2015 was the year that ‘mobile payments happened. We now have Apple Pay, Android Pay, Samsung Pay, LG Pay, Microsoft Pay, Walmart Pay, CurrentC / MCX, Chase Pay, with a few more on the horizon. But if you are a bank, you have to ask yourself the question “so what?” and how does this address my three key objectives?
1. Attract new customers
2. Drive new revenue
3. Retain existing customers
To help answer these questions, there are several innovations which can help banks to take mobile payments from ‘table stakes’ to ‘a winning hand’:
1. Improved Payment Experience
Consumers (and merchants) demand streamlined shopping experiences that remove ‘payment friction.’ At the same time, merchants are driving transaction costs, impacting FI interchange revenues. FIs need to embrace these drivers by better connecting merchants to consumers by harnessing the computing power of what is in our hands. For example, in the UK, the service known as Zapp, being pushed by bank-owned central infrastructure provider VocaLink, is enabling a ‘Request to Pay’ style of interaction that uses Faster Payments as the underlying payment rails. Other alternatives include FIs connecting to the merchant directly, or via a technology partners. This lowers the cost of a transaction whilst streamlining the shopping experience.
2. Person to Person (P2P)
P2P methods through a mobile app have been around for some time, but not all countries have put in place the ability for consumers to pay one another easily through a banking app. Enabling consumers to transact together cross-border also in part addresses the opportunity for global remittance, and with the likes of the European Central Bank looking at this now, FIs have a chance to get ahead.
3. Instalment Payments
In addition to merchant or issuer-funded instalment payments, an opportunity exists through Mobile Payments for the FIs own banking app to enable a consumer to turn any eligible payment into an instalment plan. This is new revenue potential whilst supporting the consumer to spread the cost both before the purchase (configuration in-app) but also after (with optional eligibility notification). Applicable APR options can stimulate instalment plan take up, with the commercial relationship solely between the FI and consumer.
4. Mobile Cash Access
We are without doubt in a digital age, but there are still many consumers and non-card accepting merchants who continue to prefer cash. Mobile Cash Access provides a means to withdraw cash in a way less susceptible to fraud as consumers pre-authorise from their banking app before withdrawing funds. The FI can track proximity of the consumer against regular ATM behaviour, and the banking app is A LOT harder to clone than a card. It’s also easier and quicker for the consumer to pop up to an ATM, press a button, tap the phone, and remove the cash.
5. Consumer Controls
With fraud an ever present threat, FIs need increasingly sophisticated ways to stem the flow of fraud write-offs. It is here that consumers CAN and WANT to play a role to stop fraud on their account. Putting the control into hands of the consumer to control where, when and what value of purchases can be made are all achievable in the world of Mobile Payments with tech available NOW.
6. Receipts Management
We all hate carrying receipts, but they are necessary to return goods. Some merchants trying to make it easier - B&Q for example, a DIY retailer in the UK provides a “Club” card for use at POS to enable emailing of receipts, but it’s far from perfect. Receipts are also very useful to track spend and reconcile with statements. FIs have an opportunity to provide to consumers a service that removes manual effort and helps personal financial management, increasing stickiness.
7. Loyalty, Offers and Advertising
Consumers are loyal if there is something ‘in it for them.’ Merchants need a way to attract, retain and encourage repeat visits. FIs loyalty schemes are being marginalized due to pressure on interchange revenue. FIs, through mobile payments, have an opportunity to address these issues by aggregating merchant loyalty programmes to support accrual and redemption of loyalty points. Increased understanding of consumer behaviour further enables targeting of merchant offers and advertising, creating new revenue channels for the FI, whilst providing more value-add to the end consumer.
In summary, and to answer the question ‘Mobile Payments – so what?’, here’s a simple checklist which all financial institutions should find useful:
|FI Key Objective|
|Innovation||Create the lure||Drive new revenue||Increase stickiness|
|1. Improved Payment Experience||x||x||x|
|2. Person to Person (P2P)||x|
|3. Instalment Payments||x||x||x|
|4. Mobile Cash Access||x||x||x|
|5. Consumer Controls||x||x|
|6. Receipts Management||x|
|7. Loyalty Offers and Advertising||x||x|
By Dean Wallace, Global Lead Mobile Payments, ACI Worldwide.