Payment Systems as a Critical Point in Retail

Published by Goran Bosankic on 09. April, 2024

Saturday, 12 PM. The line of customers at the cash registers of a large retail chain grows by the minute because card payments are not working. The nervousness among customers increases, with losses measured in millions per minute.

It sounds like an apocalypse and a retailer's worst nightmare because such a scenario is exactly that in today's world: an apocalypse.

Why? Because in today’s fast-paced retail world, payment systems are no longer just a means of transferring money from the customer to the merchant; they have become a fundamental component that defines success or failure in commerce. From physical stores to the world of e-commerce, the way we pay has revolutionized the consumer experience, emphasizing the importance of efficient and secure payment systems.

The Numbers Speak for Themselves

According to data from the last official report of the Croatian National Bank (HNB) in 2022, there was an almost 14% increase compared to the previous year in both the number and value of card transactions in Croatia. The number of EFTPOS devices grew by almost 20% in just two years, while the number of ATMs is declining. Regarding e-commerce, the situation is even more interesting, with the total value of transactions on this channel increasing by almost 50% in three years. Although still nearly 75% of fiscalized receipts were paid in cash, the trend is absolutely in favor of card payments, where almost a third of transactions are expected to soon be in favor of cashless payments both in number and in transaction value.

History and Evolution

This tells us how crucial and critical payment infrastructure is. Not so long ago, about twenty years back, cash and checks were the main methods of payment. With the advent of credit cards and then e-commerce, the retail world experienced a dramatic change. The impact of the pandemic cannot be ignored either, as the focus on any form of contactless interaction enabled a rapid rise in cardless contactless transactions and especially e-commerce channels, which at one point appeared as the only possibility, posing additional challenges to the merchants' infrastructure.

E-commerce Revolution

Speaking of e-commerce, about fifteen years ago, e-commerce technology was in its early stages. Online shopping websites were simpler, payment options limited, focus far less, and transaction security often was a major concern. Today, advancements in technology have enabled the creation of secure, fast, and user-customized online shopping experiences. Modern e-commerce systems, so-called IPGs (Internet Payment Gateways), offer a wide range of payment options from credit cards to digital wallets and cryptocurrencies, with a high degree of security thanks to technologies such as encryption and two-factor authentication. A key factor, along with security, is undoubtedly the user experience, and modern IPGs, like our IPG39, along with other participants in the process, work daily to remove all barriers in the so-called “friction” process so that customers can focus on what actually makes them happy: shopping, and make payments with as little effort and thought as possible.

Importance of Infrastructure for Retail

Success in retail today largely depends on the integration of efficient payment systems. They not only enable fast and secure transactions but also increase customer satisfaction, thereby encouraging repeat purchases and brand loyalty. Modern payment systems also enable merchants to better analyze consumer habits by collecting data, providing valuable insights that can help in personalizing offers. It’s no longer enough just to enable payment, but payment systems must perform a much wider range of tasks to provide merchants with insight into consumer habits and thereby guide certain business decisions. All this puts an additional challenge before payment solutions and today more than ever places such systems at the top of investment demands.

The Future of Payments in Retail

Considering all aspects, it is clear that payment systems play a key role in shaping the retail experience. As technology continues to develop, so will the way we pay, promising a future where transactions are faster, safer, and more tailored to the needs and desires of consumers. When we look at the previously mentioned requirements and the complexity that goes beyond the mere option of payment, more and more merchants are turning to their own resources and building expertise and payment infrastructure within the organization to more easily control the process, introduce innovations, and ultimately reduce the risk that comes with dependence exclusively on third parties.

For e-commerce, the same is achieved by implementing the mentioned IPGs on the merchant's side. On one hand, this enables merchants easier and simpler integration with their internal systems; on the other hand, through multiple integrations with several card payment acceptors, acquirers, they reduce the risk of unavailability and significantly save by smartly directing transactions to the most favorable acceptance routes. The increasing use of the mobile channel and the demands for the introduction of innovative payment methods, from those related to cards to various fintech providers and ultimately the increasingly popular account-to-account, i.e., payment method from account to account through banking channels, definitely put a greater emphasis on the need for a quick response to market demands and upcoming trends.


Similar considerations apply to physical payments. Just a few years ago, the idea of having a single EFTPOS terminal on the counter became a reality with the advent of aggregated POS device service providers. Through backend solutions for multiacquiring, called POS SWITCH one device connects to multiple acquirers, significantly reducing the footprint of sales space, speeding up the payment process, and ultimately achieve savings for the merchant through more favorable fees and lower infrastructure costs. Each retailer that has followed these trends and implemented its own infrastructure, has improved service quality while simultaneously reducing costs and facilitating the introduction of new products from alternative payment methods to self-service checkouts, loyalty programs, etc.


What does the future hold from the perspective of retail payment infrastructure requirements? Croatia, being part of the EU, is subject to the regulations of central European institutions, whether they are good or bad. In terms of payments, a long-term EU initiative is currently taking its final shape to create a pan-European payment network as a counterpart to the major card schemes, which are essentially American. Following PSD2, which has not lived up to regulators' expectations, the introduction of instant payments, i.e., SEPA Instant Payment (SEPA IP), as a mandatory implementation for all banks in the EU within 12 months from the decision coming into effect, opens up countless new possibilities. SEPA IP is a payment standard and legal regulation that allows funds to be transferred from one bank to another (thus in a maximum of one year to ANY EU bank) in just 10 seconds, 24/7. Combined with PSD2 or the upcoming PSD3, such a payment system poses a serious challenge to retail (and wholesale, actually) because it offers clear benefits such as instant liquidity and lower transaction costs, etc., that cannot be missed due to unprepared infrastructure. Here, the importance of smart infrastructure management will definitely show, where primarily merchants with quality solutions deeply integrated into their own systems with quality suppliers will benefit, while those dependent on generic solutions will be at the mercy of their providers.


In conclusion, the inability to respond to market demands regarding payments today would result in the scenario described at the beginning of this story, which no retailer can afford, but a good payment infrastructure certainly can.

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