shopper and increasing
valuable repeat sales.
Returns
Working with the Adyen payments platform offers a great
deal of flexibility with regards to returns. Thanks to the single
system, shoppers that buy an item online at home are able to
return it in-store, and can be refunded with cash or be credited
on their card.
Outcome: increased revenue for merchants
Each of these possibilities delivers a better experience for the
shopper, but also closely correlates with increased revenue.
This is also simple to measure – omni-channel merchants
can (for example) see a direct increase in conversion on the
payment page with one-click payments, or significant uplift
in repeat purposes from shoppers who can accrue loyalty
points across e-commerce and in-store. With the endless
aisle capability, merchants have reported 4-12% in extra sales
through solving the out-of-stock problem. And for click and
collect, merchants have reported up to 4% of extra sales from
online shoppers making additional purchases as they pick up
their items in-store.
2. Exceed shopper expectations with the latest
payment innovations
Because it brings Internet technology to the point-of-sale,
replacing traditional hard-coded terminals used by merchants
today, Adyen enables you to quickly deploy the latest
payments industry innovations in-store, and exceed shopper
expectations in terms of both service and ease of payment.
Eliminate checkout queues
The length of a checkout queue is a significant pain point for
shoppers. Adyen’s Internet technology enables you to equip
staff with mobile point-of-sale (mPOS) terminals. With these
you can process payments from anywhere on the shop floor,
meaning you can deliver a much faster payment experience
and close more sales.
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