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The Evolution Of The Checkout Experience

As CTO of Engage People Inc. Len Covello helps companies differentiate loyalty programs to deliver a better experience for their customers.

Published December 7, 2023, 7:15 a.m. EST

Early in our CEO’s career, he helped a friend who had a company that was working with a gas station on a rebrand, and its goal was to offer a much-improved member experience. Every time the two of them brainstormed, they would talk about the best ways to drive a better user experience and member engagement.

This project led our CEO to the idea of using technology to help deliver a better loyalty program experience. That’s what we do at Engage People today. We try to make it easy for consumers to redeem their loyalty points just as they’d spend cash or use a debit or credit card because we want them to have more freedom over how, when and where to spend their points.

Our evolution as a company got me thinking about the evolution of the checkout experience as a whole. It’s taken many years for retailers to grasp the concept of accepting loyalty points as a form of payment, and they’re realizing the true power of points and what they mean to consumers. While this payment option provides more flexibility and leads to stronger retention, it also provides retailers with data they can use to build better relationships.

Similar to modern payment options, the benefits of introducing “new” forms of payment through the years range from efficiency and convenience for consumers to revenue generation and cost savings for retailers and banks. Let’s take a closer look at the evolution of different payment types and where the industry is headed next.

The Evolution Of How We Pay

Debit cards emerged on the scene in the mid-1980s when grocery stores, gas stations and other businesses began incorporating computerized point-of-sale (POS) systems. For banks, these cards presented an opportunity to monetize transactions—initially through ATM fees and, eventually, through collecting merchant fees.

For consumers, the introduction of debit cards meant they no longer had to wait in lines at the bank before heading out to do their weekly shopping. However, that didn’t mean everyone was on board with swiping a card as soon as they were able. It wasn’t until 2003 that the number of card-based transactions surpassed paper check transactions in the U.S. for the first time.

1995 marked the beginning of the online marketplace boom with the launch of Amazon and eBay. What started with Jeff Bezos capitalizing on convenience with an online bookstore has evolved into marketplaces and e-commerce sites offering everything from clothes and housewares to food, prescriptions, auto loans and even mortgages.

The rise of e-commerce didn’t only reshape the way we shop; it reshaped the way we pay for necessities. Ultimately, the growth of online shopping has also expanded the desire for more payment options.

The in-store checkout experience changed in the early 2000s when supermarkets across the U.S. began adopting self-checkout kiosks. Unlike the consumer-focused drivers that influenced the introduction of card-based and online payments, however, these kiosks were introduced to save money.

Still today, the experience can be clunky and confusing, and it can take more time than visiting a traditional checkout line that an employee tends to. Yet if you visit your local grocery store or Walmart, the queue at self-checkout kiosks is rarely empty. This signals that even a less-than-ideal customer experience won’t keep people from choosing their own payment journey.

Fast-forward to 2023, and consumers have a host of options for how to pay for their goods and services both online and in-store. They can still use cash or reach for their physical card, they can pay with loyalty points or they can use options like “buy now, pay later.” Consumers can also tap their phone or wearable device at POS if they have a mobile wallet.

What’s Next For The Checkout Experience?

From our perspective, having the ability to pay with points used to be a futuristic idea. However, with the advent of other alternative payment options, points are becoming more ubiquitous. With 3.3 billion loyalty memberships in the U.S. alone, we expect to see an increase in the adoption of paying with points at POS in the coming years.

That’s why our focus is—and will continue to be—on improving relationships between brands and their customers. This includes bolstering loyalty programs with more payment options and creating a network of complementary brands to provide consumers with a ubiquitous checkout experience when paying with points. For example, consumers might stop for gas, earn points on that transaction and then head into the convenience store to buy a coffee with those points.

Looking at the retail space, we also expect to see even greater self-service at checkout as well as the use of biometrics to help drive seamless online and in-store payments. With the current state of the economy, retailers will continue to manage costs through self-serve models, but we are likely to see some changes given the rise of theft. Costco is already adding more staff in the self-checkout area to combat non-members swiping membership cards, and Five Below plans to ramp up its staffing at cash registers to help reduce shrink.

We also expect to see retailers expanding their online footprints—especially smaller retailers. A November 2023 OnePoll survey found that 58% of small businesses have increased their digital presence, while 52% have started selling products online.

Overcoming Challenges

Not long ago, Covid-19 forced the adoption of online shopping and contactless payments, and retailers had to evolve quickly to meet real-time demand. Now that retailers are back in the driver’s seat, the adoption of new payment options and checkout processes will be the real challenge since not every shopper will be keen to change. Offering incentives, rewards or bonus points can help retailers over the hump.

As we’ve seen throughout the evolution of the checkout experience, providing consumers with the flexibility to shop and pay as they prefer is paramount. The retailers who succeed in the future will strike the right balance of ensuring costs are properly managed while meeting the diverse payment preferences of their customer bases.

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