The Evolution of the Consumer Checkout Experience

Every business needs to accept payments from their customers, but over the years, the form of those payments have changed. Credit cards have replaced a substantial percentage of cash transactions, and smartphone-enabled digital wallets are slowly replacing credit cards even for in-store purchases.

This infographic reviews the evolution of the customer checkout experience through the years with an eye toward where it is headed.  

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The Evolution of the Customer Checkout Experience

It's an obvious fact that retail businesses need a way to accept payments for customer purchases. As time passes, however, businesses must evolve with technology and consumer preferences. Cash used to be the primary form of payment. It gave way to credit cards and other types of swipe payments, and these in turn are gradually shifting to digital payments processed through various mobile devices. In this look at the evolution of payment methods, we review the past and assess where the customer checkout experience is headed.

Pre-Electronics Payments

Payments in the pre-electronics era required a fair amount of manual labor. A retail clerk was required to process every kind of transaction, and some payment types took notable time to complete.

Before swipe technology, cash was king. As recently as 1995, 60 percent of consumers preferred to use cash for all of their purchases.

In addition to cash, check payments were so popular that in 1998, 87 percent of households in the U.S. had a checking account, and checks far surpassed credit purchases. By 2002, businesses processed between two and three times as many check payments as credit card or other charge transactions: For every 42.5 billion check payments there were only 15 billion credit transactions.

The Digital Age Arises

Swipe technology employed the convenience of magnetic strips for card transactions, but in 1995, these payment types still weren't popular; only 2 percent of customers paid by debit, and only 8 percent used credit cards. Less than a decade later, card use expanded considerably. In 2003, 31 percent of retail customers chose debit transactions, and 21 percent used credit.

Gift card use also grew during this period with sales totaling $80 billion in 2006. They were so popular that two-thirds of the buying public reported their intention to give a gift card.

New Electronic Payments

Evolving technology has led to new types of electronic payments that are easier to process and that allow businesses to increase customer offers. Additionally, mobile devices have created a wave of payment abilities that bypass swipe machines and make magnetic strips unnecessary.

EMV, which stands for Europay, Mastercard and Visa, uses embedded microchip technology that is more secure than magnetic strips, and mobile payments by phone or tablet let shoppers make online purchases from any internet-accessible location; they also allow in-store payments.

Near field communication (NFC) devices use small, embedded antennae to communicate with card readers without direct contact. Shoppers only need to wave the card, fob or other device over the reader to complete a purchase. The antenna transmits payment information encoded in a chip within the device.

This technology also allows businesses to present offers and promotions through preprogrammed readers whenever consumers use NFC devices during checkout. These may include rebates, coupons, discounts, gift certificates or free delivery. Additionally, retailers can encourage purchases via mobile and contact-free technology by advertising their promotions all over the store.

Payment with these new technologies is growing so rapidly that by 2017, in-store purchases with NFC devices are predicted to climb to $180 billion. Aiding this growth is an increase in mobile phones containing NFC abilities, projected to be 45 percent by 2016.

The Future of Consumer Checkout

With the development of mobile point-of-sale capabilities -- in which stores use mobile rather than fixed readers to process payments -- every salesperson is a possible cashier. When customers can approach nearly any employee to check out, there's no need to wait in line. Apple Inc. currently uses this technology more than any other retailer, and they're also the largest one to do so. Nordstrom stores empower over 6,000 salespeople to handle shoppers' transactions via mobile phones.

Self-checkout is another growing trend, and this one considerably reduces the need for in-store clerks. Multiple stations throughout a store make checkout quick and convenient, allowing shoppers to pay whenever they're ready; reduced lines and reduced sales friction provide additional benefits. According to a USA Today report, by 2014, retailer JCPenney aims to completely eliminate traditional cash registers in favor of self-checkout stations.



Check Payment Systems Association

New York Times

USA Today