PSD2 Payment implementations for a loyalty program.
A process on how Zalando Plus upgraded its payment process to fit the new European payment regulations.
Project Overview
PSD2 is a regulation that helps protect European buyers on the internet. This is supported by the user having to accept any payment that is made on the internet via a 2-factor authentication process. Zalando Plus eligible customers get one month trial when signing up, and get charged once the month is over. This was now illegal due to PSD2, so we had to re-imagine how our payments were made so we did not lose any new signups.
My Contributions
For this project, my contribution was leading the design from the early discovery phase through to delivering the finished design to our engineering team.
The Team consisted of Product Management, Back-end, Front-end engineers while collaborating closely with Zalando’s payment team.
The Problem
How do we continue to offer eligible customers frictionless sign-ups? and the big unknown of banks.
For Zalando Plus which works off a subscription model that offered customers a free trial, this was a big problem and one that could cost Zalando Plus 1000's of sign-ups if not solved.
At the time there were 2 major ways that users could sign up and pay for the program and they included #1 SEPA Payment which the money would be taken out of the users account and #2 Credit Card transaction which makes up 30% of signups, roughly 600 sign ups a week.
Credit cards were the payment method that was affected the most by the new PSD2 regulations, we needed to look at a way to make this work rather than trying to create a whole new subscription model.
Our second problem was that there was no one way that banks had advised on how to tackle this as they had different ideas and approaches. Old German Banks like Deutsche Bank and CommsBank had not thought of digital solutions yet unlike their more nimble competitors like N26. This would later become a big unknown that we had to design for.
Mapping out the journey
We needed to look at the journey that the usual Zalando Plus customer would go through when signing up for the free trial. It generally starts with a user opting in for the program at checkout so that they receive the free express delivery.
From this point users will get taken through the payment funnel that gives them two payment methods, out of these SEPA is chosen and the user will now be signed up free of charge for the next month.
The Solution
Has it been done before?
Working closely with the Zalando Payments team, we started off with a week-long workshop including all key stakeholders. In this workshop, we worked on ways that we could leverage the payments iframe to not only educate users on PSD2 but allow them to be confident that it was still a trustworthy experience.
We came up with two experiences, One was a check box that gave notified users that they would need to accept the payment once the trial had ended we referred to this as Delayed Payment. With this solution, users would get reminded on the 28th day of their members asking them to go through the payment funnel to continue being a member. This was not ideal as many customers do not open emails from Zalando with the average open rate being around 20%
The second was adopting a 2-Factor payment method that would allow users to go into the online banking tool of their choice and accept the payment that they would be charged once the month trial was over. This idea was one that we saw as risky as we could not guarantee that these older banks would have their online systems up to date by the regulation date. The positive thing was that this method had already started being used in the UK with companies like Spotify and Netflix, making it a journey that may feel familiar to the user.
Testing
Lets look at the two.
Some interesting insights that we synthesised:
• 4/5 Users felt nervous with a check box in the payment screen because of terms and conditions that might apply.
• 3/5 Users said that they do not check Zalando emails because it is usually spam or sales related.
• 4/5 Candidates had experienced a 2-factor authentication before.
• 3/5 Liked that they did not need to do an extra step to sign up if they did the 2-factor authentication with the other 2 worried that they would forget and be locked into a contract.
Because these solutions both had their pros and cons we wanted to test both these solutions in one of the user research sessions. We got a test group of five Zalando customers with differences in age and locations around Germany to go through both flows in InVision prototypes. These sessions went for around 45 minutes each and gave us great insights into customers’ thoughts on payment methods in Germany, which to this day has been a little analog compared to the rest of the world.
Implementation
The new payment norm
Now that we had our solution and had refined a couple of small tweaks like messaging to fill expectations the 2-Factor authorization method was the one that was adopted. The development of this project took the engineering team three sprints to implement before it was released before its September 14th deadline.
This Payment method since being implemented has helped Zalando Plus continue to grow across Germany as well as build a payment base not only for Plus with its expansion into other countries but help other Zalando programs like Lounge improve their payment process.