Cashless, contactless, effortless – the seamless future of bricks-and-mortar retail?
Contactless payment technology has brought small businesses the analytics that big businesses have had for decades. Marketing speaks with Ben Pfisterer, country manager at Square, about new developments in retail payment technologies, and what to expect for the future of cash.
This article originally appeared in The Money Issue, our April/May 2018 issue of Marketing magazine.
Ben Pfisterer is the Australian country manager for Square, the retail payments tech developer. After previous roles working in business development, strategy and innovation at NAB and Visa, he started at Square in 2014 and was part of its Australian launch in early 2016.
Here he speaks with Marketing about changes in bricks and mortar retail, the tech developments that are letting small businesses access the information big businesses have had for decades and what new payment technologies will mean for the future of cash.
Marketing: Today much of the discussion around retail and consumption centres on online trends. What have been some of the biggest changes in the physical retail space?
Ben Pfisterer, country manager at Square: Bricks and mortar has been going through significant changes. It probably started about nine years ago. That was when the [current] most commonly accepted form of payment – although at that time it was still cash – card, was starting to grow in utilisation. Back then and obviously for many years before that, magstripe technology was the predominant card type. It worked really well when it was a minority type of transaction, but as it continued to grow in popularity, it obviously attracted a lot of attention from a security perspective.
EMV (Europay, Mastercard and Visa) technology was deployed, otherwise known as chip cards, and that basically put a microprocessor on a piece of plastic, which was very exciting from a security standpoint, but for people like myself in the innovation space, what it meant was you effectively had a micro-computer, or a small computer format, sitting on a piece of plastic. It was great for security, but even better for additional functionality. So, the first thing that came out of that was contactless technology – with the deployment of technology like Visa Paywave and Mastercard Paypass. It’s commonplace now and Australians are the highest adopters of contactless technologies in the world. That vastly changed the transaction experience for businesses and consumers alike.
Now, if you go into a business where you don’t do a contactless transaction, it can feel like a totally different type of transaction, particularly if it’s a fast-moving transaction environment. Australian cardholders really do expect to be contactless. There’s still a place for slower transactions, but it’s remarkably shifted. We now see in excess of 85% of all transactions are done on contactless and sometimes when we look at things like events, you can see upwards of 97 or 98% contactless transactions. That immediate transaction sees an environment vastly change. The next paradigm that’s coming through is cards are the dominant transaction type above cash and cash is declining rapidly. We’re now seeing both consumers and businesses understand the power of the data that can come from card transactions, not only from the security perspective, but also from an insights perspective.
That’s something that Square loves to support small Australian businesses on. They now have the ability to not only extract transaction data, but [to also] attract an immense amount of value from understanding and analysing their transaction data. They can now understand sales trends, product sales, time, seasonality, things like that. They could start doing the analytics that big businesses have done for decades. Any business can now start to understand its sales history a lot better. Consumers too are now seeing a raft of new products come through: internet banking, and mobile app delivery of electronic transactions to give them more insights into their spending habits and make sure that they’re managing their accounts and their transaction history better.
Why do you think Australia has been one of the fastest adopters?
It’s hard to say. Having been lucky enough to work at the forefront of that migration, I think the Australian industry did it quite well in terms of deploying contactless, so it’s something that can be used in the majority of everyday environments. So, the first thing that was implemented was the $100 limit. A lot of other markets, the contactless limit capped at lower amounts – 35 or 50 maybe. That didn’t really get into your everyday spends in terms of shopping or petrol. Australia’s is a good limit, an effective limit at $100. People started seeing that they could use it in all sorts of environments. Probably most importantly, if you’re going to deploy something with a two-sided innovation – on the buyer and seller side – like contactless, you have to get the balance of both right. If too many businesses deploy contactless readers, and not enough contactless cards, those businesses would quickly get sick of not seeing the volume and probably move away from the technology. On the other side, if there were too many cards and not enough businesses accepting contactless, consumers would forget about it pretty quickly. Australia did a great job of actually making sure the growth on both sides [was] mirrored. It started to get into the everyday. People started to see it more, expect it more. Businesses started to understand the benefits and the advantages of doing faster, contactless transactions. Then, when you get your large format stores – like Coles and Woolworths – deploying it, that’s when you see hyper growth coming through across the markets, and pretty much most terminals, as they get deployed, now look at contactless to make sure that’s right for their environment.
How do Square’s products and strategies reflect these trends?
When we started about nine years ago in the US – and in early 2016 in Australia – on the payments side, our number one objective was making it simple and easy for businesses to first start accepting card transactions, and then take that migration on the path to understanding their business and the tools that they can use to start, run and grow their business. That’s been a key part of our premise, and why we offer value to the market. We started with that, and we continued to grow out. Just over a year and a half ago, we launched the first contactless reader, and that was really, really well taken up by Australian small businesses. We deployed our contactless reader and then quickly followed with around 10 different products like electronic invoices, ecommerce, a range of APIs (application programming interfaces) and things like virtual terminals, so you can take transactions over the phone, in front of a computer.
Our most recent one is the stand, which now means Square isn’t just about mobile small-sized businesses, it’s also about bricks and mortar businesses. They can now have a payment product that can integrate with their POS (point of sale) system, but also integrate seamlessly into the aesthetics of your countertop. That’s something we launched a few months ago, and sees us growing into different types of businesses as well.
Was that a move into the mainstream, when compared to your small, more portable Square products?
Although we’re becoming a more commonly known brand in Australia now, when we first launched, we had to understand that those businesses we hoped would use Square wouldn’t automatically know who we are. We didn’t want to complicate the market with a wide variety of product sets like the ones we had in the US. We’ve just launched products as and when they feel right, and then we get consumer feedback. We started with the more iconic Square readers, definitely more appealing to mobile, micro, or fleet-based businesses that have a lot of people on the road.
[For them] it’s about that small format, that low cost and that ease of accessibility. But you’re right, we had a lot of feedback from Australian businesses that started small – maybe at a market, a pop-up or online, and then migrated to a bricks and mortar environment, or they were taking one store to many stores. They loved the Square POS and software tools, but was there something for that that could integrate a payment solution and POS solution while keeping their countertop seamless and aesthetically pleasing? That was part of our migration, moving upmarket now to offer a wider variety of tools to a wider variety of Australian businesses.
How far do you think we are from a cashless economy?
This is a really topical question at the moment. We recently did a survey and found that more than 60% of our businesses could move to cashless today, which was really surprising. We see it at a tipping point. We think over the next 12 months we’ll start to see those early adopter businesses move to cashless more and more. More businesses in Australia are starting to catch up to realise the benefits of card transactions as opposed to cash transactions, so we’ll start to see a bigger migration. With any such seismic shifts, it does happen over time. We think over the next 12 to 24 months, you’ll start to see more and more businesses move away from cash.
The next step on from that is a cardless economy. How far away are we from that?
That’s definitely on the horizon as well. Apple Pay has launched in Australia, which has been really well-received by consumers. At the moment it’s only deployed across a small number of banks. Hopefully we’ll see pretty soon a wider variety of the large Australian banks as well as the small ones offering consumers the ability to use mobile phone payments. From the business side, that’s something we’re really passionate about. We know the benefit that transaction brings to those buyers and sellers. We’re definitely ready, our contactless technology is now widely deployed across a large number of businesses. Hopefully you’ll see a lot more of that, because one of the things people probably don’t understand is, putting transactions onto a mobile phone – where you’ve got to tap your phone instead of your card – is only the first step. Once that’s unlocked, you then start seeing significantly more value propositions come through to complement that experience. It’s only the start of that journey.
Are you referring to value coming from the consumer data that’s held in those phones?
Definitely. There’s no bounds in terms of what it could do. Once you start having that POS experience integrated onto a phone, you’ve got processing power and application development that’s significantly greater. You only have to think of a few ideas. So, being able to do one tap in a transaction is not only a transaction for the payment, but also an exchange of loyalty details. It can build up loyalty accounts and get more data-rich feeds from things like electronic receipts. That path keeps building out and ultimately moving towards more location-based marketing, and more location-based transaction details. So, when consumers are anywhere near a shop they may want, or a product that they’ve been looking at, they can be alerted in real time. But again, we’re only at very much the start of that, and with any of this technology, you’ve got to get the basics right. Then it’s mass adoption. I’m keen to see that happen really quickly.
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