2020 crisis as a “rise and shine” moment for mobile wallets at POS — will they capture it?
Paying with cash for groceries nowadays highly increases your risk of catching CoVID-19. Paying with a magnetic strip card (common in the US) means you hand on your card to the cashier, who is a potential virus transmitter. Even with the safest card option — chip or contactless, there is still probability you need to contact with contaminated surfaces, entering the PIN code. The safest option nowadays? Contactless Mobile wallet payments where the customer identification happens on your smartphone.
Over the last couple of years a number of mobile wallets did emerge. The customer adoption of those products was sluggish, as customers didn’t see any major benefits of using those solutions over the classic plastic card. Amid CoVID-19 pandemic safety replaces convenience as a key driver of customer payment behavior. Minimizing the contact between customers and store surfaces dramatically increases the value of mobile wallets to customers and society. This might rapidly increase customer adoption — in case wallet providers follow the right strategy.
Apple Pay and Big Pays (Google, Samsung)
Apple Pay is likely to be the biggest beneficiary, as it was best prepared with its infrastructure. Currently, there are more than 120mln iPhones in US and more than 700mln in the world. More than half of them are in countries where Apple Pay is already launched. That implies that before the epidemic Apple Pay had 1) astonishing potential customer base, 2) comprehensive bank coverage, 3) huge acceptance network as it works on all the contactless POS terminals. In 2019 it all was ready for the boost, the only remaining problem was sluggish customer adoption, which in Apple’s key market, the US, stood at 9% — far below projections. Sanitary concerns amid CoVID-19 worked as an ideal adoption enhancer, as dozens of millions of Apple users rushed to sign-up for the service. Some of the new users may like it, some may just get used to it over the course of the pandemic. As a result, a rapid spike in adoption might transform into a long-term increase in the active user base.
Google Pay and Samsung Pay face a very similar situation, although they are in a much weaker position due to open access HCE technology on Android phones. Any issuer may create their own HCE solution for Android phones that essentially circumvents Android/Samsung Pay. This means Google and Samsung will face all the types of localized competition, primarily from bank-developed “Pays” and local wallets.
Bank Wallets
Many banks in Europe and US created their own digital wallet solutions for Android. In most cases those apps were not very successful. Dutch ABN Amro and American JP Morgan even shut down their Android wallet applications in late 2019 due to low customer adoption. The current crisis presents a “rise and shine” moment for those neglected wallets to finally become of value for their Banks’ customers. The most important for banks in this situation is to reach to their customers early and efficiently with communication on how the Bank wallet solution can help shoppers to minimize the risk of contacting coronavirus followed by clear instructions on wallet setup and support contacts.
Banks have very limited revenue potential on their own wallet products but increased “Bank Pay” adoption might drive long-term loyalty and decrease the risk of disintermediation for banks.
Payconiq
Another potential beneficiary is Belgian Payconiq. Many alternative wallets are based on QR or Bluetooth connection technology and therefore require two types of scaling to grow big: from one side they need a significant number of customers to download their app, from the other side they need merchants to sign acceptance contact and incorporate QR or Bluetooth technology in their checkout. So, while many emerging wallets focused on driving customer adoption first, Payconiq was focused on merchant adoption throughout Netherlands, Belgium and Luxembourg reaching 75,000 merchants, which is a truly remarkable success for an independent solution. From the other side reported customer base stood at only 1.5mln users (meaning there were only 20 users per 1 accepting merchant), which is very low given 20mln+ adult population in Benelux and the fact that large chunk of those users was unlikely to be active ones. Given those numbers, the current crisis presents a break-it-or-make-it moment for the Payconiq and an ideal time to gear up its customer adoption. Despite the full lockdown in Belgium and quasi-lockdown in the Netherlands, people are still going to the supermarkets and grocery stores, many of which do accept Payconiq, but rarely see a customer willing to pay with it. Now is the perfect moment for a strong communication and customer education campaign. Even with little budget, there are good moves that could be done. First — push-app communication towards registered customers highlighting benefits of solution over the usage of plastic cards. Second — a joint campaign with merchants aimed at 1) educating merchants 2) visual marketing campaign to raise awareness of the solution and its benefits amid epidemic among store visitors. The sanitary concerns of pandemic present opportunities, the question is how quickly and efficiently Payconiq team is going to react and adjust their marketing strategy (at the moment of writing this article there are no coronavirus-related public communications from Payconiq visible online — surprisingly).
BLIK
Blik, Polish mobile wallet, owned jointly by the biggest Polish banks, is a great example of a mobile wallet done right. Blik already has great adoption scale-up in e-commerce and ATM payments, while growth in POS payments was slow since launch. Similar to Payconiq, the merchant acceptance network was well-established, but customers just founded it too quirky to use Blik at POS compared to contactless card. Now, with “safety first” this might change”. Before, only two parties benefited from each Blik transaction: merchants were saving money on acceptance costs (for many merchants Blik is cheaper to accept than cards) and issuing banks were getting a bit more than standard card interchange. Now customers also see the clear benefit for themselves — no need to ever enter PIN and minimized contagion risk. With the last missing piece covered, Blik POS transactions are likely to sky-rocket in Q2’20, as Polish customers are generally flexible, quick to embrace innovations and well aware of CoVID-19 danger and preventive measures that should be taken.
But Blik once again proved that they do not just rely on consumer behavior shifts, but reinforce them — quickly launching a great promotion campaign. #Shopsharing promotes a new way of shopping: one person going to the shop to buy supplies for friends and family. Blik helps twice in this customer journey: first, the shopper is encouraged to pay with Blik in the shop to avoid contagion, and later Blik app could be used to settle the bills among split shopping participants. One-minute #Shopsharing campaign video featuring top Polish MC gained >1mln views on Youtube in just 2 weeks. An amazing result for a digital wallet promo. Blik marketing continues to be best-in-class among peer solutions in Europe.
In the beginning of April 2020 Mastercard bought a share in Blik — most likely this is a sign of coming European expansion of the solution. Great traction in Poland, strong management and marketing teams and unique technology are likely to make Blik’s European expansion a success. Mastercard wants to become both an enabler and a beneficiary of this success.
Twint
Swiss Twint is a venture created by large local banks to confront Apple and Google Pay on home turf. UBS and Credit Suisse poured gigantic 500mln CHF into development and blocked Apple efforts to come to set a foot in Switzerland for some time. Combined efforts secured a certain level of merchant adoption with Twint Bluetooth Beacons and POS QR codes in 50,000 retail outlets, but customers simply didn’t see enough benefits from the solution. Customer base included only 10%, with most customers being dormant users. This gave Twint the reputation of a failure, there were even voices suggesting future potential roll-off, especially after Apple Pay market entrance. However, CoVID-19 crisis gave it another hope — at the end of March Twint reported new daily registrations more than doubling (from 3000 to 7000 per day) and transactions increase by 60–100% in certain retail segments. The demand from online and POS retailers surged as well. One of the biggest grocery chain, Aldi, incorporated Twint in their stores at the beginning of April, as part of the effort to promote social distancing. Interestingly, Twint faces an easier battle compared to Payconiq and Blik. While in card-centric contactless heavens like Netherlands and Poland wallets fight against cards, Twint main competitor is cash, which Swiss customers still use for eye-popping 70% of in-store transactions. Conservative payments habits are being changed by the CoVID-19 crisis and Twint has local banks support and strong initial adoption to capitalize on this shift.
The contactless card payments still remain the main substitute for mobile wallets. Now contactless limits for cards are being raised throughout the world, resulting in customers being less frequently asked to enter PIN. First of all, this raises fraud risks — now fraudsters can spend more with a lost or stolen card. Second, in many countries, customers still need to enter their PIN when the cumulative transaction ceiling is reached (e.g. in Belgium each time more than 100 EUR is spent in contactless mode). With mobile wallets, PIN entry is eliminated completely — and with no compromise on fraud protection.
All of these create a “rise and shine” moment for mobile wallets solutions. The ones that have their acceptance infrastructure in place and are quick enough to capture the opportunity — like Apple Pay and Blik — will rule in the cashless (and potentially cardless) world of tomorrow.
