Deliver a seamless grocery retail experience that meets consumers’ personalization expectations.
Beyond traditional banks, more businesses will expand their consumer footprint by adding financial products. By 2030, 73 percent of global consumer payments will be processed by non-financial institutions.
Consumers want a better shopping experience, and grocery retailers need to offer more without sacrificing their already slim margins. Digitizing more of the experience streamlines interactions and payments, and can offer a new path towards loyalty. By embedding financial services, grocery retailers can confidently step further into digital to deliver superior shopping experiences to every customer while expanding business opportunities.
Adapting to consumer demand requires delivering on all facets: both in-person and digital experience. Integrating financial products into physical and digital interactions adds more value to the consumer, and increased revenue and engagement for the grocer.
In a recent Boston Consulting Group survey, retail respondents saw up to a 5 percent increase in conversion when they offered embedded financial services, as well as up to a 30 percent increase in average order values and a revenue boost of up to 7 percent.
Embedded financial services boost existing loyalty and reward programs, plus enable new revenue streams by offering ancillary services that don’t require inventory on store shelves.
How embedded finance works
Embedded finance providers offer financial products through a technology platform, typically accessed via application programming interfaces (APIs). Through this platform, grocery retailers offer financial services directly to their customers. This can be through a new, customer application, or via an existing loyalty, rewards app, or website.
Retailers have the opportunity to position themselves more prominently in the minds of their customers. By integrating critical financial tools into existing apps, customers interact more frequently, get more value from the interaction, and are more likely to choose the high value brand over a competitor. By continuously incentivizing customers to maintain a deeper relationship with a brand, customer interaction and engagement grows beyond regular purchase cycles.
With embedded finance, retailers can offer their customers financial products including accounts, branded debit, and international remittances.
How grocery stores benefit by offering financial services directly to their customers
Growth for grocery means meeting the expectations of every customer every day. Consumers will increasingly expect their financial needs to be met on their terms and at the point of need, with financial services and products available everywhere and at any time. So, what do the benefits of embedded finance look like for retailers?
Let’s examine the impact each financial product has on retailers.
Embedded remittances
Every week, your customers send money to their friends and loved ones across borders. Growth in cross-border remittances has reached $860 billion sent annually each year, with the United States as the single largest source country according to World Bank. In fact, the U.S.–Mexico corridor is the single largest remittance pipeline in the world, with $56 billion sent per year ( Mastercard). Engaging the sending customers with a remittance option via embedded finance solves a key pain point for them, and brings more — and more frequent — traffic to stores.
The remittance capability can be offered as a stand-alone service either via cashier or kiosk-based, contactless solutions. Customers can shop for necessities and send funds internationally in one stop. Adding this function also increases the amount of time consumers spend in store.
Remittance can be the start of a new, more interactive experience with your brand. Next steps can be adding secured accounts or debit cards as your business and your shoppers dictate interest in additional financial products. Modular, embedded financial services give grocery retailers the ability to evolve with your customer base, building trust with each financial product.
If you currently offer in-store money transfers via a third-party like MoneyGram or Western Union, using embedded remittance removes the need to staff the store within a store, gains back significant square footage, and removes the dependency on that vendor.
Expand loyalty programs to debit cards
Co-branded credit cards are everywhere, offering an attractive option for consumers to earn points and rewards with their favorite brands. Grocery retailers often offer a loyalty card to trigger immediate discounts, earn fuel points, or other incentives. Combining a spending card with a loyalty program can bring powerful benefits for both grocery retailers and their customers. To build on that momentum and reach a wider customer segment, co-branded debit cards also offer an opportunity for grocers to extend their loyalty programs, while circumventing the need for third-party issuers, typically banks.
With branded debit cards, retailers increase brand visibility and engagement and can offer attractive rewards funded either by interchange or as part of the overall loyalty program. With open-loop cards, which can be used anywhere, each swipe represents a closer look at the spending habits of customers. Tailoring programs and offers that align with these patterns can be personalized at the group or individual level.
Another key insight from these patterns is to better understand the timing of purchases. Should discount offers happen early in the month to compel more purchases, or should rewards immediately follow repeated purchases? Grocers would have unparalleled views into overall spending habits, and can develop the most effective promotions and offers, often outsmarting the competition with better data.
Pre-funding guarantees revenue and rewards loyal consumers
Another way to leverage cards is to allow customers to add funds to a branded card or wallet ahead of purchases. It’s essentially the Starbucks model, where consumers load funds to their Starbucks wallet ahead of purchases, and earn stars when doing so. Starbucks wins with consumer deposits to the tune of $1Billion, earning yield on those deposits, completely funding rewards and incentives. Starbucks also wins the engagement game and saves on card network fees, with 41 percent of customers in the U.S. regularly paying via Starbucks Cards in stores, and 21 percent paying via the Starbucks app.
Grocery retailers offer essential products and services, forming the basis of household monthly expenses. Unlike lattes, there’s little doubt that household staples will be deemed unnecessary. Consumers will continue to purchase. But where they choose to purchase can be the difference between growth and stagnation.
Retail grocers can encourage store loyalty by rewarding pre-funding and incentivizing shoppers to maintain a monthly average balance. For example, if a consumer loads $100 for their next shopping trip, the grocery retailer can provide $105 worth of groceries. Budgeting is made easier for the consumer, and cashback rewards are immediately available — and for the retailer — all without paying higher credit card network fees. Wallet payments via accounts carry no cost.
A step towards greater trust: Accounts
With large companies like Walmart, Walgreens and Ikea taking ownership of their customers’ financial interactions, it’s a natural step for grocery retailers. Groceries are essential, however, there are still myriad options for where to buy the essentials. Shoppers favor companies that understand their preferences and reward their loyalty. But it’s not that simple.
A recent SAP survey indicates a drop in brand loyalty, spurring new ways to engage consumers, “This will require personalized offers, exceptional customer experiences, and a deep understanding of consumer preferences." With slim margins, it’s time to innovate: Deliver exceptional experiences and meet consumers’ expectations and needs.
Offering branded financial products to customers provides more accessible and flexible options to traditional banking, and brings additional avenues for engagement. Account types can be tailored for your customer base, bringing accessibility and personalization at scale.
A treasure trove of first-party data
Retailers are currently missing a significant opportunity to fully own and control the customer relationship and access customer spend data that bank issuers don’t provide through co-branded credit cards. In fact, banks like Chase are now looking to sell customer spend data to brands. First-party spending data is readily available through an embedded finance platform, delivering deep insights to retailers that can influence new promotions, brand partnerships, product development, and boost revenue.
Grocers can generate significant value from expanding connections to customers and leverage these customer insights to boost upsell and cross-sell opportunities for a higher return on marketing spend. Through precise demographic segmentation and spending behavior analysis, retailers can optimize product offerings, improve promotional campaigns, and deliver targeted offers to the right customers at the right time.
Complete ownership and access to when, where, and how customers spend money 24/7 enables full transparency between retail businesses and their customers.
The new grocery retail landscape: Unified customer experience, more engagement
Retailers continuously work to improve the customer experience as customers’ needs, expectations, and behaviors shift and change.
With a comprehensive embedded finance platform, retailers can expand and deepen automated promotional marketing alerts and digital coupons relevant to what customers value most, and what they may purchase at other stores today.
Embedded finance opens new possibilities for in-store and app engagement. Using your platform to shop, bank, and store money can be quick and easy. Imagine customers logging in to your banking app and receiving instant ads about their favorite retail products based on their individual preferences. Customers can use integrated, white-label accounts to store money, pay bills, or send remittances.
Taking the first step
Some key grocery retailers are now offering full featured financial services. But adding financial products can also take a phased approach. Start by offering co-branded debit cards to loyalty program members. Add remittance capabilities via ATM-like physical machines in-stores, or via your existing app.
Alviere makes this possible through its HIVE technology platform, program expertise and as a licensed financial institution. Grocers can deliver a full suite of financial products and services to their customers. Retailers can launch, grow, and scale new financial service solutions that enhance core lines of business for increased profitability, deepened customer insights, and improved customer satisfaction.
