CASHING UP ON PROGRESS: CUSTOMERS DEMAND NEW WAYS TO PAY

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1 CASHING UP ON PROGRESS: CUSTOMERS DEMAND NEW WAYS TO PAY globalpaymentsinc.co.uk

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3 Page 2 3 FOREWORD The retail world is changing rapidly and those retailers who use modern payment technology across all channels will yield the highest returns. Being one of the largest payment processors in the world, Global Payments helps retailers of all sizes to navigate through the constantly changing world of payments, grow their businesses and find payments solutions that are right for them. This white paper considers the challenges and opportunities of new payments technology in the retail sector and explains how retail managers and customers can both benefit from them. We hope that you find our insights helpful. Chris Davies Managing Director Global Payments

4 NEW PAYMENT METHODS ARE BEING EMBRACED LIKE NEVER BEFORE Customers are embracing new ways to pay for goods and services in their droves. Never before has there been a time when customers need for flexibility and speed of service coalesced so neatly with rapid innovation in payments technologies. As the global economic recovery unfolds, merchants positioned to make the most out of these powerful forces will likely prosper as others struggle. Shoppers are becoming savvier about carrying around old bank notes and coins, with cash having been in decline for some time as the convenience of plastic continues to resonate in the minds of time-strapped shoppers. The value of UK card transactions has seen a steady climb, rising to 592,220 million in 2014 compared to 555,006 million in 2013 (an increase of 6.7%) with a further 6% gain expected. 1 An increase in Contactless cards usage has also led to additional growth in both credit and debit card volumes. Consequently, average card transaction values fell by 1.40 in a year as consumers have used cards more frequently for lower value payments. 2 With customers growing more comfortable, Contactless spending increased significantly from 287 million per month in January 2015 to 567 million in June 2015, according to data from The UK Cards Association. With the spending limit having been increased from 20 to 30 in September 2015, additional growth in this area is expected.

5 Page 4 5 Card terminals accept Contactless payments via Near-Field-Communication (NFC) technology. The same technology is used to accept mobile payments, a method which has become increasingly popular since the introduction of Apple Pay in the UK in July So far, Apple Pay has not been as widely used as initially hoped for; however, as more and more individuals upgrade their iphones, we expect to see a pick-up in this service. Other smartphone providers, such as Samsung and Sony, are currently developing and launching their own payment apps which will further increase the number of customers wanting to pay with their smartphones. Contactless spending increased significantly from 287 million per month in January 2015 to 567 million in June 2015.

6 Retailers have witnessed extraordinary transformation in just a decade. Chiefly, online and mobile shopping has rocked the high street by introducing intense competition between one another as they compete for existing and new online customers. Retailers, hoping to benefit from the global reach of always-on customers, are quickly stepping up to the challenge of providing digital shopping solutions. The explosive growth in ecommerce is driven by customers appetite for convenience and speedy service. Changing consumer lifestyles coinciding with an evolution of payment technologies has led to increased choices in how customers can pay. Currently under-rated in terms of the extent of change it is likely to bring, new payment technologies could make or break retail brands as they come to terms with a new shopping paradigm. As a result, retailers are revamping all areas of their ecommerce shopping experience. Increasingly, payment portals are integrated into websites, enabling faster and secure payments, which reduce the likelihood of empty baskets. In addition, online only merchants of all types and sizes are on the rise; there are very few retailers who have no ecommerce offering and the vast majority of them have multichannel shopping offerings, as it helps them to streamline business processes, minimise costs and attract greater revenues. retailers are mpin revamping ecomm of their xperien sh hop

7 Page 6 7 all areas erce ping ce High street and online shopping are increasingly merging as in-store retail technology connects with online merchandise. For example, tablets placed in fitting rooms can help customers match accessories, see different styles, or try alternative colours. Mobile devices also become terminals once payments technology is installed and allow customers to order and pay directly for home delivery or in-store when items are out of stock. Such innovations present exciting opportunities for retailers to grow sales and reduce the queues associated with traditional desk-based payment terminals. In recent years, we have increasingly seen forwardlooking fashion retailers integrate tablets into their flagship stores to showcase more of their range and facilitate online payment and delivery. This has the potential to transform the customer experience in-store. Tablets used to take payment can be placed at stages throughout the store to maximise sales, and in time we may even see them replace traditional payment terminals entirely, thanks to their flexibility and interactivity.

8 More than a third (34%) of those aged between 18 and 34 are interested in using mobile payments, compared with 20% of year-olds. However, retailers offering payment through their website on these tablets, enter a grey area in terms of card security, as the payment would be considered an online transaction taking place in a face-to-face environment. This means that payment card industry data security standards (PCI DSS) apply. PCI DSS is a set of globally agreed compliance standards that any merchant who processes, stores or transmits cardholder data has to adhere to. The standards are designed to provide a framework for minimising fraud and safeguarding customers data. As well as PCI DSS, retailers would need to consider scheme rules as well as the liability for taking online payments in a face to face environment. Retailers could use a PIN Entry Device (PED) and attach it to the tablet, thus making it a true Chip & PIN transaction and, therefore, conforming to PCI DSS and meeting the requirements of the scheme rules. Further information for retailers can be found through their equipment suppliers or card processor. The adoption of new payment technologies is quickly gaining widespread acceptance as customer and retailer awareness develops further. This is especially the case for young people as more than a third (34%) of those aged between 18 and 34 are interested in using mobile payments, compared with 20% of year-olds. 3 With the younger generation quickly adapting to new innovations, the shoppers of the future will be more likely to use payment technologies and retailers have to make sure to keep ahead of the curve.

9 Page 8 9 With globalisation driving growth amongst international visitors spending more time and money in the UK, this opens up enormous opportunities to market products to a much bigger international customer base for the first time. A key development in this area has been technological innovation enabling retailers to accept international cards. Different regions around the world run their own domestic card networks. The American Discover and Diner s card, for example, historically were not accepted within the UK. However, improving partnerships amongst card networks and the development of new terminal technologies has led to more international visitors being able to pay with their domestic cards in the UK.

10 International visitors can now also pay in their domestic currency. Dynamic Currency Conversion (DCC) allows customers to see on the payment terminal how much they will be charged in their home currency instead of having to spend time thinking about conversion rates.

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13 .45 Page This has been good news for retailers as these visitors are spending a significant amount on their domestic cards. Global Payments data shows that average transaction values for spend from international visitors increased by 3.45 between 2013 and 2014 (3.2%). For European cards, spend increased by 3.74 between 2013 and 2014 (5.8%). Retailers should therefore ensure that they are able to accept the widest possible number of cards from different countries in order to improve revenue streams. International visitors can now also pay in their domestic currency. Dynamic Currency Conversion (DCC) allows customers to see on the payment terminal how much they will be charged in their home currency instead of having to spend time thinking about conversion rates. Tax Free Shopping also allows them to identify tax amounts for rebate directly at the terminal. This is likely to positively impact retailers especially amongst the large contingent of visitors who want to take a slice of British fashion and other luxury brands back home with them. Criminals continue to develop even more sophisticated methods to gain access to cardholder details and other relevant information. It is therefore essential that customers as well as retailers ensure that payments are being processed safely. This is where the Payment Card Industry Data Security Standard (PCI DSS) steps in. As mentioned, PCI DSS is a set of globally agreed compliance standards for any retailer or service provider who processes, stores or transmits cardholder data. It is designed to provide a framework for minimising fraud and safeguarding customer data, however if retailers fail to comply with PCI DSS requirements, they run the risk of being subject to a breach (a leak of data) resulting in large fines starting at 6,000 (around 4,000). Likewise, retailers need to be alert to the potential of fraudulent card use that can arise from criminals using stolen cards and data. Card processors can provide a checklist of steps to take if you are concerned about the authenticity of a card, such as calling them for additional authorisation, or requesting proof of address if they are particularly suspicious. Due to the advancements in technology, merchants are increasingly able to use terminals for more than just the processing of payments. For example, Global Payments has recently started offering trurating, a rating system that gives customers a chance to have a say when they pay.

14 Customers like to have their say and are willing to share their views especially when they have eaten out, visited a bar or stayed in a hotel. However, many end up not doing so as traditional methods such as customer surveys, polls or internet reviews are time consuming or cannot be completed anonymously. When using trurating every customer paying by card is asked one question which is rotated from a fixed set of customised questions, to rate the service, experience or product on a scale from 0 to 9 (terrible to great). The rating is anonymous and given by the customer. This feedback can be accessed by the retailer the next day and can then be acted upon to make sure the outlet provides the best possible service. Receiving ratings from the point of sale is particularly important for independents that, unlike the big chains, are less able to rely on brand awareness to keep customers coming back. Capturing, comparing and analysing feedback helps outlets to become more accountable and responsive to the needs of their guests. Ultimately, this influences the overall performance of the business and increases customer loyalty. The economic recovery will benefit both online and traditional retailers. However, those merchants adopting innovative payments technologies and those who integrate online with in-store shopping to global audiences will yield the highest returns. By asking specific questions, the outlet can find out what their customers really think; whether the product is good value for money, the staff were friendly or they like the in-store design. All of these factors have an influence on the overall experience and impact the customers decision about whether or not they will come back. 1 Global Payments data Stats and trends using GP 2014 data and Timetric data 2 UK Cards Association 2.5bn spent using contactless cards in first half of 2015, as limit rises to 30 3 Deloitte - Britain poised for mobile payments revolution

15 Page ABOUT GLOBAL PAYMENTS Global Payments, a Fortune 1000 company, is one of the largest card payment processors in the world, with offices across the UK, America, Canada, Asia Pacific and Europe. We work with companies of all sizes, from large multi-nationals to owner-managed businesses to maximise sales through payment card processing. Our focus in the UK is on meeting the needs of customers with upto-date card processing technology, whether face to face, online or over the phone. We support our customers to attract the growing overseas market with a range of services including international card acceptance, enabling visitors to pay in their own currency and tax free shopping. If you would like to learn more about how Global Payments can help your business, please contact us on * or visit for more information about the company and its services.

16 * Lines are open Monday to Friday, 9am - 6pm, excluding public holidays. Calls may be recorded. We also provide a Textphone service on Global Payments is HSBC Bank plc s preferred supplier for card processing in the UK. Global Payments is a trading name of GPUK LLP. GPUK LLP is authorised by the Financial Conduct Authority under the Payment Services Regulations 2009 (504290) for the provision of payment services. GPUK LLP is a limited liability partnership registered in England number OC Registered Office: 51 De Montfort Street, Leicester, LE1 7BB. The members are Global Payments U.K. Limited and Global Payments U.K. 2 Limited. Service of any documents relating to the business will be effective if served at the Registered Office. Issued by Global Payments, 51 De Montfort Street, Leicester, LE1 7BB. GP334