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New Customer Journeys and Merchant Payments Innovation – Q&A with IKEA Retail and VW Payments

In the past 12-18 months, there has been monumental change in the way that customers interact with merchants, with no sector or vertical left untouched. I recently had the chance to talk to Marijke Nijhoff, product manager – Payments at IKEA Retail, and Lisa Ratz, head of operations at Volkswagen Payments, about changing customer payment journeys, innovation within payments, and fraud and security.

Andrew: Thanks to you both for taking the time to talk about the new customer journeys that are emerging, largely driven by the pandemic. What I’d like to understand, from the perspective of the industries that you support, or are in, is the new customer journeys that you’ve enabled, and some of the metrics that demonstrate these shifts?

Marijke: It’s no surprise that we’ve seen huge changes during the pandemic; I think, however, that it has largely fast-forwarded some the existing trends. For IKEA Retail, activity on our website skyrocketed in April and May 2020, and even though the lockdowns have since lifted, the activity has not returned to the old levels but remains significantly higher. Consumers simply have not reverted to their pre-pandemic purchasing behaviors. We’ve witnessed diversification of the payment methods that people use and want to use too, both online and in store. What we’ve seen in our stores is a significant decline in cash payments, and a steep increase in contactless payments, including use of eWallets.

Andrew: And Lisa, Volkswagen Payments was recently announced as an ACI Innovation Award winner for digital payments innovation, though historically I wouldn’t have thought of payments being so intrinsic to the auto sector. Maybe you can explain some of the new customer payment journeys you enable for the entire Volkswagen group?

Lisa: Historically, you’re right. In fact, Volkswagen Payments was created as the payment service provider for the Volkswagen Group only in 2017. Certainly, the behavioral shifts that were already evident before the pandemic have intensified, which we’ve also seen in the auto industry. Initially, we saw a decrease in payments for parking, fueling and charging as customers were not using their cars on a daily basis. But at the same, we saw other things that have traditionally been paid through bank transfers, i.e., insurance, being paid through other payment methods on our platform. Our “functions on demand,” for which Volkswagen Payments received the ACI Innovation Award, also grew significantly – for example, when customers want to upgrade systems within their car such as navigation, they can do this online, complete the payment and the additional functionality in their car is unlocked or upgraded. This is something we have been establishing over the past four years, which grew very rapidly, and which we are definitely looking to further enhance.

Andrew: From a payment perspective, is this enabling brands to interact with their customers in completely new ways?

Lisa: If you look at the automotive industry, the manufacturer and, by extension, the brands typically sold their cars to the dealerships, and that was it. It was the dealership that then had the relationship with the customers. With the new services that we provide through our platform, it establishes a stronger connection between the end customer and the brand, but it’s also a more efficient way of delivering services and ultimately it helps us to improve our product and service offerings.

Andrew: Marijke – have you done similar things with IKEA Retail? For example, changing store formats and subsequently the way you interact with customers?

Marijke: Absolutely. Traditionally our model was 100 percent brick-and-mortar, but that has changed over the last couple of years. Within our stores, we’re developing scan-and-go technology, which enables a customer to scan items via our app and complete the purchase at the self-serve kiosk. We implemented click-and-collect during the pandemic, with different methods of payment, and these different buying journeys are here to stay. We’re also constantly learning to understand and adapt to the new ways our customers want to shop and interact with IKEA Retail. An example is the inner-city store concept we’ve introduced in a few markets and cities.

Andrew: So that means you might have smaller format stores, but can still enable the availability of all your products within those stores, almost like an eCommerce capability?

Marijke: Yes, so we’re seeing more hybrid customers. Customer journeys that start online and continue in store and the other way around and back and forth – we need to understand what they need and how we can best support them in their shopping journey.

Andrew: You’ve raised excellent points about what the store strategies of the future might look like, based on how customers are now behaving. I want to focus in on a couple of dimensions of this; one is alternative payment methods, and as an extension of this, the approach to fraud and how to enable a smooth customer journey for those shoppers you know and trust.

Marijke: When it comes to alternative payments, this is simply not something where you can get it right today and then forget about it; it requires constant re-evaluation. For us, to be truly global, we need to go local, which is the paradox with payment methods. The word “alternative” is becoming outdated, especially in some of our global markets, where the volume of these alternative payments has really swelled. The traditional payment methods are certainly still there, and I think they will stay, but the mix of methods being preferred and used by customers is and will be even more diverse. “Buy now, pay later” (BNPL) products, digital wallets, direct debit solutions…the magic lies in getting this setup right at each country level.

Lisa: Customers do not want to queue anymore and have little patience for additional friction in the payment flow. Here in Europe, with 3D Secure 2.0, it’s a bit of a challenge for cards where that additional security process interrupts the payment flow. And this is one of the areas where a number of alternative payments offer convenience and an improved customer experience.

Andrew: Finally, for your respective businesses, what’s the “secret sauce” that has enabled you to transform and adapt to the new customer expectations and behaviors that have emerged in light of the pandemic?

Marijke: It’s not like digital wasn’t on our radar – it was already our priority – but the pandemic put a spotlight on it. When eCommerce goes from being a relatively small part of the business and scales up to what we saw in the early part of the pandemic, it’s important to get it right, and solve the known weaknesses it stressed. It becomes obvious what you need to focus on. I’m very proud of what IKEA Retail managed to do as a company in responding and adapting quickly to the circumstances and the needs from our customers

Lisa: Everything is now 100 percent customer driven – you have to be able to adapt and that’s what we have done.

Find out more about the ACI Secure eCommerce Solution and how it can enable new customer payment journeys.

VP Sales, SaaS Solutions

Andrew leads business development efforts in Europe for ACI’s Saas Solutions. His strong track record in the payments sector spans omni-channel payments, card acquiring, Card Not Present fraud solutions, POS & ATM outsourcing, prepaid card solutions and security printing. Andrew is highly attuned to the changing needs of European merchants, and the role of payments strategy – and payment technology – in securing success for these merchants.

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