As AI-based technologies become more integrated into our everyday lives, one of the most popular platforms known as ChatGPT is capitalizing on new avenues for growth. With more than 700 million users, OpenAI has decided to take it one step further into ecommerce. Introducing Instant Checkout, where online merchants can sell good directly to consumers through this platform. This technology acts as an AI agent to securely pass transactional data between customers and online brands.
How does this work for the merchants?
- Using Agentic Commerce Protocol, built with payment processing platform Strip, brands can now integrate order processing systems with ChatGPT.
- The Agentic Commerce Protocol allows merchants to work with their pre-existing systems and handle all the payment processing and order fulfillment along with any customer support needed after the transaction occurs.
- Merchants pay a fee for each completed order.
How does this work for the customers?
- When customers use ChatGPT to find information about a product, search results will produce recommendations for products based on organic and unsponsored relevant information from the web.
- Search example: “Best dress shoes to wear to the office for women.” Or “Gifts for my significant other under $100.”
- ChatGPT considers factors such as availability, price, quality, and if the product is available through Instant Checkout.
If the product is available through Instant Checkout and the customer wants to make a purchase, there will be a “Buy” option. The customer then will go through the process of confirming the order and entering payment details all through ChatGPT.
All purchases have confirmation steps as well as encrypted payment tokens that are authorized with the permission of the user, along with minimal data sharing of only the information required to complete the order, again via permission from the user.
Pros
Similar to other frictionless shopping trends from Apple, Amazon, and Google, OpenAI is changing the landscape of the ecommerce industry. This technology is game-changing for the increasing volume and market reach for many small-to-medium-sized online businesses and is positioning AI as an information finding tool to a too that can take action.
Instant shoppers will be exposed to a personalized shopping experience that they may not have been exposed to with a traditional Google search. Businesses can easily tap into impulse buyers with a convenient and seamless purchasing experience on one platform. The large amount of exposure that Instant Checkout can bring to merchants can be a significant advantage to their business.
A big reason many people use ChatGPT is because it provides different options or variations of answers based on prompts; after providing a response, it follows up with other potential searches related to that area of interest. This format goes well with shopping and may prove to enhance the user experience and bottom lines.
Cons
While ChatGPT Instant Checkout offers clear advantages to influencing a positive user experience, no technology is without its trade-offs. Being able to understand the impact that Instant Checkout can have on the ecommerce industry must come with analysis on the downsides. Ecommerce is a highly competitive space, battling for clicks with high dollar advertising spends, flash sales, loyalty programs, and discounts to gather personal identification information for customer profiling and automated campaigns.
Unlike other search engines, OpenAI has not released any information about how ChatGPT produces search results, including recommendations on products. Instant Checkout may cause businesses to lose control over their brand value and storytelling, which they likely invested huge dollars and time to build to sell their products. The hush hush nature of how Instant Checkout could hinder usage for both buyers and seller.
Additionally, there are several transactional downsides to Instant Checkout. The fee structure of the platform is per transaction; therefore, customers can only purchase one item at a time. This is a huge shift from Amazon and other retail sites that feature multi-item, multi-brand cart systems that fall under one transaction. This shift is certain to drive many customers away. This transactional focus may not provide the qualified customer support needed to complete a checkout, resulting in a high abandoned cart rate.
Although Instant Checkout has provided a lot of information about strict security measure within their technology, the farther information travels, the higher risks become. Credit card information is among the most valuable for cyber attackers, and in this case, ChatGPT’s platform creates that distance. According to OpenAI’s diagram, credit card information is passed through at least four entities: Credit card company, ChatGPT, Stripe, online retailer, and then back again. ChatGPT has no track record of successfully storing sensitive financial information and this is quite a long journey for a single transaction. In a time when cybersecurity risks are at an ultimate high, every channel and touchpoint carries risk.
So, what does this mean for merchants, consumers, and the ecommerce industry?
With time, AI’s technology will reveal more consumer trends to determine if Instant Checkout is a must-have investment for online businesses and their valuable marketing dollars. Having a new avenue for ecommerce may create more competition from businesses and may come with shifts in the way the industry works. Stay tuned for more.