Often Overlooked, Checkout Is Assuming New Significance in Payments, Experts Say

Customer checkout, whether online or at a store, can be taken for granted by merchants and payments firms alike. That’s a big mistake, according to a panel of experts who spoke Wednesday about new opportunities—and threats—lurking in checkout buttons. 

For one thing, checkouts can represent a battleground in which players jockey for transactions, sometimes with offers merchants may find hard to refuse. “I would be worried if I were in the traditional payment space,” said Jordan Gal, chief executive and founder of Rally Commerce Inc., a Portland, Ore.-based technology provider for online checkout buttons. “There’s a lot of focus on the checkout space.” 

“That 2.9% rate,” he added, referring to a common discount fee for merchants, “is a huge target.”

Yet some payments players see big potential in launching—or expanding—checkout opportunities for merchants and their private-label cards. Buy It Mobility Networks Inc. has been exploiting that opportunity in the retail petroleum market. “We saw a huge opportunity with all the private-label cards out there,” said chief executive of New York City-based Buy It Mobility, which is working with Discover for processing.

Frisch and Gal were part of a panel discussion held at ETA Transact in Las Vegas, a trade show sponsored by the Electronic Transactions Association.

Frisch said information gathered from cardholders helps identify and reward them at checkout. It also drives brand loyalty, he added. “It allows us to take a commoditized purchase like gasoline to, ‘I’m going to Shell,’” he said.

But the checkout process is embracing more than pricing and marketing trends, speakers said. Merchants can use checkout to manage both loyalty and risk, said panelist Sondra Feinberg, director of partnerships and alliances for the fraud suite at Microsoft Corp. “We’re looking at checkout as a way to increase profitability for the merchant base,” she said. “If we’re able to identify the propensity for a chargeback at the beginning of the transaction, it lowers customer friction.”

The checkout process can also help manage “back of the wallet syndrome,” she added, referring to the occasions when consumers stop using a card because merchants decline it, even though additional information would indicate the card, and the transaction, are safe. As part of that effort, Microsoft shares “contextual data” with issuing banks, Feinberg said.

At checkout, “you can make it very easy for the customer and still make it safe for the merchant,” Frisch said, by using better data in “declining the right people.” 

And while the new focus on checkout may well bring new pressure on transaction pricing, as Gal predicts, Frisch said pricing will ultimately be viewed in the context of value to both merchants and consumers. “We view ourselves as an engagement company that just happens to do payments,” he said. “If we are doing our jobs collectively, then merchants and consumers should win every day. We’re only limited by our imagination.”