the future of digital payments

Rethinking payments Visa Innovation day Prague | 06.22.2015

The world of payments is undergoing significant disruption.

The empowered consumer !

With seemingly unlimited knowledge, and borderless reach, consumers choose what, when, and how they buy. They expect: !• Engaging experiences • Personalized service • Instant gratification • Seamless transition between channels • Innovative relevant solutions !

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Fierce competition !

New, financial and non-financial competitors are entering the market and changing the competitive landscape: !• Telcos • Retailers • Tech giants • Startups • Banks • Credit card companies !

When we look at the competitors in the world of payment we see many players - financial and non-financial !

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The world of payments is undergoing significant disruption.Regulatory changes !

The dynamics of the regulatory environment demand timely responses:!!• Interchange rules • Consumer protection laws • Compliance requirement !

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Profitability pressure !

The reduction in Interchange Fees and competing solutions are driving the profitability down. !

And then we have profitability pressure with low interchange fees and competing…

Complex technology landscape !

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!• Terminals • Wearables • Beacons • NFC, HCE, BLE !Finally we have a complex technological landscape which is changing every day !

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The world of payments is changing at a fast and furious pace. !

To understand the future of payments we need to first look at what makes a mobile payment service successful.

Rethinking payment2015

The concept of a “Digital Wallet” is something the entire industry has been struggling with.

Google Wallet Square wallet-$300M -$25M -$100M

Isis/Softcard

Terminated 5/2014 Terminated 3/2015


And this is not surprising, since successful innovations have always:

1. Delivered against a key pain point or

2. Added unique value

or both…

The world of payments is undergoing significant disruption.!

• Reaching for one’s wallet is easy • CC companies are carrying the security burden • Plastic is widely accepted • Credit is mitigating the ‘abstract pain of payment’

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It is a pretty good practice after all…

“Swiping a card at checkout is one of the easiest things consumers will ever do”. Bill Ready, CEO, Braintree

Paying with a card is not really a big pain point


Furthermore, using the current mobile payment offering creates new pain points: !

54%Find it easier to pay with debit/credit cards (Infoscout)

85%Of iPhone 6 users in the US have never tried paying with apple pay. (Infoscout)

70%Don’t want to transmit sensitive information to the merchants (BI)

62%Don’t want to store sensitive information on their phone (BI)


“For an entire week, I left all my cash and credit cards at home to see how well wallet-free mobile services work in the real world: On two occasions, friends had to buy me drinks. Another night I had to borrow $43 in cash. And I prepaid for drinks at one bar because I couldn't leave a card to keep the tab open.”

’No cash, cards, just mobile pay for a week’ Associated Press !


Most digital wallets are defined by a literal translation of the physical wallet, rather than a tool for what it actually enabling - which is buying products or services. !Looking at the current landscape, we see that most digital wallets are defined by a literal translation of the physical wallet, rather than a tool for what it actually enabling - which is buying products or services. !By choosing the literal translation approach the players restrict the value they deliver to both shoppers and merchants. !


Successful digital versions of analog products have never been literal translations, but tools that enabled an action in a new way:

Telephones have been supplanted by Skype

Stores have lost share to Amazon

It is not about a new phone, it’s a better cheaper form of communication from far.

It is not about a new store, it’s about making millions of products accessible from one’s armchair.

CD’s have been replaced by iTunes

It’s not about a new CD, it’s about a better way to consume music.


Stepping outside our category, we see that apps that do solve a key pain point and deliver customer value have 4 traits:

“Make something easier”

Efficiency“Save time or money” !

Effectiveness“Use personalized insights” !

Contextuality“Fun & Cool”

Entertainment

Waze Skyscanner Spotify Candy crush


When we look at successful mobile payment solutions we see that they too: !

• Deliver against a key pain point • Add a unique value • Enable an action in a new way • Share some of the 4 traits

In most cases, the core competency and added value is not the payment itself. Payment is an integral part of the value chain which is usually seamless and may even be transparent.

The world of payments is undergoing significant disruption.In 2014, 15% of all US transactions went through the mobile app. !

Pain point: • Managing loyalty program • Miscommunicating orders • Waiting time !

Added value: • Personalization • Seamless payment • Pre-order

Starbucks

The world of payments is undergoing significant disruption.Starting in 2009 as a luxury car service, Uber is now valued at $50 billion. !

Pain point: • Finding a taxi • Not knowing when taxi is expected • Awkwardness of payment and tipping • Having to pay and deal with cash • Fear of strange drivers • Zero clout in relationship with driver !

Added value: • Information about driver • Precise ETA • Rating and review as tools for improved service • Receipt management

Uber

The world of payments is undergoing significant disruption.When we look at banking apps globally, we see that few actually make this cut. !

Financial services are continuing to create transaction based apps which are basically digital versions of the credit card statement or account management website. !

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The world of payments is undergoing significant disruption.But focusing on financial transactions alone limits use, because consumers don’t live their lives that way, they live in the moment.

82%of smartphone users turn to their phone to influence a purchase decision while in a store.

90%of smartphone users have used their phone to make progress toward a long term goal or multi-step process while “out and about."

62%of smartphone users are more likely to take action right away toward solving an unexpected problem or new task because they have a smartphone.

(Google insights)

I would like to show you a short video created by Google which illustrates this idea of consumers living in the moment !

https://www.thinkwithgoogle.com/micromoments/index.html

https://www.thinkwithgoogle.com/micromoments/index.html

Consumers want to live in the moment and expect instant gratification to their actions. If the utility offered is not relevant for the particular moment they have no interest in it. !

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I Want What I Want When I Want ItIWWIWWIWI

In other words - consumers want what they want when they want it



we need to understand what they want, when they want it, where they want and it and how they want it.


I Want What I Want When I Want ItIWWIWWIWII Want Where I Wai How I Want It


I Want What I Want When I Want ItIWWIWWIWII Want Where I Wai How I Want It

Once we know this, we can start thinking about how payment can be a part of it.



By listening to the consumers needs and applying a user-centric approach, we can generate payment solutions which are relevant to consumers lifestyles. !

Lets look at some recent innovation in payments and explore how they fulfill human needs and tap into moments of desire, ultimately leading them to own the payment itself.


Pinterest Buyable pins

People create pinterest boards where they collect photos, items and designs which can serve them as inspiration for things they find interesting or they would like. A month ago pinterest added buyable pins which enable consumers to buy items directly from pinterest. Reaching people at the moment when they have already stated their interest and giving them what they want !techcrunch.com/2015/06/02/pinterest-unveils-buyable-pins-a-way-to-purchase-things-directly-from-pinterest/#.phkool:gslO

http://techcrunch.com/2015/06/02/pinterest-unveils-buyable-pins-a-way-to-purchase-things-directly-from-pinterest/#.phkool:gslO


Amazon Dash

Amazon dash is a new product Amazon introduced which allows you to order and pay for products by a push of a button.

At the moment the consumer realizes they need a product (they are out of detergent), the solution is already there anticipating there need offering the solution. !

Of course, payment is the least interesting part of the solution, it is completely transparent.


Jawbone UP4 Amex payments

Jawbone collaborated with Amex to create wearable technology which incorporates payment.

In this case it is about Realizing that in some situations people prefer leaving their smartphones at home. And so the answer in this case is adding the payment solution to the technology which is relevant to the situation - in this case a fitness tracker.


Open table

Open table started as a platform for making reservations at restaurants. recently they have added the option of paying the bill for the restaurant through the app. Once you have ordered the table, you are already in the system and when you are done there is no need to order the check, wait for the waiter and so on. !https://pay.opentable.com/#tour

https://pay.opentable.com/#tour


Lets see a video illustrating this.. We see that our current restaurant experience is not giving us what we want when we want it. Open table not only helps people book a table, it enables them to get up when you feel like it with zero additional effort. By enabling this experience they own the payment.


Venmo

Venmo is a P2P transfer app handling 2.8B USD of transactions annually. it is an example where payment is the core competency but it is done differently. !Instead of entering a long series of bank and checking account numbers, the user can enter recipient’s email address or phone number to route a transaction. Taps into consumer demand for fewer points of contact – using existing methods to perform more functions. In addition there is an added social aspect to the financial transaction with transfer being posted on a feed - this answers the consumer need for creating social network content and knowing about others


Facebook Friend to friend payments

The feature is already hidden in the app’s code, so the launch is likely imminent. When Facebook launches payments in Messenger, it’ll be tapping into 500 million monthly active users


Snapchat

Snapchat is another successful messaging app with over 100 Million users. Snap chat is interesting because not only does it incorporate payment in a way which is natural to consumers lifestyles, it does it in an engaging and entertaining way.

Eaze Nod to pay

When we talk about interesting interactions, Eaze is a payment service which uses google glass and head nods for payment. !

Lets watch a video to see how it works https://www.youtube.com/watch?v=Wu7tMD3ufKI !


When we look at all of these solutions disrupting existing industries, we see that they all leverage technology to create new connections, matching consumer needs with value propositions, ultimately leading to seamless if not invisible payment.


I would like to end with an amusing interview of the comedian Louis C.K. to show just how demanding consumers are and what it takes to keep them satisfied.

Desktop Research

The future of payments is uncertain, unknown and impossible to predict. Our only way for navigating successfully through these uncharted waters is by applying a strategical and human-centric approach that will ensure that our ideas address true and lasting needs of consumers.


I would like to end with an amusing interview of the comedian Louis C.K. to show just how demanding consumers are and what it takes to keep them satisfied.

Desktop Research

Thank you.

the future of digital payments

Economy & Finance