Phygital Now

Customers want
phygital payment experiences
here’s how to deliver them
2 Giesecke+Devrient Customers want phygital payment experiences
here’s how to deliver them. 3

»Customers quickly found that they loved the

speed, convenience and enhanced security features
Table of contents
of phygital payments, not to mention the hyper-
personalization that makes phygital so attractive.« Phygital payments the preferred choice 4
Customers tried phygital and they love it 6
Making phygital real 8
How banks can deliver phygital 10
Phygital across the entire customer journey 12
Global reach with a local touch 14
4 Giesecke+Devrient Customers want phygital payment experiences
here’s how to deliver them. 5

Phygital payments »Phygital will constitute

a quarter of all retail sales
the preferred choice by the end of 2026.«

In a whitepaper published earlier this

year, we explained how the blend of
physical and digital payment experiences,
phygital payments, is now the number
one consumer preference in Europe,
North America and Asia.

From using apps to enhance payment cards

through to “click and collect” services at
retailers, phygital payments are now so
popular with shoppers that a recent article1
predicted phygital will constitute a quarter
of retail sales by Q4 2026. In this
whitepaper, we set out what customers are
looking for in phygital and how banks can
deliver on those expectations.

1
The PayPers, 5 September 2023: “Phygital is the new black”:
https://thepaypers.com/thought-leader-insights/phygital-is-the-new-black
6 Giesecke+Devrient Customers want phygital payment experiences
here’s how to deliver them. 7

»Over two-thirds of shoppers Customers tried phygital

now use mobile devices for
product research while shopping and they love it
in a bricks-and-mortar store.«
During the pandemic, many customers
used phygital payments for the first time

71%
by force of circumstance – and quickly
found that they loved the speed,
convenience and enhanced security
features of phygital payments, not to
mention the hyper-personalization that
makes phygital so attractive.
of people who first tried
Commercetools report2 that 71% of those
self-checkout during the
who first used self-checkouts in-store pandemic say they’ll use it
during the pandemic have continued the again.
practice, while just under half (49%) of
those surveyed said they spent more
in-store when picking up click-and-collect
items while more than two-thirds (68%) of
consumers now use their mobile devices to
research products while shopping in-store.

49%
So-called “soft POS” systems, through which
smartphones become POS devices, are also
part of the phygital revolution, offering
enhanced payment experiences with
greater security and personalization to both
shoppers and merchants from anywhere in
store – not just at a cash desk. Soft POS of shoppers using BPOIS (Buy
online pick up in-store) made
systems also enable a huge expansion of the
additional purchases while
merchant base by making electronic POS
picking up their items in-store.
systems more affordable than ever before.

Phygital retail
One example of phygital transforming the
brick-and-mortar retail journey from the
customers’ perspective is app-based

68%
shopping. The customer downloads the
retailers’ app and scans their purchases
into the app as they shop. Once ready, the
customer can pay directly from the app -
eliminating the need to visit a checkout
altogether.
of US consumers use their
Retailers can also choose to personalize mobile devices to research
and customize this experience with rich products while shopping in
physical stores.
media content, such as recipes based on
what the customer is choosing to buy -
making the experience more compelling
and more convenient.

2
Commercetools, 8 August 2023: “Let’s get phygital”: https://commercetools.com/blog/let-s-get-phygital-the-omnichannel-revolution-that-blends-in-store-online-shopping
8 Giesecke+Devrient Customers want phygital payment experiences
here’s how to deliver them. 9

Making To start with, the advent of phygital payments should serve As European bank branches decline phygital fills the gap

phygital real
as an impetus for modernization. McKinsey & Co recently
published research3 suggesting that 90% of bank IT budgets
are absorbed by the maintenance of outdated legacy 2012 178300
systems, many of which are incapable of adapting to new
payment methods such as Buy Now, Pay Later (BNPL),
real-time payments or rapid integrations to new
technologies. 2022 133000

Clearly, such a situation cannot continue at a time when The

Banker predicts4 the global use of real-time payments is
0 50000 100000 150000 200000
predicted to rise by 13% each year to 2026, reaching more
than $850 billion in value. In these circumstances, banks Source: The European Digital and Card Payment Yearbooks 2022-2023

should see the rise of phygital as a business driver to develop

updated, all-digital systems. Despite this, or possibly because of it, more customers are
visiting branches that are still open, leading to higher
footfall per branch, longer queues and reduced customer
Key in-store phygital experiences include click-and- Phygital experiences in banking and payments range »Banks urgently need to improve satisfaction with their visit. Citing data from KPMG, The
collect, plus either browsing online then buying from combining contactless cards with biometric Guardian recently reported6 that in the UK alone, consumers
in-store, or the reverse, in which consumers browse security factors delivered via app to confirm user ID the in-person experience to keep had visited branches 25% more in 2022 compared to the
in-store then buy online. through to clients browsing for financial products previous year. Digital capabilities and processes can help
online or authenticating transactions by tapping a card up with consumer expectations banks to provide a seamless customer experience in the
This latter category is proving especially popular in against a phone. physical world outside the format of a traditional branch,
categories such as apparel and jewelry, where customers in the phygital era.« whether that’s through automated banking kiosks, “branch
want to physically touch and feel items before they buy Whether it’s in-store, online or in-branch, phygital offers of the future” services that blend physical and digital
while enjoying the convenience of home delivery. huge opportunities to enhance the overall customer experiences, or by delivering more services through a
Meanwhile, companies such as DoorDash, Deliveroo and experience, positively building loyalty, growing customer Secondly, there has been much downsizing in bank branch combination of card and app.
JustEat have revolutionized the hospitality sector by usage/engagement and creating new revenue streams at networks over the last decade. The implication of this fact is
combining digital selection and payment with the physical a time of stiff and rising competition. Phygital also helps that banks should be doing more to improve their customer’s
delivery of food and drink. banks to get closer to their customers, offering in-person experience – whether using automated banking
complementary services without massive investments in kiosks, offering more services through physical cards,
infrastructure. Phygital also enables the gathering of new improving the in-branch experience or through “bank of the
insights and data that can be used to enhance the service future” virtual branches. Research by Payments Cards &
»Whether in-store, online offering. However, grasping the phygital opportunity will Mobile for their European Payment Yearbooks notes5 the
require fresh thinking from banks compared with number of branches across the European continent dropped
or in-branch, creating new strategies employed over the last decade. 31% over the last decade, down to just 133,000 consumer-
facing branches. In other terms, whereas in 2012 there was
phygital experiences for one bank branch for every 2,583 Europeans, there is now
one branch for every 3,383 customers.
customers is a major »Phygital helps banks to get
opportunity for banks.« closer to their customers,
offering anywhere, any time
services without massive
investments in infrastructure.«

3
See Episode Six, 2023: “The Cost of Legacy Technologies for Banks” at: https://buzz.
episodesix.com/the-cost-of-legacy-technology-challenges-for-financial-institutions
4
The Banker, 12 September 2023, “Digital Wallets Dominate but A2A grows”: https://www.
thebanker.com/Digital-wallets-dominate-payments-but-account-to-account-grows
5
See www.paymentyearbooks.com
6
The Guardian, 28 December 2022, “Bank Branches Still Vital”: https://www.theguardian.com/
money/2022/dec/28/bank-branches-still-vital-as-squeezed-uk-households-seek-cash-and-advice
10 Giesecke+Devrient Customers want phygital payment experiences
here’s how to deliver them. 11

Characteristics Maturists
(pre-1945)
Baby boomers
(1945-1960)
Generation X
(1961-1980)
Generation Y
(1981-1995)
Generation Z
(Born after-1995)
Gen Alpha
(Born after 2010)
How banks can
deliver phygital
Formative • Second World • Cold War • End of Cold War • 9/11 terrorist • Economic • COVID
experiences War rationing • Post-war boom • Fall of Berlin attacks downturn • Fairness and
• Fixed-gender • Swinging Sixties Wall • PlayStation • Global warming inclusivity
roles • Reagan / • Social Media • Global focus • Education
• Apollo Moon
• Rock n’ Roll landings Gorbachev • Invasion of Iraq • Mobile devices • Content
• Nuclear families • Youth culture • Thatcherism • Reality TV • Energy crisis creation
• Defined gender
roles –
• Woodstock
• Family-
• Live Aid
• Introduction of
• Google Earth
• Glastonbury
• Arab Spring
• Produce own
• Streaming
media Most bank executives involved in service
particularly for
women orientated
• Rise of the
first PC
• Early mobile
media
• Cloud
• Influencer
culture delivery will be familiar with customer
technology
teenager
• Latch-key kids
computing
• Wiki-leaks
segmentation and what various
• Rising levels of
divorce demographics are looking for, as well as
Percentage in UK Currently employed how fast those expectations are changing.
workforce*
3% 33% 35% 29% in either part-time
jobs or new
apprenticeships
0%
Aspiration Home ownership Job security Work-life balance Freedom and Security and Being their own As the graphic shows, customers are anticipate customer needs and deliver on
flexibility stability boss switching not just from cash to digital, but those needs without the need for
from payments as a process in its own right researching products and services on the
Attitude Largely Early information Digital immigrants Digital natives ‘Technoholics’ Integrated – every
towards disengaged technology (IT) – entirely aspect of life is to payments as an embedded part of the customer’s part. Tomorrow’s customer is
technology adaptors dependent on IT; technology- shopping experience. looking for appropriate options to be
limited grasp of assisted. They see presented to them, rather than having to
alternatives no separation.
In terms of technology as a medium for hunt down the right product for their needs.
Attitude Jobs are for life Organizational Early ‘portfolio’ Digital Career multitaskers Content creation communication and identity verification,
towards career – careers are careers – loyal to entrepreneurs – will move enables wealth at a passwords are giving way to different As the phygital era dawns, banks will have
defined by profession, not – work ‘with’ seamlessly between young age. authentication methods that are more to cope with a growing over-65 customer
employers necessarily to organizations not organizations and Suspicious of accessible to a wider range of social groups group that still wants physical touchpoints
employer ‘for’ ‘pop-up’ businesses ‘traditional’ careers
as a path to success.
and which provide easier access to such as cards and telephone banking
technology. Examples include vocal and contacts alongside the expectations of
Signature Google Glass, Smartphone, home facial recognition, and most recently younger customers who may be digital-
product graphene, voice assistants. haptic (finger/hand/face movement) first, but who still want physical
nano-computing, (Google Home, recognition. Furthermore, customers experiences. Phygital service delivery helps
3D printing, Alexa, etc)
driverless cars increasingly expect banks to all customer groups to access banking
Tablet /
services, from simple payments
Automobile Television Personal Computer Smartphone
configuration through to confirming
Communication Formal letter Telephone Email and text Hand-held Very app-based – identity for mortgages and loans, or
media message Text or social (or integrated SnapChat, TikTok, discussing how banking products can be
media into clothing) WhatsApp. tailored to suit them.
communication
devices

Communication Face-to-face Face-to-face Text message or Online and mobile FaceTime Short video,
preference ideally, but email (text messaging) images, and voice
telephone or email notes over
if required text-based
communications.

Preference when Face-to-face Face-to-face Online – would Face-to-face Solutions will Unknown as too
making financial meetings ideally, but prefer face-to-face be digitally young, but likely
decisions increasingly will if time permitting crowd-sourced to be critical of
go online traditional
financial services.

Source: http://fourhooks.com/marketing/the-generation-guide-millennials-gen-x-y-z-and-baby-boomers-art5910718593/
* Percentages are approximate at time of publication
12 Giesecke+Devrient Customers want phygital payment experiences
here’s how to deliver them. 13

Phygital across the

entire customer journey
The graphic shows how banks can elevate As the “digital native” generation grows in
their service levels at each stage of the influence, the need to ensure that physical
payment process to deliver the hyper- services remain accessible to all – regardless
personalized, rapid, secure and convenient of their digital fluency – will only increase.
experiences customers are looking for. Early signs of this include legal mandates in
Sweden, Norway and the UK that
Phygital innovations can make a difference consumers must be able to pay with cash,
at every stage of the payments lifecycle, and that banks must maintain ATM
from product selection through to networks across these countries. In short,
engaging customers in the card production both governments and citizens are looking Digital card
process or automating onboarding for to a future that includes both physical and Digital
display payment
greater speed and convenience. Other digital services: a digital-only future risks
phygital service areas include card excluding vulnerable and older customers, enabling
management via app, push notifications, not to mention the systemic risk of any
online activation, frictionless biometric down-time in digital-only networks.
authentication and more. Today’s Phygital services represent a “best of both
customers use phygital payments to make worlds” approach, in which physical Payment card Rapid card
Digital
their lives easier and expect their banks to services are enhanced by digital, and creation printing
provide solutions that deliver seamlessly digital services are supported by physical experiences
across both physical and digital equivalents. Payment
environments. To stay competitive, retain credentials
customers and grow share of wallet, banks As the world moves into a “digital first” management
need to meet these expectations, both era, the payments ecosystem must respond
online and off-line. by putting customer experience at the
Customer- Real time
heart of your product and service offering,
Instant PIN Passwordless
created cards updates
ensuring that the physical – be it cards, authentication
»governments and in-branch experiences, or point-of-sale
delivery
checkout – merges seamlessly with the
citizens are looking to digital. Phygital experiences are with us
now and are only set to grow in
a future that includes importance – the onus now lies with banks In-branch
card printing
to deliver these services across their
both physical and product portfolios, so that they can keep Automated Tailored card
carriers
pace with the rate of change in other onboarding Eco-innovative
digital services.« industries. payment
solutions

Accelerated
Customer activation
messaging One-tap
authentication

Onboard Issue Activate Use

14 Giesecke+Devrient Customers want phygital payment experiences
here’s how to deliver them. 15

Global reach
with a local touch
G+D has a trusted network of local
representatives and partners with a
resilient network of R&D sites, operations
and data centers globally across

Asia
Europe Learn more
Middle-East
For a conversation about delivering phygital
experiences to your customers, contact
epayments@gi-de.com

35+ Americas G+D PayTech is a global leader in payment

solutions, providing innovative, customized
offerings such as payment card and issuance
services that blend the digital and physical.

Africa This includes card issuing and activation

services that enable clients to activate cards
countries online and use their cards securely as soon as
they receive them. We provide a single service
touchpoint that enables banks to effectively
combine physical and digital customer
Australia journeys according to their needs. Our G+D
Convego® offering is an ecosystem of products
and solutions that orchestrate convenient
customer experience across physical and
digital banking and payments.
About Giesecke+Devrient
Giesecke+Devrient (G+D) is a global SecurityTech company headquartered
in Munich, Germany. G+D makes the lives of billions of people more secure.
The company shapes trust in the digital age, with built-in security technology
in three segments: Digital Security, Financial Platforms and Currency Technology.

G+D was founded in 1852 and today has a workforce of more than
14,000 employees. In the fiscal year 2022, the company generated
a turnover of 2.53 billion euros. G+D is represented by 123 subsidiaries
and joint ventures in 40 countries.

Giesecke+Devrient ePayments GmbH

Prinzregentenstrasse 161
81677 Munich
Germany

www.gi-de.com
www.gi-de.com/en/contact Follow us on:

© Giesecke+Devrient ePayments GmbH, 2023