What Companies Miss With Invisible Payments

By Mike Elgan  |  Posted 06-03-2016 Print Email

Yes, friction-free invisible payments work wonders. But only when something else is highly visible. 

Everybody's talking about invisible payments. But there's more to this particular form of "friction-free capitalism" than meets, or doesn't meet, the eye.

I'm going to tell you why a successful invisible payments process is only half the battle (and I'll tell you what the other half is) but first, let's fully understand the invisible payments idea.

What makes payments "invisible"

An invisible payment is where a consumer pays for something without mentally participating in the payment process. It's not really invisible. It's just not particularly noticeable.

My favorite example is paying for toll roads. In the old days, you had to pay with cash. In some cases, you chucked coins into a basket, which would bounce to the bottom and into a hole where a machine would count them, then open the traffic barrier gate when the fare price was met. In other cases, you'd interact with a surly toll booth employee, handing them bills or coins, then they would manually press a button to raise the traffic barrier gate. In both cases, payment is decidedly "visible." You need to fish cash out of your wallet or coins out of your car somewhere and explicitly go through a whole vending machine or cash register type payment process.

Nowadays most toll roads use an electronic toll collection system (ETC). When you sign up for the program, you're given a transponder that you place in the car. When you need to pay a toll, you do nothing -- just keep driving -- somewhat slower through the toll gate. Equipment at the toll site grabs the data from your transponder, and your account is charged accordingly, which is usually prepaid .

ETCs make payments invisible, at least at the point of sale. They're invisible because the payment is made -- the service is purchased -- because no action is required. In fact, awareness isn't even required.

Invisible payments are driven by the fact that more people are buying things with their phones, rather than with a desktop. The small screens and tiny keyboards make an arduous payments process even more so. The ability to thrill customers with invisible payments on mobile is a major advantage.

But invisible payments also drive purchases from desktop PCs.

The best implementations of invisible payments that I know of are Uber and Starbucks.

At the front of the invisible payments revolution is a company called Braintree, which offers a turn-key payments system for mobile app developers and website owners. (In fact, it's the system used by Uber and other on-demand Silicon Valley unicorns.)

Another major driver of invisible payments is Amazon.com, which offers myriad ways to make paying invisible. The company's Subscribe and Save program lets customers "subscribe" to products that are ordered monthly. For example, customers can "subscribe" to paper towels, dish soap and dog food through the Subscribe and Save program, which also gives them free shipping and a 15% discount. The payments just happen in the background without any action by the customer.

Amazon's Dash Buttons are product specific, complete with branding, and they stick to the wall at strategic locations in the home. By pressing the button, a product is both ordered and paid for.

The newest example of Amazon's commitment to invisible payments is a system called the Amazon Dash Replenishment Service (DRS). It's for products that sometimes run low on something. Partners include Brita Water Pitchers, automatic dog food dispensers, printers, washer/dryers, and even a blood glucose meter. When they do run low, these connected devices actually order more of whatever's needed through Amazon automatically. So, for example, instead of having to remember to buy dog food, you simply enroll in Amazon's DRS, and the dog food shows up on your porch when you need it.

Why invisible payments are only half the battle

In all the discussion about invisible payments, the assumption is that simply moving to a friction-free model makes the magic happen. But that's not true.

The best invisible payments combine the payments part with one of four additional customer benefits:

1. Control. Amazon is great at this by offering ordering through its Amazon Echo and Amazon Dash Button appliances. Telling the Amazon Echo's "Alexa" virtual assistant to order new batteries, or pressing on the Tide button in the laundry room gives consumers a mild thrill of easy control and power. That feeling is conveyed because the payment part is invisible, but the invisible payment is made into a pleasurable experience by the sense of control.

2. Influence. Uber's invisible payments process is augmented by the gratification of rewarding or punishing the driver. The app enables you to both rate and tip the driver. Note that you can tip a taxi driver, but because that tip involves handing over cash personally, the motivations for tipping could be any number of things, some of which feel negative. With Uber, you can tip after getting out of the car, and so the tip feels better.

3. Surprise. Amazon's Dash Replenishment Service is a perfect example of where the invisible payment is improved by an invisible decision. You're liberated from having to notice, remember and take action on the low printer ink problem. When the ink arrives, you experience an emotional lift from learning about a problem only as the solution is presented to you.

4. Privilege. When your flight lands and disgorges its passengers, many of them will (like you) begin the epic process of getting a rental car. This often means finding, waiting for then taking a bus to a rental car facility, waiting in a long line to talk to a representative, answering a bunch of questions about gas, insurance and so on, then struggling to find the car they picked for you. A startup called Silvercar will rent you a silver Audi A4 in a way that gives you the feeling of special treatment. Instead of lines and awkward and boring conversations with the rental agent, you simply get off your flight, pick any Silvercar rental at your rental company of choice and drive off. You use the app to unlock the car and the payment is invisible.

The super successful invisible payments processes are able to provide more than one of these benefits at once. For example, Starbucks' Mobile Order and Pay system gives you both control and privilege.

When you use the Starbucks app's Order feature, you can pick any menu item, complete with details about toppings, flavors, size, temperature, type of milk -- you name it. That provides a feeling of control.

And the best part is when you walk into a Starbucks, saunter past the long line of people for the cash register waiting to place an order. You get you bypass the line and just pick up your order and leave. It feels like flying first class.

The most important aspect of all these benefits is that they give customers an emotional feeling -- the minor thrill of control, influence, surprise or privilege -- which their alternatives do not.

Conventional methods involve a feeling of hassle, boredom, invasiveness or frustration from the payment process -- a punishment without a reward. The invisible payments processes that provide one of these four benefits give customers a reward without the punishment.

Invisible payments work -- but only when you also give customers something extra. 


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