Talking About a Revolution…?

By Dan Salmons, Managing Director, PayPoint Mobile and Online

Why consumers won’t be swapping their wallets for their phones just yet: four things that need to happen for m-payments to really take off

Payments are attracting some of the biggest valuations in tech currently.  Venture capitalists invested over $1.2 billion in payments start-ups in 2013 – an all-time high, according to CB Insights.  That’s in addition to the considerable sums invested by larger groups – not least Apple, Google, Visa, MasterCard, and PayPal – in developing their own digital payments capabilities.  A conservative estimate of the total dollar flow into payments might be $1.5 billion over the past year: that’s a lot of money going into optimising that brief moment in time between choosing what you want to buy, and then handing over the money for it.

It’s been genuinely exciting watching some of the technological developments in play here.  But will these technologies deliver the business value end users (and their customers) expect?   On their own, I think it’s unlikely, for the following reasons.

Payments strategies need to draw on genuine consumer insight, not just technology.  Why? Because it’s meaningless to define people by how they choose to pay, just as it is daft to define people by how they choose to get around.  Consumers simply do what is most convenient for them at the time.  Just like deciding whether to take a taxi, the bus or the underground could depend on a range of factors, it follows that narrowing the gap between choice and payment is less to do with the technology, and more to do with the how well the merchant understands what customers want to do.  While the solution may involve mobile or online payments, it could just as easily draw on cash.

The point is that simply offering mobile payments, contactless, or any other payment mechanism won’t mean consumers naturally gravitate towards it.  Organisations need to understand how and why people pay the way they do; and then cater for them.  If you understand how people pay, you can start improving the experience – and boost the bottom line.

Consumers need compelling reasons to pay via their mobile – For all of the fanfare around Apple Pay and Google Wallet I just don’t see how consumers are going to embrace swapping their bank card for their phones when they go shopping anytime soon.  For one thing, cards are a lot smaller, and don’t mind being dropped!  Levity aside, mobiles are tremendously powerful in some contexts, but barely superior to existing payment methods in others.  For me, the most compelling applications of mobile rely on context and location – when you park your car, for example, or rent a bicycle.  There are plenty of others, and the possibilities are especially rich in cities.  For instance, PayPoint underpins the city of Nice’sintegrated transport strategy, providing a single mobile payment platform for public transport, bike hire, and car parking.

Organisations need to rethink their service model first – It’s been over a decade since portable chip and pin terminals first arrived on the market, yet most retail businesses still have counters, queues and cash registers: no change there in getting on for a century. If we could get rid of those counters, the cash offices, or the vending machines, the spare real estate, all those overheads, could be recycled in many different ways.  Sales assistants at Burberry’s or Victoria Beckham’s flagship stores are more likely to sit you down on a sofa to take your payment via a tablet – that’s a much more agreeable experience than queueing up at a counter.

Customer loyalty could be the x factor for mobile commerce – Why? Because the real value for businesses lies in the data these different payment methods can provide.  If you know how consumers use your apps, you can build partnerships with other brands, while using the payment engine in your app to finalise transactions.  But, as with everything else I talk about here, it all starts with consumer insight, not with the technology.

And here’s the rub.  Too much of the payment debate has been about the technology.  Actually how consumers might use this technology, and how that experience might be added to, receives scant attention.  Am I calling for a new kind of payment-centric UX?  Perhaps.  Given the payment stage is the most important part of the entire consumer journey, organisations should probably begin their research with the customer, rather than allowing themselves to be waylaid by the technology.