Over the past few years the world has seen rapid and exponential growth in the payments markets, with this trend expected to continue. Iin such a rapidly changing environment, however, the big question is: what next? One answer that is emerging is mobile payments.
New players, such as PayPal, continue to evolve in the market and innovate. This demands that existing players look at their current models and think about what their corporate customers really want. The different experience that both retailers and consumers have with mobile payments needs to be examined: consumers want a seamless experience, while retailers are eager to be able to dynamically respond to demand and target their approach.
The market is undoubtedly vast, with over 100 million phones in the UK, many of which are smartphones, and an increasingly tech-savvy base of not just consumers but retailers themselves. Within this, there is huge opportunity for service providers such as banks to innovate and enable the services that will come to shape the payments market. Services and information is set to be supplied where people want and in the format they need – enabling them to bank, transact and pay how they want. Customers will be massively empowered as service providers go far further to meet their needs.
The Banks’ Role in Developing Mobile Payments
Traditionally banks have been perceived as old fashioned and with too much inertia to change models and innovate, contrasted to the newer players in the arena who are said to move more quickly and responsively. Arguably such a perception is wrong – currently banks are leading many of the trials and tests that are occurring at the moment, driving development and innovation far more than people realise, playing a fundamental role in bringing new products to the market. Furthermore, products being pioneered in the consumer arena are beginning to enter the business-to-business (B2B) market as corporates realise the efficiency savings and value-add of flexible and mobile technology. Banks, standing over both these strands of development, are seeing unprecedented advances unfolding.
As well as helping to drive the development of technology, banks hold key advantages: they have in-depth and time-proven knowledge of both the payments arena and the associated risk management aspects of this. They also have a great level of consumer familiarity and interaction. Consumers want to know when they are making and receiving payments, with whom they are undertaking the transaction, and that it is executed in such a way that it is not going to be fraudulently misused now or in the future. Banks can do this.
Currently banks in the UK are delivering millions of contactless enabled cards (estimates of around 20-25 million by the end of 2012), and these will be the precursors to the delivery of payment through mobile devices. At the moment there are a multitude of trials happening among a number of banks and mobile providers using near field communication (NFC) payments. Ultimately this is anticipated to replace the card not just for low value, vanilla payments but for all payments in the future.
Developing in the same sphere as mobile payments is the increased mobility in banking. Already online banking is extensively developed and entrenched within the way we manage our finances and this is rapidly expanding to proliferate onto new platforms. Already we have seen the Faster Payments service providing impetus to change as payments near real time, and the prospect of integrating banking with payments is compelling. We are moving towards a multi-device, one channel world and it is imperative that retailers are ready for this.
With the advent of mobile wallets, we really will bank on-the-go, and retailers will need to engage with a far more dynamic consumer environment. When this is combined with technological leaps in how we shop, particularly how we compare and locate offers, retailers will need to offer customers options that are both genuinely appealing and in some way unique. Additional information from a mobile payment system will play an important role here.
Accessing Payments Information
Location-based services integrated with mobile payment systems will emerge to become a key component for businesses. Already, we understand how different groups of consumers and different regions dramatically impact the what, where and when of consumer spending, but what is difficult is collecting this knowledge and scaling it up the business. Mobile payment systems will be able to go a significant distance to assisting here. Companies will have information far quicker (and with considerably more accuracy) by combining this with their own mobile technology. They will be able to change stock and offers on an almost real-time basis, as well as alerting targeted consumer groups.
With the infrastructure for mobile payments being put in place, most interesting for businesses is the amount of information that payments are giving banks with which they can then subsequently use to improve the customer experience. In a sense it is not just the technology that is an exciting development but what it enables companies to do with the information that they receive from payments and location based data. Information can be used in a huge range of ways; it can help define what drives transactions and how, when and where these are made.
Banks have a deeper understanding of the linkage between the phone and transactions alongside how and when consumers want to receive information and offers. This is vital. Businesses want to be in control of timings, locations and products that they push out to the market, enabling them to better manage margins and inventory.
The role of mobile payments to enhance efficiency through a business is a compelling prospect: in linking real world information into a larger database, in real time, businesses can define actions against their current environment far more accurately. Mapping customers is a concept that has had legs for a while, and mobile transactions demonstrate how this can actually be integrated into a company’s operations.
Not only can companies take advantage of this opportunity, they need to. Over the next couple of years, the way in which consumers and retailers interact is set to change drastically and mobile payments will be central to this. As consumers become increasingly specific in what they want and how they want this delivered, so must businesses become more advanced and targeted in the way they deliver these services. Obviously the key to this is information, and payments can be a critical aspect of how that information can be derived.
The ability of retailers to accurately target products at consumers, while offering a smoother consumer experience is set to have a massive impact on the payments and related markets. It is not a case of whether but when, and new technology innovation will play the key role.
Traditional service providers and newer entrants alike are looking to take mobile payments to the next level, aiming to make payments faster, smoother and more flexible. Over the next 12 months, and certainly by the time we get to Sibos at the end of October, a plethora of announcements are anticipated and this could well be the year when the mobile payments movement really takes off. If we look back to the movements towards cheques from cash and cards from cheques, the evolution has happened faster each time and this trend will continue. Mobile payments will be ubiquitous far quicker than many people would think. We will move quickly into using both cards and phones and then, swiftly, cards will disappear as we enter a truly mobile age of banking and payments.
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