The Move to Mobile: Commerce and Payments
There has been a paradigm shift in the way consumers can pay for goods, with today’s millennial customers tapping away their NFC cards and making remittance payments from an app or via messenger from their phones — a stark contrast from the days of cash and cheques. However, the landscape is still nascent with significant scope to be further disrupted; banking the unbanked, cryptocurrencies, beacons, mobile wallets to name a few. But where is this all going, and what fine print has the potential to disrupt this disruption?
Part I: Where the Need is Strongest — Key Drivers and the Answers So Far
The Unbanked Population
Over 2.5bn adults do not use formal financial services to save, borrow or transfer money. 2.2bn of these live in Africa, Asia, Latin America, and the Middle East. Africa tops the mobile payment league table accounting for 52% of the world’s mobile money services. In Africa as well as other developing geographies, there is a large unbanked population prime for what mobile banking has to offer given mobile infrastructure capabilities. M-pesa, a P2P SMS payment service launched by Safaricom in 2007, has transformed the routes for trade for Kenyans in particular. The National Bank of Egypt has collaborated with MasterCard, Fawry and the Egyptian Banks Company to create ‘Phone Cash’, a mobile payment service for the banked and unbanked across Egypt and the Middle East. However, only a small percentage of the potential market in these economies is benefiting from mobile payment capabilities, so there is significant scope and pull from the market to absorb new developments.
There have been more high-tech developments for the West’s unbanked, such as PayNearMe in the US which allows 7-Elevens and other stores to be able to take cash and trigger the actioning of pre-made online orders; something that could potentially be rolled out in developing regions. Heading towards the Far East and beyond, WeChat, China’s dominant messaging service has functionality to allow P2P and C2B payments — a big hit for the mobile obsessed Asian market. Facebook placed its stick in the ground in the mobile banking sector years ago with CommBank Kaching (allowing Commonwealth Bank of Australia customers to bank without leaving the social media site); one of the more notable collaborations in the space, but for the unbanked they recently launched P2P payments via their messenger service.
With Facebook though, there is a greater potential in the extent of services it could offer the unbanked given the rich information Facebook has on individuals, putting it in the privileged position of being able to perform a truly informed risk assessment for the loans space (fast cars and weekly partying pictures uploaded?). A global platform already — it could access a large proportion of the unbanked world.
With there being increasing demand in this increasingly globally connected world of trade and dispersed families, reaching the unbanked — for trade and remittance — is a top priority.
It can never be underestimated how large a driver human laziness is. Today’s millennial customers’ loyalty is determined by ease and speed of use. Paypal provides a quick and easy online payment tool that has stood its ground dominating the mobile P2P space for years, but this technology giant knows it cannot sit still as consumers look for ever easier ways to pay. Paypal has created Venmo, its mobile app that has been gaining traction with total payment volumes rising 29% quarter-on-quarter to a startling $906m in Q4 2014. This giant realises it needs to invest in technology to stay ahead of the curve as new entrants (as well as existing providers) look to make it even easier for consumers to pay.
UB (Universal Basket) is just one of those new entrants, which is deployed via a SDK that stores consumers’ credit card details (sans CVV) within their program that sits as a native checkout basket across a number of stores — to pay for items; all you have to do is put in the CVV code — a shorter time to purchase than the password and confirmatory clicking through Paypal.
Laziness and ease of use is also a key driving force as to why NFC has become so popular — with purchases being made with the tap of a credit card (currently up to £20 in value, to be increased to £30 in September 2015). However, routing through your wallet and pulling out a credit card is becoming too cumbersome and people already have their phone to hand, so mobile wallets and HCE (host card emulation) are predicted to rise in popularity. Vodafone has recently announced a collaboration with Visa and Carta Worldwide of this nature allowing customers to sync their bank cards with their Vodafone Wallet which can be used once customers receive their new NFC SIM. It is predicated mobile contactless payments will increase ten-fold over 2015 alone, starting however from a base of 0.5% of all in-store payments in 2014.
My bets would be that soon even getting a phone out may be too arduous with a twist of the wrist being the preferred method once the Apple Watch (and perhaps the Swatch and Tag/Google/Intel collaboration watches) become mainstream.
Personalised and Combined Services
This “trend to lazy” is so powerful — credit card companies, banks, mobile operators and retailers observe it and this has given rise to a host of collaborations to create “one-stop-shops” for buying needs. This often means combining services and pushing them out at relevant times, whilst always being available. Companies such as Proxama, Yoyo and Appflare look to make shopping easier and more enticing by pushing out relevant coupons/ content, allowing easier payments and assist in gathering consumer data to tailor the shopping experience. The personalised shopping experience has been one of the hottest topics in the evolving retail landscape and with mobile devices being so close to consumers’ hearts — both physically and in the decision making process — it is recognised that personalisation (and hence ease of payment) through mobile is key.
So in summary, the dispersion of families and trade over the globe, and human laziness are what I see as key sector drivers. Rolling out mobile services to bank the unbanked, creating quick routes to purchase, creating personalised experiences, as well as making money transfer easier (preferably with discounts/ at cheaper rates) is where my money would be.