5 Ways Fintech is Evolving the Brick-and-Mortar Retail Experience

Reports of the death of brick-and-mortar retail have been greatly exaggerated, it would seem. Following strong signs of post-pandemic growth, retail stores are readying to transform the shopping experience for customers all over again, thanks to advances in fintech.

This decade has already seen brick-and-mortar stores outgrow their eCommerce counterparts for the first time in 2021, increasing at a rate of 18.5% compared to 14.2%. 

Crucially, this growing number of retail stores has made a splash in terms of revenue, generating $6.22 trillion in the United States alone in 2023. 

While brick-and-mortar retailers face bigger challenges and operating costs in general compared to their digital rivals, advances in fintech are contributing to delivering a more transformative experience in-store that has helped to replicate eCommerce’s ability to deliver payment flexibility and personalization. 

Although we’re living in challenging times for traditional retail, there’s evidence that technology is helping the industry to thrive in the face of more adaptable eCommerce businesses thanks to the adoption of more fintech solutions. 

With this in mind, let’s take a deeper look at five ways fintech is evolving the brick-and-mortar retail experience for business owners and customers alike: 

1. Streamlined Payments

One of the most transformative impacts of fintech in brick-and-mortar retail stems from the emergence of open banking and the ability for users to democratize their payment options using an integrated point-of-sale (POS). 

While store experiences hinged on cash or the use of card readers, payments have been streamlined to the point where contactless options and mobile wallets are commonly accepted throughout a number of retailers. 

With developments in Apple and Google Pay, customers can have a complete store experience with the help of their smartphones alone. 

As open banking continues to evolve in the fintech landscape, we’re set to see the emergence of open finance as a means for fintech to anticipate consumer behavior and preselect their preferred payment options. Over the coming years, this can expand to incorporate alternative payment options and even cryptocurrency like Bitcoin. 

2. Unprecedented Visibility

Although eCommerce businesses can market their products to fine-tuned audience segments online, fintech is helping to level the playing field so brick-and-mortar stores gain the same customer insights. 

Big data analytics can help retailers create a holistic overview of customers on an omnichannel basis. This can help more customers receive a personalized level of service where their purchase history, integrated loyalty schemes, and POS trends can all deliver bespoke recommendations and enable in-store staff to anticipate their concerns or queries regarding the in-store experience. 

3. Embracing the BNPL Boom

Data suggests that shoppers prefer to use brick-and-mortar stores to make luxury or expensive purchases. Some 31% of luxury shoppers visit physical stores at least monthly, with face-to-face interactions proving to be a valuable part of the experience. 

Furthermore, 68% would rather visit a physical store for customer service. While 37% report feeling happy when shopping in-store. 

These trends present opportunities and challenges for brick-and-mortar retailers. Welcoming more luxury-focused foot traffic is great, but how can more stores welcome luxury shoppers despite the far greater spending power that high-value purchases require? Cue buy-now-pay-later (BNPL). 

The BNPL boom has been made more sophisticated with fintech, and many retailers now include the option for Klarna or competitor BNPL purchases at their POS. This development helps to welcome more luxury foot traffic who can make larger purchases and take their items home immediately without having to spend a significant amount of money in a single transaction. 

BNPL loans from five major lenders saw an astonishing growth of over 970% from 2019 to 2021, and the ongoing fintech boom is set to drive further growth for this flexible payment option as the decade progresses. 

4. Phygital Collaboration

Brick-and-mortar doesn’t have to compete with eCommerce, and in many ways, the two retail experiences can align to deliver a strong customer experience. 

This can be seen in the emergence of BORIS (buy online, return in-store) and BOPIS (buy online, pick up in-store) services that unite digital and physical stores. 

BORIS and BOPIS are effective because they can streamline the try-on experience for online purchases while inviting customers to visit more physical stores where they’re more likely to spend money. 

Again, handling returns or confirming transactions with an integrated POS can help to make BORIS and BOPIS a frictionless experience and can pave the way for more brick-and-mortar visitors who may have only been aware of the retailer’s online presence. 

5. Intelligent Inventory Management

Thanks to AI and fintech, customer payments can also help to deliver intelligent inventory management where every in-store purchase automatically triggers a stock update. When inventory levels are running low, the software can even automate the replenishment process to ensure that there’s no risk of stockouts occurring. 

POS data can also use payment trends to create demand forecasting models where brick-and-mortar retailers will be able to pinpoint where spikes in demand are likely to occur.

Whether an online trend has pushed a new product into the limelight or seasonal items regularly receive a surge in interest during certain periods throughout the year, fintech can help retailers visualize their stock flow and make adjustments accordingly. 

Unlocking the Potential of Retail

At times in the midst of the pandemic, it seemed as though brick-and-mortar stores were facing a digital transformation dilemma that could drive the dominance of eCommerce for years to come. 

However, the unrivaled in-store experience provided by retailers still has the ability to charm customers. With the help of fintech and data analytics, we’re seeing more brick-and-mortar stores replicate the streamlined payment processes offered by eCommerce. In this technologically leveling playing field, forecasts of retail’s demise appear to be premature.