I have spent over 25 years dealing with commerce systems of one kind or another. The one part of it I hate the most is payments, and I have tried to avoid even dipping my toes in the water, let alone diving in.

That time is over, not because I want it to be, but because true omnichannel commerce is simply not possible without solving the payment problem. I’ve heard multiple retail executives say over the last year that if they could have one thing to make their lives easier, it would be one basket/one swipe.

Omnichannel Without Blockchain

Here’s what I mean by that. Let’s take a “typical” shopping journey…

I accidentally click on the third email that a retailer has sent me today, but when it opens it actually does have a sweater I like. I click on it, and it takes me to the retailer’s website. I like the look, but sweaters are getting shorter these days and I want to make sure it covers everything I want it to cover, and I was going to stop by the mall anyway to recycle my Nespresso capsules, so I check online and the retailer has the sweater in my size at that mall’s store and I decide I’ll stop by and try it on.

I get to the store, I like the fit, but they don’t have the black one in my size. The sales associate sells me on the cranberry one, and shows me a pair of earrings that go with it, but I decide to buy the cranberry to take home, order the black one to be shipped to my home, and skip the earrings.

This is one transaction which ideally should be one payment, and some payment providers do accommodate this situation through persistent tokens. But it is impossible to make this situation a reality without additional technology beyond the swipe (or shove or tap, depending on your EMV maturity): the retailer can’t charge me for the black sweater until the box from the eCommerce DC is shipped to my house.

Even with instant updates to systems (which is still a highly unlikely scenario), if I’m standing in the store at 6pm at night, the last wave of orders to pick and fulfill in that eCom DC may have already come and gone. The soonest that box is going to leave the retailer’s possession is the next day. And while the retailer can and will charge me for the cranberry sweater while I’m standing in the store, they cannot charge me for the black one until the next day – at the soonest. Because keep in mind this scenario reflects an Amazon-level speed of fulfillment (that even Amazon doesn’t hit as regularly as one would expect).

There are a couple of reasons why this issue matters. One, retailers don’t want to hold on to payment information for security reasons, but absent implementing a token-based payment system, in order to take that “one basket” payment they would have to hold the payment info until they can charge me again once the black sweater ships.

Two, there are really two types of payment actions that happen when you buy something with a credit card – there is the authorization, and then there is the actual payment (it can be even more complex this – I am simplifying). Behind the scenes, when you hand over a credit card, the entities involved in the payment actually put a temporary hold on those funds. This is the authorization part. It basically is the bank that issues your credit card saying “yes, she’ll be good for this payment when the time comes.” That’s why when you go to a hotel, they warn you that if you try to use a debit card when you check in, you’re going to see a hold on your account where that money won’t be accessible to you. They pre-authorize at least one night or some kind of “deposit” amount, which they will settle out to the actual amount when it comes time to pay.

When retailers complain about merchant fees, they’re not just complaining about fees on transferring money from the bank to the retailer, they’re complaining about a whole range of fees, including authorizations. In an omnichannel payment, this becomes important because that hold has an expiration date. So, let’s say the black sweater had an incorrect quantity in the warehouse, and actually it’s backordered – but will be fulfilled in the next two weeks. Now my sweater isn’t going to ship for at least two weeks after the initial authorization. The retailer may find itself in a situation where they have to re-authorize my card, because the card won’t “hold” the funds forever. At some point, if the payment isn’t settled, the card will release those funds and make them available to be used in some other way. So the retailer has to check again – for a price – to make sure I’m still good for the payment as the sweater finally gets packed and shipped.

All of this also doesn’t take into account that depending on how the retailer has their payment network set up, the cranberry sweater may be hit with a card-present transaction fee (cheaper because the card was physically in the retailer’s presence when I made the purchase) but even though the same card was physically there and used to pay for the black sweater, that part of the transaction might be charged at the higher card-not-present transaction fee, because it is authorized as an eCommerce purchase, not as one that happened in store.

That’s just a “simple” omnichannel basket. There could easily be a situation where I buy something to take with me, order something to be shipped to my home, and also order something to be picked up in another store. The assumption may be that I’m going to drive immediately to the other store, but what if I don’t show up for a few days? Or even a week (I’m amazed at the number of retailers who report people buying – and paying – for in-store pickup who never show up for the items, causing its own headaches)?

And then there are returns and exchanges. Most retailers require consumers to receive return credits to the tender that was paid (or a gift card). What if I split tenders, and paid for one sweater with cash and one on the card? What if I return the cranberry sweater once I get the black one but want to also buy the earrings after all? While standing in a different store than where I made the original purchase? What if I buy something online (card not present) but I want to pick it up in store?

If you’re feeling ill right now imagining these scenarios, I don’t blame you. It’s exactly why I’ve tried to avoid the world of payments for as long as possible.

Along Comes Blockchain

Then along comes blockchain. So far, it has been a solution in search of a problem, at least as far as how it applies to business use. But forget about cryptocurrencies and their oft-repeated benefits of “stateless” currencies that could be used anywhere in the world, or that are supposedly anonymous and untraceable (they’re not, by the way).

Fundamentally, blockchain can be boiled down into three parts: a token, a contract, and a ledger. To me, the contract is the most interesting part of the three, because you can set up contracts to automatically do things based on new information that gets added to the chain. Containing this automation in a contract is what people mean when they start talking about “smart contracts”.

It’s not that far of a stretch to say that one basket and one swipe is a “contract” between the customer and the retailer. That if I buy a cranberry sweater to take home and a black one to be shipped to home, I’m committing to a payment now (cranberry) and a payment later (black), and that there are conditions on that second payment. Specifically, that the second part of the payment can be taken once a ship confirmation is posted to the chain, that the funds will indeed be held until that event happens, or that the funds will be automatically released if the item doesn’t ship within seven days, or whatever timeline the retailer cares to commit to. The token governs the payment part, so the retailer doesn’t have to hold the payment information – that is secured on the blockchain, the contract governs what requirements have to be hit for payments to be made, and the ledger keeps track of what is promised, what has been met, and what is still waiting to be met.

The Bottom Line

I’ve seen many iterations of payments and blockchain, everything from the O.G. Bitcoin to Facebook’s Libra as the newest entrant. I’ve seen loyalty and identity schemes, and even some crazy applications of blockchain that I’m saving up for an article all its own. But one thing I have not seen is omnichannel payment. Am I missing something because of my general avoidance of this issue? Or is it the one case where blockchain really might be the tool for the job, but no one seems to be embracing it?

Whatever the answer to those questions, one thing holds true regardless: omnichannel will never be seamless, even from the customer’s perspective, until the thorny issue of payments is resolved.

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