From omnichannel to omnipayments: Why a payment revolution is on its wayby
As ecommerce reaches maturity, driven by the rise of mobile, sensors and start-ups we are seeing dramatic changes in the payments space.
As the smart phone competes for shopping supremacy, its role has now crept firmly into paying for goods or in the case of mechanisms such as Square, taking payment.
Today’s physical retailers are competing to guide the customer as they research and purchase goods, taking into account where they are in the store and their current and past behaviour, and looking to make sure that if customers do price-compare the store can respond by price-matching or offering other benefits.
The rise of Bluetooth Low Energy (BLE) technology is expediting this trend, mobile messaging can now be targeted at a micro level, aisle by aisle in a supermarket or floor by floor in a department store and payments can be made without being physically at the till or terminal. Already in 2014, we have seen Waitrose and Tesco introduce ‘proximity’ messaging to customer smart phones to support click-and-collect customers arriving in store and deliver aisle-based messages to shoppers comparing goods. Payment is a natural extension to all these activities, perhaps the ultimate convenience if we do not even need to retrieve our plastic cards.
WorldPay estimate that by 2017, alternative payments will account for 59% of all online transactions globally and this will change the landscape of how we shop, pay and manage our money.
Although banks are responding, many have been slow off the starting blocks. Whilst Barclays, with its Pingit app, was first to market with peer-to-peer payments, the introduction of ‘Pay M’ - the first manifestation of a cross-bank effort to enable mobile payment between peers - will bring payment functionality to millions of consumers but it will not let you pay for goods at point of sale (POS), yet.
However, at the moment, conversion rates are not strong. A poll by Harris Interactive last year showed that over half of consumers abandon purchases on mobile devices due to payment friction. As mobile commerce becomes better integrated and user design reaches maturity, the distinction between ‘buying’ and ‘paying’ for goods on your smart phone will blur. A customer could, for example, browse for goods on a mobile phone and then use a card in their mobile wallet to pay for it. Equally, consumers could (whilst in a physical store) use Bluetooth or NFC to ‘tap and go’ without retrieving their physical payment card.
New entrants are starting to disintermediate banks that do not act quickly enough to develop a compelling mobile and payments offer. In the fourth quarter of 2013, a third of transactions in Starbucks across North America were pre-paid, with users drawing-down on funds through the plastic card or app instead of using cash or a credit card to pay for their morning caffeine fix.
Perhaps the biggest change in this space is the emergence of digital banks and payment services such as Moven, Go Bank, Virtual Wallet, Simple, Ripple, Venmo and TransferWise. Many of these brands lead on convenience, personalised digital money management services and apps, whilst lowering charges to the consumer and in the case of TransferWise, building their brand through social media and stunting, they are fast becoming hard to miss.
Similarly, mobile wallets such as Weve and Google, that combine ways to pay with digital loyalty points and coupons, make it easier for the consumer to discover new goods wherever they are and pay however they wish.
So, what is the issue for the banks who wait and see? Card and account dormancy, loss of interchange, or attrition as disgruntled consumers move to a digital bank.
A recent Amaze survey of 10-15 year olds revealed that a third would consider banking with Amazon. In the last year Amazon has acquired payment start-up GoPago and launched ‘Amazon Payments’, a service that allows shoppers to pay for goods on a wide range of sites using their Amazon account. Are Amazon trying to become a bank? In much the same way, we have seen that Facebook has applied to become an ‘e-money’ institution and hired PayPal’s Ex-President David Marcus; does this mean we will see more tech giants evolving in this direction?
In an era of bank branch closures, this change in behaviour is a genuine threat to banks that are slow to reform digitally. As digital payment friction reduces and the software starts to act as more of a navigational device that reacts to our physical proximity, the opportunity for retailers and other service providers will be formidable.
Jasper Bell is strategy consultant at Amaze – a leading, full service digital marketing, technology and commerce consultancy.