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Checkmate: How Retailers Can Manage the Digital Payments Puzzle

Steve Gilde July 24, 2024
digital-payments
Checkmate: How Retailers Can Manage the Digital Payments Puzzle
5:58

 

While the recent announcement from Target that it will no longer accept checks for payment in its stores made the headlines, it wasn’t really breaking news. 

Other major retailers, such as Whole Foods and Aldi gave up on checks some time ago. And don’t even think about trying to write a check at McDonalds, Starbucks or most other convenience-oriented pay-in-person venues.

Rather than declaring this as big news, we should simply recognize the move by Target as part of the continued shift away from slow, antiquated payment options. After all, who goes to a shop these days hoping to pay by check? 

There’s no doubt about it, checks are high-friction for consumers, retailers and banks alike. 

 

Check Usage Has Fallen Dramatically as Digital Payment Options Increase

By the end of 2023, American consumers were, on average, writing only one check per month, and that payment is typically for rent, utilities, insurance, premiums, tuition, etc. - not for retail purchases.

Average monthly consumer payments by type in the United States

Source: The Federal Reserve 2024 Diary of Consumer Payment Choice

 

The speed, convenience and security of digital payments have combined to spur their widespread adoption and push checks into their steep decline. The days of cashiers asking shoppers “will that be cash or check” are already long gone, with the inevitable end of check acceptance at retail stores not far off. 

Retailers live by the credo that “convenience is the new currency” - a reference that could not be any more appropriate than it is for the payment experience. Today’s sophisticated consumers - who hate waiting for anything - have truly embraced all forms of digital payments and especially love to tap their card, phone, watch or wearable in order to make the speediest getaway possible. 

In reality, Target’s decision to stop accepting checks was not only predictable, but practical. The economics of taking checks at most retail locations just doesn’t add up anymore. Checks slow down checkout lanes, they are expensive to process and they carry a significant risk of fraud

 

“Anyone with graphics software and a high-quality printer can readily turn out counterfeit checks.”

- The Federal Reserve Bank of Atlanta 

 

So while it is entirely logical and highly likely that the use of slow, high touch and high cost payment methods like checks will continue to decline (goodbye card swipes and dips?), it also seems inevitable that we will continue to see faster, slicker - and eventually no touch - digital payment options continue to proliferate. 

 

automated-testing

 

 

The Increase in New Non-Cash Payment Options Brings New Challenges

Unfortunately, dealing with this ever expanding universe of alternative payment methods is going to become even more complicated and expensive for major retailers than dealing with paper checks – and the problem is still at the check-out lane (and in the back office). 

Most of the large US retailers will take a standard assortment of payment methods, including cash, credit cards, debit cards, prepaid cards, even checks. 

The next level of detail is much harder to discern, do they take Apple Pay, Google Pay, mobile wallets, contactless EMV cards etc. Sometimes you can find this out by looking closely for specific signage, decals or other indications the store accepts what you want to use.  

Sometimes the only way you can find out is to ask someone – good luck getting the right answer from a retail store clerk – but asking introduces friction into the process, which is exactly what we are trying to avoid.

Sure, if you shop at a store regularly, you’ll get to know if they take your specific payment method, and you’ll also get to know who doesn’t support the way you want to pay. The more friction there is in the process, the more opportunity for merchants to lose customers. 

 

So, How do Retailers Keep Up With Modern Payment Options? 

The simple truth here is that it has become difficult for retailers to keep up with all of these options. 

Supporting multiple payment methods is complicated and expensive. It may involve add-on hardware components, such as NFC readers or QR code scanners, and will most certainly involve software changes on multiple systems, additional training for staff, new signage, - and a whole lot of testing to make sure everything works together. 

The growing number of alternative payment methods will continue to add complexity to the already incredibly complex network of connected components that change and evolve at different speeds. Many organizations struggle to keep pace with all the different pieces moving across the chessboard that is the payment industry. 

Every new payment method adds another to the vast global fabric of networks, systems, and applications that are required to ensure every transaction is processed correctly from its initial click or tap or scan through the entire authorization journey before a consumer can complete their purchase and head home with their groceries, garden tools, or school supplies. 

Modern payment tools that support 24x7 remote access, automation, and resource collaboration can help ensure that all your payments are processed efficiently, reliably and securely, no matter where or when or how they are initiated. Thorough and accurate testing is a key to delivering a superior customer experience on every transaction. 

Interested in learning more about how web-based tools and simulators can help your organization improve its payment testing processes and support the growing number of alternative payment methods quickly and easily? 

Request a consultation with Paragon today, and learn how our portfolio of payment testing solutions can help you achieve your business goals. 

 

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