Should PSPs and merchants care about mobile payments? Yes, they should. But perhaps not for the reasons they think. Frank Breuß, PPRO’s Director of International Sales, explains.
It’s almost impossible to talk about Alternative Payment Methods (APMs), without the conversation coming around to mobile payment. Often, when I’m talking to a payment service provider (PSP) or an acquirer they ask me, “You also support mobile payments, right?”
I tend not to answer right away. Instead, I let them explain what they mean. Almost always, it turns out that they mean online payments on a mobile device. This is different to what the industry generally means by ‘mobile payment’, so I thought I’d take this opportunity to clarify.
Mobile payment makes life easy at the point of sale
The common definition of mobile payment is a service that allows you to pay at the point of sale using a mobile device. Usually, this involves a technology such as near-field communications (NFC) or a quick-response (QR) code.
Examples of mobile payment include paying for a taxi ride in the US with Apple Pay or buying a pint in a London pub using Android Pay. Generally, you just ‘tap’ your smartphone on the reader at the checkout — and with one beep; you’ve paid for your purchase.
It’s important not to mix up definitions
Being able to pay at the point of sale with your mobile device — true ‘mobile payment’ — is great. I love it and I hope it takes off. But it’s important not to confuse it with the experience of shopping and paying for something online using a mobile device.
More and more people are now shopping online using their smartphone or tablet. A good example of how this is changing the industry came in 2015 when Chinese retailer Alibaba sold an incredible $14.3 billion worth of goods on a single day (the recently invented Chinese holiday ‘Singles Day’). Almost 70 percent of these purchases were made using a mobile device.
As more people use mobile devices to shop online, merchants and PSPs will have to pay greater attention to creating a mobile-friendly check-out and payment experience.
So mobile payments aren’t relevant to online retail?
That doesn’t mean that the growing popularity of mobile payment services for POS isn’t changing the online retail market. Through their experience with services such as Apple Pay and Samsung Pay, consumers are getting used to easy, one-touch transactions. This makes them want the same at the online checkout. This is one of the factors behind the growth of e-wallets and one-click payment methods such as Alipay, PayPal, Skrill, ecoPayz, and Amazon Payments.
This pressure for simplified payment methods can mean extra complications for the merchant. In many cases, for instance, e-wallets are just card payments through an intermediary. This leaves the merchant with the complication of adding support for the e-wallet, without the added benefit of being able to attract a new group of users — those who don’t use cards to pay online.
Realistically, however, the impact of true mobile payments on online commerce has been limited, at least so far. This might change now that Apple Pay, Samsung Pay and other big players have announced plans to integrate their mobile-payment apps with leading e-commerce stores. But even global giants such as Apple and Samsung may have a tough time tempting consumers away from payment methods they already know and trust.
Why would a Dutch customer, using iDEAL for sixty percent of his or her transactions, suddenly use a different payment method when shopping on a mobile device? You could ask the same question of a Belgian consumer using Bancontact, a German using Sofort, or a Portuguese using Multibanco. Why should they switch when their existing payment service already offers a smooth and easy-to-use mobile experience?
What will the market look like in future?
Apple and Samsung and other big players will make an impact but they won’t suddenly dominate the payment market in online commerce. What will happen is that there will be a shift away from online payment methods that don’t offer a good mobile experience, to those — such as iDEAL, Alipay or Bancontact — that do.
At the same time, we’ll see new players enter the market. And they won’t have legacy payment interfaces to update — with all the complexity that involves. They’ll be mobile optimised from the start.
In the near future, we can expect a much more varied marketplace in online payments, with big players from the world of POS-transactions and those local ‘heroes’ that are willing to adapt, competing for customer loyalty and market share. What all the successful players will have in common is the ability to offer a good customer experience in all channels, including mobile.
What does this mean for PSPs and their merchants?
To succeed in this new market place, PSPs and merchants will need to constantly monitor trends and customer expectations. When the market changes, they need to be able to quickly and responsively offer clients and consumers a service that meets their changing needs.
Many schemes will need to constantly change their interfaces in order to keep up with the ever-changing omnichannel environment. As the interface changes; so must the support-structure around it. That means putting extra resources into technical, legal, and operational maintenance. Some payment schemes may even end up developing more than one API, in order to best support omnichannel payment methods. What’s certain is that PSPs will be kept busy, making sure their merchants and users have access to the latest features.
When choosing a PSP, merchants will want to know with a high degree of certainty that the PSP they choose will be able to support this level of constant change and complexity. Doing so will be vital to keeping the merchant’s customers happy and its conversion rate high — no matter what the market throws at it. Trust will carry even more of a premium than ever before.
That’s why it’s so important for PSPs to choose the right partner, a provider such as PPRO on whom they can rely to keep their payment schemes always up to date, without the PSP itself having to put effort into the continual maintenance required to make that happen. Having a partner like this is likely to have a huge impact on which PSPs prosper in the new market and which don’t.