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Innovations and Payment Systems

Augmented reality: Welcome to the new way to pay

AR is the new frontier in shopping, but it carries potential financial and privacy risks

Summary

Augmented reality offers consumers a seamless buying experience, enabling you to test-drive products at home using your smartphone. But frictionless payments can encourage overspending, and the apps that enable AR shopping can collect your data. Read on to find out what AR means for your wallet.

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In summer 2016, the world first encountered PokémonGo, an app-based game that inspired millions of people to traipse around their neighborhoods and beyond in search of virtual creatures.

For many consumers, that was their first visceral encounter with augmented reality (AR). The technology bridged the online-offline gap, bringing a virtual experience into the tangible world.

AR has become more ubiquitous in the three years since PokémonGo became a phenomenon. If you haven’t already, you’ll soon be shopping in this hybrid space. Perhaps you’ll need a new couch for your living room, and you’ll use an app that allows you to use your smartphone’s camera to “try on” different furniture models without leaving your home.

The next day, you’ll head to a local store where you’ll scan physical items into a smartphone app to learn more about the products and receive coupons. While you’re driving home, you can place a Pizza Hut order through Amazon’s Alexa directly from your car.

A new experience for virtual shoppers and physical stores

This is the frictionless buying experience of the future. AR enables you to shop from wherever you are. Not just that, it allows you to effectively test-drive everything from eyewear to sneakers via a smartphone app, then purchase them in your exact prescription and size without ever entering a store.

“This kind of engagement is a tremendous opportunity for consumers now to have access to products, services, manufacturing goods or anything that they never may have had access to before right off their phone, and then seamlessly purchase it online,” said Alen Paul Silverrstieen, CEO of Imagination Park, a company that helps businesses develop their own AR apps.

Silverrstieen predicted AR will allow for a more tactile digital shopping experience, allowing consumers to engage with online products in a more immersive way than they ever have before. But it’s not just the online world that’s benefiting from AR, he said. Brick-and-mortars are also using AR to incentivize foot traffic. Silverrstieen offered the example of themed scavenger hunts, in which customers search for items they can scan with a smartphone app to win prizes.

The clothing company Tillys partnered with AR platform Zappar to create such an experience for its customers, according to Zappar Managing Director Max Dawes. Tillys staged a treasure hunt in 200 of its brick-and-mortar shops, encouraging shoppers to search for discount codes. Between the discounts and the involvement of YouTube personality Shonduras, it was an exciting way for consumers to shop and engage with the brand, and the campaign generated 55,000 scans.

Dawes said AR is being used to bridge the online and offline experiences in numerous ways. Don’t be surprised if you begin to see integrations between the two when it comes to redeeming coupon codes and brand loyalty points as well.

See related: Could your credit card help you control overspending?

What AR means for your wallet

Augmented reality holds significant potential not just for immersive, seamless shopping, but for payments and financial management as well.

Larissa Lowthorp, a fintech specialist and president of TimeJump Media in St. Paul, Minnesota, noted that some banks now use in-app AR to help customers identify their nearest branch locations and check their budgets ahead of making large purchases.

She gave the example of a customer snapping a picture of her bank or credit card through the bank’s app and then seeing a 3D visualization of her finances. The customer could then input the amount of a major purchase she’s considering and the visualization would show her how that would impact her monthly budget and credit card expenses.

“It’s really empowering customers to make informed decisions on the fly,” she said.

But nothing comes for free, and that’s especially true of new technologies. The more immersive the shopping experience, the more likely you are to buy — and that’s the point.

“The consumer should be aware that AR is about engagement and a call to action,” Silverrstieen said.

While the technology makes shopping more convenient and fun, it could also drive you toward impulse spending. There’s a greater sense of urgency than, say, just scrolling through product photos on a website. If you already have a payment account set up in the app, it’s all the more tempting to head to the checkout screen before you’ve really considered the consequences.

Research shows people spend more money more often when they use mobile payment channels, just as they spend more with credit cards than they do with cash. It seems that the more abstracted a person is from physically handing over money, the easier it is to part with — and nothing is easier than seeing something you want and having a one-click option for buying it.

Do better shopping experiences mean giving up privacy?

Privacy is a growing concern among consumers, particularly following Facebook’s Cambridge Analytica scandal. People want to know how their data is being used and, more importantly, whether their information is protected. As new payment options emerge, both companies and consumers should place privacy concerns at the forefront, according to Lowthorp.

“Companies that are looking to implement augmented reality as part of their customer experience need to immediately  — not retroactively — apply transparent policies, privacy policies and security protocols,” Lowthorp said. “It would be dangerous for them to operate under the assumption that their users and their customers understand all of the implications and security risks that augmented reality can cause for them.”

But consumers can be proactive as well. Before using a new app, read the fine print in the user terms to understand exactly how your data is being used and with whom it might be shared. Ideally, companies will make this clear up front. But if they don’t, you’re entitled to understand the terms, so don’t be afraid to contact the company for clarification.

Lowthorp said hacking of AR apps is also a concern, particularly because AR experiences are more intimate than traditional shopping methods. AR apps can track biometric data and potentially conversations, Lowthorp said, so it’s critical that you know what you’re agreeing to when you use these services.

When deciding which apps and brands to trust, Lowthorp acknowledged the impulse to default to trusting highly visible brands. However, she urged caution no matter who is backing the app.

“Recognizable brands are recognized for a reason,” Lowthorp said. “But the informed customer should always read the fine print. The informed customer should not make assumptions … they need to see what kinds of partners and affiliates a credit card [company] might be sending their information to.”

“I would say to apply the same common sense and skepticism as they would on any mobile experience,” Dawes said. If an app or page seems “wonky,” as he put it, don’t input any private information.

However, Silverrstieen said many of the companies and platforms through which you’re purchasing will take place through established e-commerce channels with built-in security protocols. So, while caution is always necessary, you’re not purchasing through entirely new systems.

See related: As credit cards go contactless, can RFID-blocking wallets protect your data?

How to make the most of AR shopping

Frictionless shopping is where both online and offline shopping experiences are headed. As a consumer, that likely means better options, more personalized discounts and an all-around better brand experience. But it also means more opportunities to overspend and become a target for advertisers.

To make the most of AR experiences, you’ll need to keep your drive for impulse buying in check and use these tools for financial management as much as for shopping.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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Published: June 27, 2019

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