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Phygital: is e-commerce crossing the line and moving in-store?

Phygital payments are on the rise. While payments vendors continue to pitch and strategise with a focus on omni-channel, the omni-channel story has already moved on.

Phygital commerce

Phygital: e-commerce moving in-store?

Omni-channel remains important and the best vendors have solutions that provide a single cloud payments service capable of delivering a single view of the customer across stores and digital channels,” according to Andrew Marshman, Account Executive, Merchant Retail at ACI.

The best retailers utilise these solutions to deliver efficient cross-channel shopping experiences. Meanwhile, many other retailers get by (though seldom rise to the top) with a siloed approach.

Is the future of retail a single channel?

Amazon Go – and a growing number of other scan-as-you-go offerings – mean that digital payments are now also in-store payments, not a separate channel. While this trend might be in its infancy, eventually, terminals in their current form will disappear completely.

Customers will use their own devices – or no device at all. One of the buzz words of the past couple of years has been “frictionless” – with the ultimate goal being, of course, to reduce friction of in-store payments to the point where good customers essentially enjoy a “shop-lifter experience.”

That’s still a long way-off – and the current cost of infrastructure to deliver an Amazon Go-like experience isn’t to be ignored – but the digitisation of the in-store payment is a step in that direction. And as a consequence, the term “phygital” is starting to gain in popularity.

Retailers now need to think digital when it comes to payments acceptance in store. The rise of alternative payment methods has been an e-commerce trend for a number of years, but they are now entering the physical store space, and retailers need to accept these alongside cards.

We’ve already seen forays into this – for instance from PayPal. But only looking at card-dominated North American or European markets obscures the pace of change and impact of this trend on a global scale.

Alipay, often described as a “lifestyle super app” rather than an alternative payment method, is the most commonly cited example – and acceptance beyond China is growing, from the fashion houses of Paris to hop-on hop-off bus tours in South Africa.

Growth markets, unimpeded by the legacy of a card payment culture, will adapt to the phygital world more quickly, but change is coming to mature markets too.

Consolidating payment platforms to cater to the phygital world of payments

Retailers need to respond to this emerging trend by focusing their IT payment strategies on using cloud-based payments services that process traditional in-store terminal payments in the same way as they process digital payments.

That means using the same platform, the same levels of service, the same payment types, and shared tokens – so that they can take payment from shoppers in the ever-expanding connected world of payment points homogeneously.

Those that look at digital payments differently to in-store payments and have different teams managing them will struggle to meet this challenge.

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