The convergence of mobile and digital, of money and data, of people and identity is affecting all parts of the retail and payments industries. Every corner of the market is confronting the same challenges but each brings its own specific rules, culture and heritage.
Consumers might say they would like a single app on their phone that does everything for them. But the reality is that a number of global giants have tried and failed to bring a ubiquitous solution to market – Google Wallet and Paypal Instore are just two examples. To these we can add any number of attempts by the mobile phone industry to incorporate payments into its product set culminating in the successive failures of CurrentC (ISIS) in the US and Weve in the UK.
If the future belongs to niche players that understand their customers and eco-systems, the pre-pay industry should be prospering. These businesses provide niche services that supply digital money for the unbanked, loyalty and gifting schemes on behalf of retailers, international money transfer and payroll programmes.
The pre-pay industry is moving from being a market in itself to becoming just one part of a much larger retail payments ecosystem and will need to integrate technically and emotionally with the mainstream mobile app world.
This was reflected in the opening up of the APEX conference to a much wider set of speakers and delegates. Unfortunately, this led to a fragmented and sometimes incoherent agenda of often unrelated content. Many of the presentations were worthwhile but they were not always in the right order and you have to respect the reckless iconoclasm of the organisers to run a three day conference without a chairman.
Nevertheless, three themes became quickly apparent:
- The pre-pay industry risks being upstaged by Fintech start-ups that are looking simply to solve problems and don’t feel bounded or restricted by the etiquette and regulations of the payments industry.
- There was a chasm between the questions the retailers were asking – rooted often in the physical challenges of printing and distributing gift cards – and the digital dreams of seamless mobile shopping journeys expounded by some of the speakers. It’s not that retailers don’t think about such things; it’s more that the content wasn’t matched to the needs of the individuals invited.
- The SEPA area makes life much easier for everyone. The UK – benefiting from a strong and vibrant payments industry – would be ill-advised to withdraw.
Apple Pay is quickly taking root in the US. Does this provide a model for the future of payments in Europe? Samee Zafar from Edgar Dunn thought Apple faced three significant obstacles bringing its service to this side of the Atlantic.
- Apple’s market share is much lower than in the States, typically between 15%-30% in most EU countries compared to over 50% in the US
- European banks still control the payment “switches” and so have more ability to throw obstacles in Apple Pay’s path
- Recent regulatory reductions in interchange don’t leave enough margin for Apple to charge card issuers as much as in the US
In Samee’s view, this leaves the way clear for other wallets or similar mobile payment services to prosper. Zapp in the UK could be one. Or even the mobile network operators that may have finally arrived at the killer app…
Christian Van Hommell Bonten from Wirecard (the conference sponsors) used his keynote slot to explain to a slightly bemused audience the three ways mobile operators can deliver a tap-and-pay service: using an NFC SIM, using the secure element (eSE) or via that latest buzzphrase, host card emulation. WireCard has powered a number of NFC SIM projects, most recently Orange in France which links to a pre-paid card embedded in an Orange Cash app.
This kind of solution requires phones to be equipped with new SIMs which costs the operator money and can take up valuable selling time in a mobile network’s retail outlets. Not a bad thing, said Christian. “The best way to bring a new payment type to a user is in a shop.”
Christian said that NFC SIM or eSE give the best user experience as you just tap and pay, even if your phone is locked. In contrast, HCE based services, which store card details in the cloud, necessitate a strong password on the payment app itself which slows things down. But HCE does present clear advantages to app vendors of all kinds – they should be able to add high value contactless payments to their services with as much ease as linking to Facebook Connect. There is a clear opportunity here for digitising gift cards and joining them up with location based communications of various kinds.
Meanwhile, in Italy, Poste Italia Mobile (an MVNO) is going live with an NFC SIM based service which allows its customers to tap and pay (provided they have a Post Italia payment card of some kind) at shops but also on public transport. Loyalty cards will be next. Already, 850K people have downloaded the Poste Italia app, 500K have got one of the new SIMs and 80K have digitised a payment card.
The video is slightly misleading. You don’t just tap and pay. You tap first. Then the app prompts for a passcode. So, it’s actually a two step process. Anyway, by next year 4m SIMs will have been swapped out and Daniela Maurello, the marketing director who made the presentation, was sure that Poste Italia’s reach alone would drive mass adoption of the service. Interestingly, the mobile network is not looking to make any money from this. The business case is about customer acquisition and this has allowed it to focus on customer experience.
Vodafone are expected to launch a similar service in a number of European markets imminently.
Unrelated to either the mobile operators or the pre-pay world itself, a couple of interesting start-ups presented:
LocalZ – winners of the John Lewis prize last year, LocalZ uses geo-location techniques, including beacons, to improve customer service. Pete Williams gave an example from Peter Jones, a John Lewis shop in Chelsea. If a shopper approaches the store and she has a click-and-collect order waiting, staff get an advanced notification so they can get the parcel ready. This cuts waiting time from 12 to 5 minutes. While still conceptual, this is a great example of technology being used to solve a specific and very measureable problem. The central assumption, that the people nearing the store are intending to come in an pick up their parcel, remains to be tested but sounds plausible.
Reward Technology – Paul Sheedy explained that his venture was aimed at the middle aged females that do most of the world’s grocery shopping. His business puts RFID tags in loyalty cards. This allows stores to recognise customers as they enter and to push messages back to their phones – by SMS primarily. Paul sees the need for a bridge from analogue to digital as real consumer behaviour is moving slower than some would like to admit. 45% of Spanish people don’t have a smartphone, for example.
Several other start-ups got a positive mention:
Quixter – a Swedish idea that registers your payment details along with your handprint, then pay by placing your hand on a reading-frame. It works using vein recognition and is live at one University.
SEQR – another Swedish venture, this is a multi-retailer mobile wallet which works by scanning a QR code produced by the till. It is live with McDonalds in the Sweden.
Orderella – order for drinks at counter-service bars and pick them up when you’re ready, avoiding the queue. It’s now available at 1000 location around the UK but will face the usual issues that the bottleneck in bars is not ordering drinks, it’s making them. That’s why there’s a queue. If you increase demand without increasing supply, the (virtual) queue will just get longer.
Tiply – use your phone to tip hotel and restaurant staff by taking their photo. It’s a great idea from the UK with a good tagline: “Don’t feel like a jerk because you don’t have cash.”