Retail payments: A practical guide to retail payment processing

Retail payments are transactions individuals or businesses make to purchase goods or services. These payments can occur across various channels, including in store, online, or mobile apps, reflecting how customers interact with retailers.

Although retail payment processing is completed in a matter of seconds, quite a few steps happen during this time.

Let’s start from the beginning:

1. The customer starts a payment in app, online, or in store, and the retailer sends the payment details (like cardholder information) to the payment gateway.

2. The payment gateway processes the data according to specific security and technical standards and forwards it to the local payment processor.

3. The payment processor sends the information to the card network (e.g., Visa, Mastercard), which then communicates with the customer’s bank to perform checks, such as verifying available funds.

4. The customer’s bank either approves or declines the transaction and shares this decision with the card network.

5. The card network returns the response to the payment processor, which relays it to the payment gateway. The gateway then informs the retailer and the customer, completing the transaction.

Finally, the funds are transferred from the customer’s bank account to the acquiring bank and then to the retailer’s bank account. This process is usually initiated by the end of the business day.

Traditionally, retail payments involved shoppers visiting physical stores to purchase products. However, as digitalization advanced, retail payments moved to ecommerce stores, prompting retailers to adapt by rapidly creating and optimizing their online stores.

This transition introduced a multichannel retail environment. However, having multiple channels alone wasn't enough – customers began expecting seamless and flexible experiences across these channels. For example, they wanted the convenience of buying a product online and returning it in store. To meet these expectations, retailers embraced an omnichannel approach. Now, the retail landscape is evolving further with unified commerce. Unified commerce integrates all customer-facing and backend systems into a single platform. This approach ensures that data from every channel flows into one centralized system, enabling retailers to understand customer needs better, streamline operations, and adopt emerging technologies that support scalable growth.

Many retailers face significant challenges in improving their payment systems due to reliance on outdated technology – a patchwork of legacy systems not designed with today’s customer experience in mind. These limitations create several critical issues:

• Unified customer experience: Modern customers expect enhanced experiences like self-checkout, endless aisle options, and click-and-collect services. However, legacy systems with siloed data and numerous integrations make it challenging for retailers to deliver and maintain these services, falling short of customer expectations.

• Financial reconciliation: For retailers with operations across multiple locations and regions, reconciling payments from different stores can be lengthy and error-prone. It often takes days, incurs high labor costs, and delays financial reporting, impacting overall operational efficiency.

• Reliable and stable payments: System downtime has severe consequences, including significant revenue loss and a negative customer experience. Retailers require a stable, dependable payment solution to handle high transaction volumes and ensure seamless in-store operations.

• In-store conversion: 56% of shoppers in Singapore abandon purchases when they can’t pay their preferred way, such as through digital wallets or local payment methods. Additionally, many customers will abandon a purchase if the payment process is too slow or overly complicated. Businesses that streamline in-store payment processes often experience a substantial boost in conversion rates.

The fragmented setups that retailers use lead to inefficiencies, revenue loss, and a compromised customer experience.

To meet evolving customer expectations, retailers need a payment system that seamlessly connects every part of the process through a single, unified platform.

Unified commerce enables data from all channels to flow into one system, making it easier to understand customer needs, adopt emerging technologies, and scale your business rapidly. By streamlining operations, such as financial reconciliation, businesses can increase efficiency while enhancing the customer experience.

This approach empowers retailers to deliver personalized, exceptional experiences while maintaining operational efficiency and scalability. Leveraging data effectively is the key to achieving these goals and staying ahead in a competitive marketplace.

At Adyen, we simplify and improve online and in-person payments for businesses and their customers. Our unified platform combines a payment gateway, processor, and acquiring bank into one solution, making retail payment processing simple. Direct integration with global and local card networks lets you leverage local market conditions, boosting authorization rates and reducing transaction fees. Managing payments is easy when you only have one contract and one party to interact with to optimize your business performance.

Our Unified Commerce solution allows retailers to offer the experiences that their customers expect, including benefits such as: 

• Boost in-store conversion by delivering personalized experiences with advanced payments technology. 

• Reduce time spent on financial reconciliation is through automation, lowering overhead spending and eliminating errors, no matter how many brands you manage. 

• Offer flexible shopping experiences with a unified platform. 

• Never lose a sale with unmatched payments stability, deliver uninterrupted shopper journeys online, in-store, and beyond – free from technical issues.

Learn more about how Adyen can support your retail ambitions.