The way shoppers pay in stores has undergone some big changes in recent years. “Cash or card” (with the occasional check mixed in) has quickly become cash or card or Chip/EMV, contactless, pay by QR code, and more. For retailers, that’s a lot of emerging technology to keep up with (and deploy). So, what are the predominant payment methods for in-store shopping today that will continue to power most payments into the future?
Cash and checks
Once king of payments, cash has decreased in popularity alongside the increase of electronic payment options. According to one study, just 16% of Americans say they always carry cash with them. That number is even lower for checks, with the number of checks written dropping by 1.8 billion every year. This has advantages and disadvantages for retailers. The main disadvantage is credit card processing fees which cost businesses an average of 1.5% to 3.5% of each transaction. The upside is that accepting, processing, and transporting cash also carries a cost, especially for large retailers. That cost can range anywhere from 4.7% to 15.3%, making cash an expensive way to do business. As other payment methods take hold, cash is continuing to be used less and less. As a result, many of the latest payment technologies, like self-checkout kiosks, are offering credit/debit-only payment options.
Takeaway: cash is expensive to manage and is on its way out as many modern self-checkout systems eschew it altogether.
Credit and Debit Cards
Plastic was the first widely used alternative to cash and checks, and while it is still one of the most commonly used payment methods today, it has undergone some noteworthy changes.
The original technology behind credit (and debit) cards, the magnetic stripe or “magstripe,” uses magnetic particles on the black band on the back of your card. As you swipe, it is read by a magnetic reading head. The problem with magstripes is that they have a range of security vulnerabilities, making them easy to steal and copy. As a result, major credit card companies are moving away from the magstripe, with Mastercard ditching it completely by 2024.
So, what’s taking the magstripe’s place? You’ve probably already noticed that newer credit cards have a chip embedded within them. This chip creates a unique code for each transaction which is then validated by your issuing bank to ensure the transaction isn’t fraudulent. The slow change has allowed consumers time to adjust, with most Americans now preferring the chip/EMV payment over any other method.
Near Field Communication (or “NFC”) lets two devices communicate with each other at close ranges. The most common example of this is smartphone payments. Many of today’s smartphones are equipped with NFC technology, which is the driving force behind common payment apps. Further, in a time when sanitation is on everyone’s mind, contactless payments mean less tapping, swiping, and interacting with objects other than your own. Let’s look at the two most common NFC payment methods:
Apple combined its touch ID technology with NFC to create fast, contactless payments that allow you to add various cards to your wallet, select a default, and pay in just seconds. Apple Pay is accepted at over 85% of retailers in the U.S. and, like all Apple proprietary software, includes privacy and security features that are second-to-none.
The main competitor to Apple Pay, Google Pay offers a similar level of convenience, but with the caveat that not all Android devices are the same and might not offer the same experience.
For many businesses, offering QR code payments can mean deploying a fast and easy payment method on a device that is already in all of their customer’s pockets: a smartphone with a camera.
QR payments give stores the ability to offer their own payment method that connects with their loyalty programs. This gives stores more information about their customers and gives shoppers a more personalized payment experience. We’ve seen several tier-one retailers like Starbucks, Target, and more offer QR code payments as a result.
Other payment apps have also joined in on the QR code option, with apps like Venmo and PayPal offering a way to scan a QR code to pay.
Get our free payments guide to further explore these payment options:
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