Thursday, 23 June 2016

Three decades of automated payments – but what next?

In 1986 Barclaycard was the first payment provider to introduce Process Data Quickly (PDQ) technology, which allowed in-store transactions to be processed faster and more securely than ever before. I joined Barclaycard in 1972 and was working in the Business Research team when we embarked on a huge project to transform how retailers take and consumer make payments.

Before PDQ technology was introduced retailers relied on “zip tap” technology, which involved taking an imprint or carbon copy of a customer’s card to create a voucher, which was sent to the appropriate bank to process. This system was not only admin heavy but also susceptible to human error and with ever increasing volumes desperately in need of modernising.

After months of testing, the first PDQ transaction, for a blue and white blouse, was administered by Barclaycard in 1986 in a Miss Selfridge store in London’s Brent Cross. This landmark moment helped shape the future of British commerce by delivering not only faster and more efficient payment in stores, but also by paving the way for the online shopping revolution of the last 15 to 20 years.

The speed, ease and security of this new way to pay meant that merchants across the country quickly followed suit, with Barclaycard rolling out tens of thousands of terminals to bars, restaurants, petrol stations and virtually every retail sector by the turn of the 90s.

Thirty years of innovation

Over the last three decades, the focus for developing new payment innovation has shifted from meeting the challenge of reducing the headache for retailers and banks, to enhancing the customer experience, making paying for goods as quick, pain-free and convenient as possible for shoppers. The introduction of each payment innovation Barclaycard has introduced – from chip and PIN in 2003, contactless in 2007, wearables in 2012 and most recently mobile wallets and digital payments – has taken a further step to make the process quicker. Now, the onus has shifted again, from purely providing speed, to providing speed, convenience and choice.

What’s next?

As a result of the shift in demand, it’s unlikely that one payment option will rule over another in the next thirty years. Consumers have become more focused on finding something that works well for their specific preference, which may well be very different from another consumer even when buying the exact same item. Retailers in turn are looking to create new digital experiences and aim to embed payments experiences that are seamless. Whilst previously, new products would replace others as older technology became obsolete – such as the use of chip technology over magnetic strips – we’re now starting to see payment providers offer a range of payment options simultaneously to suit every shopper, however they want to pay.

To offer every consumer an option that suits their preferences, the concept of automated payments has had to extend far beyond the simple card transactions we saw in 1986. The demand for wearables for example, was borne from the fact that many shoppers don’t even want to get a card out of their wallet to ‘touch and go’ anymore. So what if next they could make all payments without even lifting a finger, by using a digital payment system?

Companies like Uber are already leading the way in encouraging the use of this type of payment – where the user simply registers their card once, then each transaction is logged by the merchant and automatically charged to the customer. In the next few years the popularity of this method and seamless omnichannel experiences will continue to grow, and we will start to see it appearing in more restaurants and bars, and shops.

The way we use our cards themselves has also changed significantly, and in the years to come, even the appearance of our bank cards will continue to change. The magnetic strip, for example, is barely used at all now, and could one day be removed from cards altogether.

Ultimately, payment innovation will continue to be driven by consumer demand as it has been since PDQ technology was first rolled out thirty years ago. In another 30 years’ time, there are sure to be many more payment options which haven’t even been imagined yet.

James McDonald
Director of Innovation and Strategic Initiatives

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