AI Overview 

Win-win factor: Why plastic still leads at checkout

Just because you can, doesn't mean you should offer customers a new payment method. I've seen decades-old solutions that are neither fast nor accurate and are still working out the kinks. Whenever we add a new product or service, my partner Dave and I consider how it will benefit our business and our customers.

When check imagers first became available, for instance, customers liked them because they could write checks at stores, and business owners liked them because funds were guaranteed for a small fee. Twenty years later, we still use the win-win rule when investing in a new technology or payment method.

Who wants Plastic?

If consumers want it and merchants can derive measurable benefits such as saving money or preventing chargebacks, a solution is a win-win. If consumers don't want it, it will probably never be used. This is why we counsel business owners to carefully vet a hot new product or payment method and to disregard the hype it may be getting from vendors and influencers.

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Vet with care

Following are some examples:

 

 

 

• Pay-by-bank:

   I would caution business owners to run a simple test before broadly deploying a Pay-by-bank system. Transactions tend to take a long time, which can slow down checkouts, damage the customer experience and create pain points for merchants.

   

  Customers will not receive points and rewards that they would normally receive from credit cards, and merchants will pay additional fees for the service.

 

 

• Stablecoin:

   Will consumers get a discount when buying these coins? Will they pay for them with a credit card? Will stablecoins be less expensive to accept and use than credit cards, despite related costs of mining and storing the coins on a ledger?

   

  With additional details to be determined, it remains to be seen if banks will accept them and if consumers or merchants will be attracted to these alternative currencies.

 

 

• Cryptocurrencies:

   The main motivation behind the first cryptocurrency, Bitcoin, was enabling people to earn and spend without being taxed by the federal government. Adoption has been slow because most businesses will not want to hold a digital asset that fluctuates in value when they have rent to pay.

   

  In addition to their volatility, cryptocurrency payments are complicated and gradual; if a wallet has insufficient funds, a cashier may receive a partial approval and incomplete funding.

 

 

People first, tech second

In my experience, it's never a good idea to rush to install a new system or technology before weighing the benefits and costs of investing in new equipment and services and training employees. Another consideration when evaluating payment solutions is how third-party service providers will impact your new checkout streams.

A case in point is the complicated lifecycle of a cryptocurrency transaction at the point of sale, as in this example:

 

 

 

• Step one:

   Customer receives an invoice or scans a QR code on a POS device to connect to their crypto app or wallet.

 

 

• Step two:

   Customer sends the equivalent crypto to dollar amount, which usually includes a conversion-to-fiat fee.

 

 

• Step three:

   Any number of failure points could occur if a consumer's wallet has insufficient funds, which could result in a partially approved transaction.

 

 

• Step four:

   Crypto transactions are checked against fraud data to make sure none of the digital assets were involved in a crime, ransomware payoff, etc. Merchant checks the processor's backend to confirm the amount collected. This type of transaction is not viable in a restaurant or retail store; there is too much room for error.

 

 

• Step five:

   When a sale goes through, the merchant receives fiat currency in their bank account. Crypto-to-crypto transfers could also be enabled but are unlikely to be popular with merchants who have bills to pay and would not want to rely on fluctuating values of digital assets.

 

 

Rewards, loyalty

When debit cards gave rewards people loved to use debit. Then credit card rewards started, enabling customers to earn airline miles and cash. My airline card gives me deep discounts on plane tickets that I use to visit my daughter in Iowa. I know other business owners who have traded in their points and miles for exotic vacations and cruises. I doubt that anyone would want to give up those benefits anytime soon.

Visa and Mastercard, the chief innovators of the global financial ecosystem, are incorporating digital assets and pay-by-bank into their global payment rails. Considering the complex fee structures and credit and debit card interchange tables already in place, it's unlikely that businesses will escape paying fees for these new payment schemes.

As Amazon and Walmart launch their own respective stablecoins, I can't help but wonder how these initiatives will benefit consumers. Why would a customer transfer money and set aside funds to pay for products later? People need good reasons to let retailers hold their money. Starbucks mobile app users, for example, get faster service, points and discounts. This 2016 infographic (bit.ly/41WICSM) shows the company held $1.8 billion in prepaid revenue across hundreds of banks, a win for merchants, customers and payment professionals.

Want to know more? Keep reading The Green Sheet and consider following me on LinkedIn, www.linkedin.com/in/allenkopelman/, where we can share ideas and support each other.

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