Mark Carter, VP Product Mobile at Skrill, discusses the outlook for mobile payments
Digital banking on the up
It’s no longer a question of how and when mobile will emerge as a payments platform; it’s more a question of what’s next for mobile as it begins to firmly cement its place within the payments industry. The habit of researching products on a smartphone and paying for things on a tablet is already common place, with the development of larger screens and optimised websites making it easier than ever to pay for things and bank on the go.
The latest BBA (British Bankers’ Association)1 report compiled the industry figures on digital banking and found that the number of mobile phone banking transactions made by British consumers nearly doubled in the UK last year. Customers are now making more than 5.7 million transactions a day using smartphones and other Internet-enabled technologies.
The BBA report also highlights that how we are choosing to bank has changed. Customers of Britain’s five largest banks used their smartphones for more than 18 million transactions per week in 2013. Furthermore, over 12.4 million customers have downloaded their bank’s app.
There is clearly a convenience element of being able to manage your account on the go. Therefore, banks will need to deliver additional ‘value added services’ on top of everyday banking in order to drive consumers to use their banking app as their primary mobile payment application. Barclays is leading with Pingit, but Zapp’s recent announcement of their partnership with FEXCO’s Flashiz shows a growing push into the mPOS space.
Tech players enter the game
With these points in mind, it’s no surprise forward-thinking businesses are continuing to make payments as easy as possible for shoppers and merchants, in physical stores and on the move. For example, Apple has already begun to disintermediate payments providers with its iTunes wallet where users of the music store think they are buying with their iTunes ‘account’ rather than their Visa/MasterCard. Then of course, there is the launch of iBeacon. The accessibility and intelligence of this technology compared to Near Field Communication (NFC) payments, leads me to think that the latter won’t achieve widespread customer adoption. In a world where usability and simplicity contributes significantly to take-up, the requirement of the physical ‘tap’ against the card reader to complete the transaction limits potential. In comparison, iBeacon uses Bluetooth Low Energy (BLE) so more data can be communicated over a much wider distance. And with the arrival of wearable tech, there is no need to take the phone out of your pocket.
iBeacon is only one example of a line-up of new products and services on the market that let consumers pay for products using a digital wallet instead of a card or cash. For instance, Starbucks says that last year more than 26 million in-store transactions were paid via the Starbucks Card mobile app, with customers able to use their phones and tablets to make purchases over 9,000 locations at the press of a button.
One concern for consumers is the issue of security and trust when paying for things on the move, worrying that sensitive financial information isn’t as secure when paying via a mobile device as it is on a laptop or PC. However, you could argue that the technology companies driving these new forms of payment are potentially more adept and informed at dealing with cyber threats and are likely to build products thinking about security right from the very beginning.
Innovations from companies like Square/Stripe and Starbucks mean the payment space is being blown wide open, with the future of mobile looking to become savvier, securer and more frictionless than ever before. However, nobody has really rethought the payment flows or challenged and addressed simplified account opening, verification, Know your Customer (KYC) and how the mobile device itself can support all these issues to deliver a fully optimised solution. Maybe Apple might just help to drive this.
The new mobile generation
There is an evolving shopping ecosystem, with the high street, online and mobile co-existing to deliver an all-round experience and a new generation of shopper is emerging. This new, always on and always moving consumer is combining their mobile device with the real life high street and Internet to create an alternative retail checkout process that meets their individual needs.
Only recently, Viacom business Scratch found that one third of ‘millennials’ (those born between 1981 and 2000) think that in five years’ time, banks will be superseded by tech firms when it comes to managing their money. It’s those generations who will drive companies to keep money mobile as customers, understandably, expect to make transactions as quickly and easily on the screen of their mobile or tablet device as they would on their desktop.
I believe the biggest opportunity ‘tech’ companies have here is that they are light years ahead of banks and legacy financial service organisations in terms of anticipating consumer needs and delivering those needs in a compelling way. Yes, there may be trust and security concerns but they also apply to those institutions that currently hold the majority of my money. If you ask someone to draw their money, they won’t draw a five pound note, they will draw their house, their car and so on. It is these things that are important so if we can help to service and manage those needs and provide integrated experiences delivered through mobile, then we are well on our way. Imagine a world where you can buy a TV using your mobile device? Where the online store knows you are at home, asks how long you will be there and then can deliver the product in the same day? The receipt, warranty, instruction manual are all delivered to your online portal where everything important is stored and where you can review easily at a glance. It’s not a bank but it’s a whole lot more relevant and useful to our lives today.
Integrating mobile into your business strategy
Considering the recent research and statistics, businesses have to consider how mobile will fit into their strategy. If a payment company fails to embrace mobile, it will no doubt fail to reach consumers and merchants, both on and offline. Consequently, it will be at risk of being overtaken by those companies who realise that fast and easy payments are essential.
We are already seeing a new approach to mobile payments developing within mobile apps and this is certainly a key focus for Skrill. We are innovating with the sole focus on making payments easier for our consumers both online and mobile, how we drive mobile conversion for our merchants and are exploring new approaches to the traditional methods of paying and being paid. It’s a fast-evolving market, but for us, working to design and deploy technology to improve the customer experience and simplify money management on the move can only be enhanced by other vendors shifting consumer transaction habits from physical payment methods to digital.
So, what next beyond mobile? With businesses constantly looking to deliver more functionality, we can definitely anticipate the evolution of mobile into wearables. Only recently, Samsung released its Gear 2 watch with the ability to download an app to pay for items across merchants, to redeem offers and to send money to friends instantly and securely. This is just one example of how brands are beginning to focus on making wearable technology that will incorporate payment on the move. Perhaps the ease of paying for something using a watch will encourage adoption even more.
We are not saying mobile banking will be the end for bank branches. Yes, the Internet and optimised websites have certainly changed and shaped people’s opinions on how they shop and bank. However, the social elements of the high street and being able to speak to someone face-to-face will always have some value with the consumer. More than anything, it is relevance that matters here and how many of a bank’s products are relevant to the young? Well, not many, and those that are are designed from a monetisation first perspective, not from a deep understanding of that consumer-base. In my opinion, digital wallet providers have a huge opportunity to engage with consumers in a relevant and rewarding way. Done well, this could well stem the flow of ‘follow my parent banking’ that persists today. For me, the future is definitely looking mobile.
1 British Banker’s Association, 31st March, BBA launches major new work on digital banking