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Page 1: Is Retail Ready for a Cashless Society?

IS RETAIL READY FOR A CASHLESS SOCIETY?Evaluating Retail’s Top 5 Mobile & Digital Trends

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CONTENTS Executive Summary ................................3

1. The Omnichannel Imperative ..................3

2. Mobile Payment/Mobile POS ..................6

3. Digital Wallets ..........................................9

4. Digital Currency .....................................12

5. Social Commerce ..................................14

Conclusion .............................................16

About VendHQ .......................................18

About PayPal ..........................................18

About Retail TouchPoints .....................18

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It costs U.S. households $43 billion a year to handle cash,

between fees, time, and theft. The tally is even higher for

businesses: $55 billion, accrued through administrative costs,

and most especially, retail theft. Government is on the hook for

$101 billion. Altogether, cash costs the U.S. $200 billion a year,

according to September 2013, research by Tufts University, The

Cost of Cash in the United States.

Online shopping and mobile technology are driving the retail industry toward a

potentially cashless business model. A report by Javelin Strategy & Research found

that in 2011, just 27% of all point-of-sale purchases were made with cash, and that is

expected to drop to 23% by 2017. Just 40% of consumers currently carry $20 or less

in cash, according to the 2014 Future of Retail Study, from Walker Sands, and 40%

shop online at least once per month.

What does this mean for the future of retail? Is the retail industry ready for a

cashless reality?

To be sure, cash has its value — and its fans. But significant trends underway in

retail are largely incompatible with cash transactions, together suggesting that in our

increasingly digital, mobile world, cash may be on its way out. This white paper

outlines the 5 key trends moving today’s retail industry and includes a call-to-action

for each:

1. The Omnichannel Imperative

2. Mobile Payment/Mobile POS

3. Digital Wallets

4. Digital Currency

5. Social Commerce

Cash costs the U.S. $200 billion a year. — Tufts University

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1. THE OMNICHANNEL IMPERATIVEShoppers want a consistent brand experience from the couch to

the checkout. In response, retailers are working to sync

information across all channels to provide personalized offers

and flexible order/deliver options. That means the call center, the retail

store as well as online and mobile apps are seeing and working off the same

centralized data and applications to get a 360-degree view of the customer.

According to Corporate Attitudes and Adoption Trends of Multi-Channel and

Omni-Channel Marketing, by Platt Retail Institute, “Firms that fail to adopt

an omnichannel marketing (OCM) strategy risk losing their customer relationships.

However, viewing this as a

strategic opportunity can

lead to competitive

advantage for skilled

marketers by ensuring that

all consumer touch points

have seamless

interoperability to deliver a

consistent brand and

shopping experience.”

41% of consumers said quick and easy payments influenced their purchases when shopping online and mobile. — Accenture

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Meeting consumers’ needs seamlessly across channels is key. Look for solutions that provide:

•• The ability to easily transition from online to mobile to the retail POS;

•• A full array of payment choices, including credit, debit, gift card, check scanning, and PayPal’s fast processing speed; and

•• A 360-degree view of customer data across all channels, easily accessible to all employees, from HQ to store managers.

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A significant part of this effort is creating frictionless

payment. Retailers want customers focused on the

thrill of the purchase, not the mechanics of the

payment process.

For many, that means moving to omnichannel

payment: Making the experience identical across

channels. To attain this, retailers need POS systems

that offer the same customer interface and options and

the same steps to pay no matter the channel.

Research by Accenture found 41% of consumers said

quick and easy payments influenced their purchases

when shopping online and mobile.

PayPal is leading the pack when it comes to helping

retailers accommodate the changes in how consumers

shop. Today, consumers can access their PayPal

accounts online, via mobile technology and use their

PayPal account to pay at the POS in the retail store.

Businesses can accept a PayPal mobile payment or

swipe a U.S. credit card or

debit card for a 2.7% transaction fee. PayPal also

supports merchants’ different needs from multi-location

solutions to inventory management — and is

collaborating with top POS providers to bring innovative

payment solutions to businesses.

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2. MOBILE PAYMENT/MOBILE POSA significant step in making payment frictionless is to bring it to

the customer, rather than forcing the customer to the payment

device. This can involve equipping associates with mobile

devices as well as enabling customers’ own mobile devices to

transact a payment. IHL Group estimates that approximately 45%

of retailers are adopting mobile devices in stores.

There is a widespread sense among retailers that mobile payment is essential to the

seismic changes underway in retailing. In Boston Retail Partners’ 2013 Retail

Technology Study, 45% of retailers called providing customers with mobile and

checkout important or very

important. A separate study

by Walker Sands found that

59% of consumers would be

more likely to shop at a store

offering the ability to self-

checkout on a mobile device.

Mobile payment is quickly

emerging as a must to satisfy

increasingly demanding

consumers accustomed to

the ease of doing business

online and expecting an

equal experience in stores.

It’s also a great option for

retailers looking to rapidly

deploy pop-up stores.

“Cash management is always an issue, particularly at theme parks, where you have to store it, get it to the bank and deal with loss prevention,” said Steve Taitoko, COO of Magic Memories, a souvenir photo concession operator. “The sooner we can move to cashless the better.”

Approximately 45% of retailers are adopting mobile devices in stores. — IHL Group

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RSR Research’s The Impact of Mobile in Retail:

Benchmark Report, December 2012, put it this way: “Now

is the time to be experimenting, even if only in small-

format pilot programs to unearth new ways to delight the

mobile consumer.”

A number of solutions have emerged to execute mobile

payment, such as using barcode scanning, near field

communications, and cloud. PayPal, for example,

leverages the cloud, and is collaborating with a number of

leading POS providers to integrate its mobile solution.

PayPal also has unveiled its own consumer mobile app

designed to make transactions simpler and a lot more fun

for consumers, like receiving special retail promotions,

paying by photo check in via the mobile app, order ahead,

and ordering and paying right at the table. The

combination of a mobile platform and a flexible payment

partner, such as PayPal, enables retailers to get POS

solutions that are tailored specifically to their needs.

Convenient, mobile payment is critical for Magic Memories, which operates a souvenir photo concession

at more than 100 global attractions. Associates have

approximately 90 seconds to present photos to guests

and complete the sale. A tablet solution that offers a fast,

integrated payment solution is a must, said Steve Taitoko,

COO of the New Zealand-based retailer, which chose

POS software from Vend to meet these requirements

While Magic Memories will accept it, “Cash management

is always an issue, particularly at theme parks, where

you have to store it, get it to the bank and deal with loss

prevention. The sooner we can move to cashless

the better.”

When selecting a mobile payment solution, look for:

•• Tight integration between the POS and payment processing software; it’s important that both are part of a full payment ecosystem;

•• Fast processing speed;

•• Solutions that protect retailers by complying with PCI;

•• Solutions built on knowledge of payment requirements in all countries where you will sell;

•• Robust wireless connectivity;

•• A solution partner offering a wide array of mobile options that can be tailored to specific business needs; Click here to access a free trial of Vend.

•• A payment brand partner — such as PayPal — that your customers already trust.

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A mobile device is a great tool, but it takes a full solution including software,

payment and the right vendor to really make it work for a business. That’s the

lesson Boating in Boston learned over the past six years as it tried different

POS systems at its 12 locations. The company operates boating concessions in

public parks, far from any wired connection, so wireless connectivity and an

easy-to-learn interface are key. To help the company’s part-time seasonal

workforce succeed during the May to October season, Boating in Boston sought a

vendor that could tailor the software to its needs. “We like Vend’s cloud model and

their application, and they’re extremely responsive,” said Michael Aghajanian,

Owner. Vend acted quickly to modify the application to meet

the boat rental service’s unique needs, such as the requirement for “as many as

100 ‘parked’ transactions, and customized reports,” he said. “They’re very

customer service-oriented.”

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3. DIGITAL WALLETSThe promise of mobile wallets goes well beyond payment: In

addition to credit cards, wallets aim to place loyalty cards, gift

cards, debit cards, checks and coupons in a digital wallet — so

consumers can access their information online, at the POS or

on a mobile phone.

A comprehensive digital wallet solution enables demand generation such as loyalty

and offers; account management such as shopper preferences and purchase

history; mobile POS to pay in stores; e-Commerce for web payments; and payment

for mobile web purchases. Many large companies are vying for the largest piece of

the mobile wallet pie, including PayPal, Google,

MCX and ISIS. In one study, comScore found that

one in two consumers say they are likely to use a

digital wallet within the coming year, provided the

ability to do so.

Each wallet vendor offers a unique approach to

technology, infrastructure and security, and many

experts have weighed in on which vendors will

attain critical mass.

Analysts including Forrester note that a critical

factor in the success of a wallet solution is the

trust that consumers place in that brand. For

example, PayPal offers shoppers the ability to

pay through their phones, receive store offers/

coupons and transfer funds to their bank account

or send money to family/friends.

One in two consumers say they are likely to use a digital wallet within the coming year, provided the ability to do so. — comScore

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The comScore report also noted that trust is a leading

influencer of intent, second in importance only to

privacy. Consumers are more than twice as likely to

trust already familiar digital wallet brands. When it

comes to digital wallet features, consumers value ease

of use and usability over innovation.

Both Forrester and comScore found a high level of trust

in PayPal: Forrester’s Consumer Technographics data

showed that U.S. online adults trust PayPal more than

any other financial institution to act as a mobile wallet

platform — even more than a bank. Almost three

quarters of Americans equate digital wallets with

PayPal, and almost half have used the PayPal digital

wallet, according to comScore. Usage drops from 48%

to just 8% for the next most-popular wallet.

PayPal recently announced PayPal Beacon, a new

technology that will make paying completely hands

free: shoppers won’t need to pull out a wallet or

mobile device, swipe a card, or even open up an

app. The solution uses Bluetooth Low Energy (or BLE)

technology to connect mobile devices seamlessly.

One it hits stores, consumers will be able to choose to

check in at a store (or at their favorite stores that use

Beacon), his or her photo will appear on the POS

system; all it takes to pay is a verbal confirmation.

Customers who choose not to check in are not

tracked, so privacy is maintained.

To ensure the ability to accommodate wallet solutions:

•• Compare packages and look for maximum value. Over the next 12 to 24 months wallet vendors will be making a full-court press to acquire merchants. PayPal, for example, recently offered more than six months of free processing to qualifying merchants through its Cash For Registers program.

•• Work with vendors who show interest in collaborating with you to offer features you value, such as loyalty, coupons, offers and funding mechanisms, as well as programs that bring you customers.

•• Make payments simpler by offering consumers options such as order ahead, pay at table, or simply checking in to pay, to encourage the adoption of mobile payments.

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As more customers adopt wallet technology, retailers like Top Shelf Style, a clothing

store-on-a-truck that frequently parks in San Francisco’s financial district, are

becoming major beneficiaries. Female financial executives often dash out of the

office with their phones and just enough cash to grab lunch, said Christina Ruiz,

Owner of Top Shelf Style. “We get a lot of people who say ‘I left my card in the

office’. They might come back, or they might not. If I can offer one other way to make

a payment, that increases my probability of making a sale on the spot.” Making the

transaction fast for the customer makes a sale even more likely, she added.

“We get a lot of people who say ‘I left my card in the office’. They might come back, or they might not,” said Christina Ruiz, Owner of Top Shelf Style. “If I can offer one other way to make a payment, that increases my probability of making a sale on the spot.”

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4. DIGITAL CURRENCYAs traditional forms of payment grow increasingly digital, digital-

only currencies are growing in profile. Typically alternative digital

currencies are not produced by governments or backed by a

national currency. The more well-known digital currencies

include Ven, Ripple, Coinbase and Bitcoin.

Of these, Bitcoin has the most traction to date. According to Jeff Neuburger, co-

head of New York-based Proskauer Technology, Media & Communications Group,

bitcoins exist purely as code, created through a mathematical process called mining

and processed through exchanges, moving from one Bitcoin user’s wallet to

another’s. They exist as both a real-world currency and an object of speculative

investment, so Bitcoin’s value can fluctuate widely. There are more than 11 billion

bitcoins in circulation, and there will never be more than 21

billion. In mid-November each one was worth $392,

rising to a high of more than $1,100 in December.

Yet, the value of bitcoins dropped after China

questioned its legal status. All in all, it is not a very

stable currency at this stage.

But due to a lack of regulation around digital

currency, while Bitcoins allows the ability to

conduct anonymous, public transactions,

they also could be used for illegal

activities. During recent U.S. Senate

committee hearings on Bitcoin and

digital currencies, regulators, officials,

and academics offered cautious but

Retailers should select flexible POS and payment software that includes a provision for current acceptance of digital currency, or a roadmap that includes acceptance.

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positive views on their potential role within the greater

economy, according to Neuburger. Meanwhile, the

currency has been making inroads with mostly smaller

retailers and eTailers including Foodler and Etsy. Benefits

to retailers, he said include:

• Attracts a tech-forward clientele;

• Creates a “buzz”;

• Natural connection to certain industries;

• Option for investment if the company holds the

Bitcoins instead of immediately exchanging them

for USD;

• Encourages spontaneous transactions;

• Flexibility for consumers: PC, mobile, web site; mobile

to mobile; and

• Lower transactional costs.

But there are risks as well, including the lack of

governmental backing and regulatory uncertainty;

performance, reliability and security issues with the

processing network; volatility and liquidity issues; and

digital currencies’ mixed reputation. While experts point to

some momentum, the future is far from certain.

To prepare your POS system for digital currency, consider the following:

•• Select flexible POS and payment software that includes a provision for current acceptance of digital currency, or a roadmap that includes acceptance.

•• Investigate leading digital currency providers and their geographic market presence and consider installing a shopping cart plug-in for the provider(s) of choice.

•• Choose trusted options that consumers will feel comfortable using without fear of theft or fraudulent use. Solutions such as PayPal continue to provide that type of trust.

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5. SOCIAL COMMERCEThe path to purchase is becoming increasingly complex. Beyond

online research, pre-purchase activity often now includes social

media — Facebook, Twitter, Pinterest and YouTube. The Walker

Sands study found nearly six in 10 consumers report interacting

with brands on social media, and three in 10 were frequent online

shoppers — purchasing online more than twice per week —

using Pinterest to discover new products.

Retailers are recognizing this trend and setting up processes to engage with

consumers and influencers. But these are still early days. Many are experiencing a

social relationship management execution gap in which they view a number of

activities as valuable, but haven’t gained proficiency with their execution. But

according to Aberdeen Group’s Social Powers Activate: Engineering Social

Engagement to Win the Hidden Sales Cycle, September 2013, retail leaders are

reaping more value from their current social media activities, compared to retail

followers. For example, they are more likely to drive social contacts to their web site

or convert a marketing response into a qualified marketing lead.

Magic Memories sees social media as key to expanding the company’s relationship

with theme park guests. Already, guests can share purchased photos, but in the

future, social media will allow Magic Memories to drive additional post- and even

pre-visit purchases. “If we can get to guests before they visit, they are already

engaged, and we hope we can significantly impact conversions,” said Taitoko. “It will

make the sale more than an impulse.”

70% of leaders, compared to 35% of followers, see social media as a vehicle to improve their firm’s brand image. — Aberdeen

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What is left to determine is whether social media will

remain an enabler, generally building sentiment and

driving customers to existing channels, or whether they

will evolve into transaction channels as well. Currently,

Aberdeen found that:

✓✓ 70% of leaders, compared to 35% of followers, see social media as a vehicle to improve their firm’s brand image; and

✓✓ 55% of leaders, compared with 52% of followers, plan to expand demand (lead generation/customer acquisition) using social media.

“ The connected nature of today’s buyer’s journey pushes

firms to incorporate social touch points within CRM and

customer experience management (CEM) initiatives,

and to foster social communities among existing

customers, stakeholders, and advocates,” according to

the Aberdeen report. Clearly, right now leaders see

social media as a way to drive positive sentiment and

conversions, but not as a vehicle for direct selling, and

therefore, an area where they need to develop a

payment mechanism.

When you think about your business and social media transactions:

•• Start with current and future objectives for your social media activity and consider whether transactions are appropriate;

•• Look at options to seamlessly move interaction to payment: Top Shelf Style uses social media to share the latest arrivals with fans, then seamlessly transitions to PayPal Here for sales; and

•• Ensure your POS and payment software providers offer the flexibility and APIs needed to integrate with social media sites.

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CONCLUSION: PLAN AHEAD FOR PAYMENT’S DYNAMIC FUTURERetail is undergoing a profound paradigm shift in the way

retailers and consumers interact, and so is payment. A

customer-centric, omnichannel retail experience requires a

consistent payment experience. It also means:

1. Offering solutions that deliver real value to consumers. To have long-term value, new payment options must help shoppers save time and money;

2. Bringing the transaction to the customer through mobile payment, where appropriate.

3. •Engaging with the leading wallet solution to be ready for the imminent disruption in how retailers store and exchange payment and loyalty data.

4. Keeping an eye on rapidly evolving digital currencies.

5. •Monitoring evolving best practices in social media and in particular, its link to commerce.

So is your business ready for a cashless society?

“All of these trends represent the drive to make payment a convenient, frictionless,

part of transactions, and the move away from cumbersome processes such as

handling cash,” said Vaughan Roswell, Founder and CEO of Vend. “Savvy retailers

that stay on top of these developments and act quickly as trends emerge not only

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gain first-mover advantage, but cast a positive, cutting-edge vibe over their entire

business. Being that nimble requires flexible solutions that can adapt to whatever

forms of payment catch on.”

Entrust your business to POS and payment vendors that offer a flexible, innovative

platform that accommodates all of these possibilities, combined with a business

model based on tailoring the broad array of POS and payment options into a

package customized to your unique business needs. Click here to discover why

leading retailers are using the Vend & PayPal mobile POS solution.

“Savvy retailers that stay on top of these developments and act quickly as trends emerge not only gain first-mover advantage, but cast a positive, cutting-edge vibe over their entire business.” — Vaughan Roswell,

VendHQ

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About VendVend is a cloudbased retail software platform, which enables retailers to accept payments, manage their inventories, reward customer loyalty, and garner insights into their business in realtime. It’s simple to set up, works with a wide range of pointofsale devices, and operates on any web capable device with a browser. Vend also seamlessly integrates with other fantastic business apps such as Xero, Timely and Magento. Launched in late 2010, Vend now has more than 8,000 active users in over 100 countries and is seeing continued rapid global growth right throughout 2013.

About PayPalPayPal is the faster, safer way to pay and get paid online, via a mobile device and in store. The service gives people simpler ways to send money without sharing financial information, and with the flexibility to pay using their account balances, bank accounts, credit cards or promotional financing. With 137 million active accounts in 193 markets and 26 currencies around the world, PayPal enables global commerce, processing almost 8 million payments every day. Because PayPal helps people transact anytime, anywhere and in any way, the company is a driving force behind the growth of mobile commerce and expects to process $20 billion in mobile payments in 2013. PayPal is an eBay (Nasdaq:EBAY) company and contributed 40 percent of eBay Inc.’s revenues in 2012. PayPal is headquartered in San Jose, Calif. and its international headquarters is located in Singapore. More information about the company can be found at www.paypal-media.com.

About Retail TouchPoints Retail TouchPoints is an online publishing network for retail executives, with content focused on optimizing the customer experience across all channels. The Retail TouchPoints network is comprised of a weekly newsletter, special reports, web seminars, exclusive benchmark research, and a content-rich web site featuring daily news updates and multi-media interviews at www.retailtouchpoints.com. The Retail TouchPoints team also interacts with social media communities via Facebook, Twitter and LinkedIn.

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