Guest Perspective: Avoiding the Five Fatal Mistakes of Mobile Payment Systems
The secret to earning wide acceptance by consumers and merchants
By David Pipe, Chief Marketing Officer, MPayMe
One of the great things about my career for the past 20 years is that I get to travel the world. This has provided me a unique perspective on the developing landscape allowing consumers to make financial transactions with their smartphones. I’ve noticed the same five mistakes are being made in multiple markets around the world.
Virtually all competitors in the space are moving in the wrong direction. The five mistakes are: limiting the function only to payments, using single-channel solutions, trying to replace the consumer’s wallet, not looking beyond retail and missing international opportunities.
A significant amount of money is being invested. Powa Technologies received series A funding of $76 million to take their technology global.The mobile app Zapp—a subsidiary of VocaLink, which operates the UK’s national payments infrastructure—plans to launch in 2014 and will provide mobile payments by linking consumers’ bank accounts to their mobile numbers. And PayPal’s new gadget will help stores identify shoppers when they walk in by connecting to shoppers’ smartphones and letting them pay without using an application or checking in.
These investments could be put at risk by the five mistakes, which are easy to avoid by expanding your company’s view of the market and broadening your goals.
1. Focus on more than payments: Everyone pays for things—by cash, by debit card, by credit card. We pay online using Internet banking, and we sometimes write a check. To attract more customers, the mobile payments industry should solve these emerging problems in addition to payment:
Channel Management: Merchants need a way to sell to consumers across multiple channels and offer a consistent, streamlined payment experience. Merchants want to sell in-store, online, from printed ads, via mobile commerce, from TV shopping, on mobile POS and through billing (both consumer bills and merchant invoices). Consumers may learn about a product on TV, get a coupon in the newspaper and then redeem it at the shop. To be relevant, mobile solutions need to tie these together, plus provide the payment piece.
Customer Segmentation: When it comes to coupons and special offers, merchants would like to escape the “one-size-fits-all” model. Coupons in newspapers give the same offer to everyone, even to those consumers who are going to buy the product anyway. Real value would come from a mobile business platform that could segment customers based on preferences or past purchases and deliver targeted offers electronically. Cross-sell and up-sell opportunities maximize the ROI in these programs.
Loyalty: The holy grail of loyalty is the accrual and redemption of loyalty points in real-time, and this is where a mobile business platform could add real value to both merchants and consumers. Additionally, consumers would no longer have to carry around multiple loyalty cards or always remember to have the one they need during any particular shopping trip.
2. Broaden the solution: In my opinion, any mobile payment solution that restricts usage to a single channel—or even just a couple of channels—is doomed because it won’t attract mass consumer adoption. Why would a consumer want to use my mobile phone system to pay in-store and revert to traditional payment methods in every other channel? Consumers have adopted Visa and MasterCard because they can use them almost anywhere—both in the store and online. Mobile payment systems also must work anywhere.
Visa and MasterCard have limitations that a mobile business platform could overcome. With mobile, a printed ad in a newspaper or magazine could be transformed into a sales channel using a QR code. Scanning the QR code downloads the merchant’s catalogue into your mobile device, where you can use the app to shop and pay. Geolocation functionality could direct you to the nearest store to pick up, or simply have the item delivered to your house. Why stop at printed ads? QR codes can appear virtually anywhere: outdoor ads, printed brochures, television or the seatback of a bus or airplane. How many potential sales channels could you imagine?
3. Hands off the customer’s wallet: I’m always amused when I see a mobile payment app that promises to replace my wallet. I don’t know what’s in your wallet, but I just dumped the contents of mine onto my desk. Here’s what fell out: two debit cards, three credit cards, four loyalty cards, a couple of coupons I picked up somewhere and two identification cards.
How could an app that links my bank account to my mobile number—or any payment app, for that matter—replace all of that? Even if you’re just trying to facilitate a payment, a mobile payment app needs to cater to multiple funding sources: credit cards, debit cards, bank accounts and even stored value. And, once you’ve accomplished that, you still need to cater to loyalty cards, coupons and identification for access control.
4. Look beyond retail: Virtually everything I see in the mobile payments space is focused on “shopping.” But the payments market, both B2C and B2B, is massive, and only a fraction of it (about 7 percent) is consumer retail. The majority of monthly household spending is for items such as mortgage payments, insurance payments, utility bills, satellite TV service, mobile phone contracts, car loans and credit card repayments. Don’t ignore the other 93 percent of the market when developing a mobile payment application. Some consumer utility payments are on recurring direct debit, but why couldn’t I manage those via the mobile payments app?
And speaking of recurring direct debits or “auto-pay,” adoption is far below what merchants would like because consumers resist for fear of losing control. What about allowing a consumer to set up a direct debit via the mobile payment app where the consumer maintains control? The app messages the customer a day or two before the payment is scheduled, allowing the customer to approve payment, change the amount or cancel. Consumer adoption would increase, saving large billers millions. The mobile payments industry should solve these problems, not how to buy a cappuccino with a phone in Starbucks.
5. Expand International Marketing: I travel more than the average person, but most consumers will find themselves out of their home country on occasion. Large international events like the Olympics and the World Cup attract many consumers who need payment methods while abroad. But virtually all of the mobile payments applications I see are useless outside the home country. If I can use my Visa or MasterCard abroad, why shouldn’t I be able to use a mobile payment app abroad? Again the current players in this market should create global functionality. This is the standard already set by the international card schemes, so why take one step backwards when moving to mobile?
The mobile payments industry is crowded with hundreds of participants trying to become the standard. Any of them could fail if they don’t follow the five guidelines I’ve detailed above. By the way, I was tempted to add another potential problem to the list: Security. No mobile payment solution will be widely adopted by consumers unless they have confidence in its security. But that’s a subject for another article.
David Pipe is the CMO of Hong Kong-based MPayMe, provider of the ZNAP mobile platform—a multi-factor, secure and comprehensive payment solution, bundled with software and applications to manage payments across various physical, online, and billing channels. Pipe has served as head of marketing for Premium Credit Ltd and has served in various marketing and business roles at global consulting firm KAE, Genworth Financial, JPMorgan Chase, Wells Fargo and Charles Schwab.