How mobile payments for retailers and customers are being held back by big players
Byline: Michael Rolph, Chief Revenue Office of Yoyo Wallet
“Cards will be king”, “UK moves closer to cashless payments”, “plastic to oust cash”. If you believe the headlines, our “flexible friends” shall inherit the earth.
According to the latest forecast from industry body Payments UK, debit card payments will overtake cash payments by 2021, as consumers make a projected 30 payments a month using plastic, on track to become the most popular method overall by 2025. It’s amazing it will have taken over 55 years to get there!
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What’s being painted is a slowly evolving picture. The reality could, perhaps should, be very different though, with the next five years holding the potential for a completely revolutionised payment landscape. The catalyst is, of course, mobile.
The first iPhone hit the shelves nearly a decade ago and in that time smartphones have become almost ubiquitous. Yet today, we are still some way off maximising their potential as a payment device. Even amongst users of iPhone, Apple Pay repeat usage seems to be going in reverse. So what’s the problem?
Put simply, the big industry players have not created a value add proposition for retailers or consumers. They are hampered by the need to preserve their vested interests – card rails. As a result they are failing to provide a product and experience the retailers and consumer really want.
If a transaction was a coin, innovation would have to make both sides shine at the same time – both meaning both the consumer and the retailer get a benefit. In this respect, the big players need to stop dragging their feet and start delivering a genuine value add experience.
Don’t hold back innovation
Most of the technology that could ignite the opportunity is already available. But the Big Finance companies who make up the gatekeepers to the industry – the banks, credit card and major app providers – have been purposely taking baby steps.
Take Zapp and Paym. Formed by VocaLink, the UK payments infrastructure provider owned by the major banks, Zapp was conceived as a way to pay retailers and friends, whether online and in-store. Zapp carried the heavyweight backing to become the UK’s pre-eminent mobile payment standard.
But, two years after launch, Zapp is a travesty, suffering from a muddled proposition while Paym has faced the challenge of rival efforts from VocaLink’s own member banks, like Barclays’ Pingit.
This period of stifled advancement has happened when innovation should have been booming. But change is coming with the European Commission’s second Payment Services Directive (PSD2) forcing the banks to pull down their barriers. PSD rules will compel all banks to open up access to consumer bank accounts from any apps and services users allow. That will relegate the banks to mere infrastructure providers, allowing true innovation to come from outside providers.
Focus on the shopping experience, not on payment
Most mobile payment platforms used today focus only on providing the underlying transactional infrastructure for payment, mirroring the card experience on a new platform. This, however, fails to deliver any significant added value to the consumer or retailer experience. What is needed is an end-to-end transformation of the payment experience.
Take a look at another industry undergoing transformation – taxis. People often say Uber has upgraded transportation by making payment frictionless – but that’s not the case. Uber has carved a role for itself by providing a fantastic, end-to-end experience at every step. What used to be an advance phone call and a 15-minute wait for a cash-only cab is now something effortless and fun – pre-booking, immediate arrival and, ultimately, cashless payment, which is just one part of a holistic mobile experience.
In other words, we won’t see real progress in the payment world until innovation goes beyond just the payment experience.
So, what does end-to-end payment innovation look like in a mobile-first world? Shopping automation is going to provide another boost to this experiential imperative. Mobiles know our movements, habits and preferences so well that, in time, they will begin to anticipate our needs and help with product choices. Making shopping easier makes payment more likely. So retailers and brands should focus on the whole purchasing journey – from start point to the final transaction.
Know thy customer
There’s been plenty of talk of innovation and potential, but how does this actually translate within a mobile-first world? The answer is simple: a personalised consumer experience built around basket data (what we buy and when).
As consumers, our behaviour leaves behind an amazing amount of information both online and offline. Whilst this data integration is flourishing online, the physical world has a long way to go in order to catch-up. For the first time though, payment platforms such as Yoyo Wallet, are tapping into offline basket data to go beyond mobile as a payment capability in bricks and mortar stores.. Retailers and brands can now connect their customers to preferences and behaviours on an individual level, opening up a new world of information about their customers.
The basket data alone is useful of course, but what is truly revolutionary is the way it can then be turned into actionable insight. With a mobile wallet like Yoyo’s, this means retailers or brands can segment customers based on their behaviour and then target them with specific offers and marketing via their mobiles. This is the future of payment for retailers – a platform that ultimately seeks to drive increased revenue – via a valuable customer offering. After all, that is the kind of win-win that retailers really want.
Which leads us to: provide more value
Unlike in the US, where card technology remains fairly archaic, UK shoppers already benefit from frictionless contactless payments, even without phones.
To really drive mobile payments, we are going to need to incentivise customers to buy something they may otherwise have done, but with greater perceived value.
The key is providing consumers with disruptive payment solutions, such as Yoyo Wallet. Consumers consistently say they would make more mobile payments if they were incentivised with loyalty or reward features.A new breed of payment providers are emerging – building loyalty into the heart of the process with automated loyalty points and online “stamp cards” with every transaction.
FInally, consumers have been reluctant to embrace mobile payment due to security concerns. In reality, mobile payment, with security features such as tokenisation and encryption, is more of a secure form of payment than a contactless card.. Consumers consistently say they would make more mobile payments if they were incentivised with loyalty or reward features – this is the kind of value add experience that is available right now to retailers.