Creating a seamless, safe and differentiated customer experience must include a flexible payments model.

From personalized offers to convenient payment options to widespread smartphone adoption, it’s fair to say consumer expectations and preferences are constantly changing. For today’s convenience retailer, the power to compete and win in a crowded marketplace lies in boosting brand affinity by creating differentiated experiences at every step in the customer journey.

Increasingly, payments are a critical part of that journey, and the global pandemic has only highlighted the need for retailers to invest in this area of their business to ensure customer safety, satisfaction and loyalty.

Here are five payment predictions we’re making for the convenience retail industry heading into 2021.

Mobile payment adoption will increase

While mobile payment options have increased in popularity in recent years, the COVID-19 pandemic accelerated the necessity for and adoption of this technology. According to the Global Consumer Insights Survey 2020, 45 percent of consumers said they were using their mobile phone more as a shopping channel since the COVID-19 outbreak. The trend also extends to loyalty program members. PDI’s 2020 Global C-Store Shopper Report said that 39 percent of consumers use a loyalty program’s mobile app to pay for purchases—the third most popular use behind redeeming and tracking rewards. The report also revealed that three out of ten U.S. and non-U.S. convenience retailers have seen increases in purchase and payment methods such as contactless and digital/online and curbside pickup or home delivery.

Investing in mobile payment technology also has lasting implications for the future, especially along generational lines. The Pew Research Center says Millennials and Gen Zers will eventually account for more than 60 percent of the U.S. population. That means retailers must prepare to provide a digital-first experience, including mobile payments, across the customer journey. This is particularly crucial for convenience retailers since research shows that Gen Zers already prefer convenience stores to more traditional retailers. These two generations are also increasingly more inclined to engage with mobile technology, from in-app payments to mobile wallets.

More than ever, consumers expect mobile payment options to be readily available and will favor establishments that offer them in the future.

America runs on debit

Decades ago, Dunkin’ launched its famous tagline, America Runs on Dunkin’. And while I’ve run into enough die-hard, donut-eating, coffee-drinking Dunkin’ fans to know the slogan lives up to its claim, America, and much of the world, also runs on debit. And we believe, reliance on debit cards, particularly private label debit cards, will continue.

In a 2020 survey by Google, consumers said they preferred debit payment for convenience store purchases between $10-50. If you drill down even further, 52 percent of Gen Zers and 41 percent of Millennials prefer to use to debit cards, according to Deloitte.

So, even as mobile payments continue to find footing in the U.S., why is private label debit a preferred payment method? The obvious answer for consumers is that it helps them keep track of the money they spend, which consequently keeps them out of debt. But the benefits extend beyond that. Last year, convenience retailers spent nearly $12 billion on credit card swipe fees. By moving to private label debit cards, retailers can save on these fees and put it back into rewards to the consumer. In turn, this produces profitable customer behavior by engendering more loyalty in the form of increased visits and spend.

Lastly, convenience retailers benefit from private label debit programs because they drastically change consumer behavior. For example, according to the Purchase Model Lift Study, having a private label debit program results in considerable sales lift of around 36 percent.

The power of combining loyalty and payments

There’s a common misconception that payments and loyalty should never intersect with one another. For far too long, this “never the twain shall meet” mentality has caused convenience retailers to manage these areas separately, rather than treating them like two complimentary pieces. But today’s consumers are sophisticated, and they’re looking for a simple, easy, connected customer experience. To meet that expectation, convenience retailers will begin combining their payments and loyalty programs, if they haven’t already.

According to the 2020 Global C-Store Shopper Report, 63 percent of consumers belong to a c-store loyalty program, and 39 percent of consumers use a loyalty program’s mobile app to pay for purchases. In addition to creating the seamless experience customers want by combining loyalty and payments, retailers also gain a treasure trove of data that allows them to market to customers based on their interests. In fact, 49 percent of loyalty program participants said they were happy for their shopping data to be tracked or analyzed if it would lead to more personalized rewards.

Combining loyalty and payments gets at the heart of convenience retailers’ main goal. In this year’s Road to Rewards Report, 40 percent of all loyalty programs had the primary goal of changing customer shopping behavior. Separately, loyalty members and consumers who use a retailer’s private label payment options are already likely to engage more frequently with that brand. Bringing these two pieces together—loyalty and payments—can create an even “stickier” relationship between a retailer and its customers.

Regulation drives technology adoption

It was only a few years ago the convenience stores around the U.S. were scrambling to hit the October 2015 deadline to outfit their in-store POS systems with EMV compliant capabilities. Well, it took a few years, but those regulatory requirements are making their way to the pump.

The 2020 NACS/Nielsen Convenience Industry Store Count report states that nearly 80 percent of all U.S. convenience stores sell fuel. That means about 122,000 c-stores will need to support chip transactions at the fuel pump by April of next year. While many convenience stores around the country have already begun making the necessary updates to avoid being held liable in cases of credit card fraud at the pump, the impending deadline will no doubt accelerate adoption of the technology on a wider scale.

5G technology powers a better in-store experience

In 2019, cellphone companies around the world began rolling out their 5G networks with promises of marked improvements. In the U.S., T-Mobile was the first to jump into the 5G fray, claiming to give millions of people access to the new technology.

Even as carriers like T-Mobile, Verizon, and AT&T move ahead with efforts to make 5G available to the masses, the fact remains that many people around the country have yet to gain access. At the beginning of the year, only 50 cities in the U.S. had rolled out 5G networks. But that’s changing. Over the next three years, it’s expected that the majority of the country’s population will be on 5G.

Increasing adoption combined with better performance—including faster speeds, more data capacity, lower latency, and precise location sensing—has significant implications on the customer experience at convenience stores. This is particularly true for mobile payments and loyalty, and the convenience retail industry will likely see increasingly more people engage with both of these offerings as technology improves and barriers to entry become lower.

COVID-19 has changed our world for the foreseeable future. The rapid adoption of new payment methods will likely remain, even after the pandemic subsides. For retailers looking to thrive in the year ahead, creating a seamless, safe and differentiated customer experience must include payments. So, what’s your payment plan?

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