31 October 2014

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A counter-intuitive way to make mobile payments irresistible

19 April 2009  |  6056 views  |  0

Put loyalty and prepaid cards on mobile phones first, which will create the desire to have credit and debit cards as well, integrated into a single transaction. Going the other way, credit cards first, will be extremely challenging. The difference is the value proposition to customers and retailers.

The main promise of putting credit and debit cards onto an NFC mobile phone seems to be, "you can leave home without your wallet". That promise is impossible to deliver until the vast majority of retailers accept NFC payments. Customers still have to carry around their wallet, and, from the merchant’s angle, if customers have other payment methods on them anyway, the value of accepting NFC payments is limited. The promise is empty.

Some other promise is needed. How about, “tap your phone, instead of pulling out your wallet”? That promise can be delivered now, but is it really valuable? The difference between tapping your phone and pulling out a card is questionable in the vast majority of retail environments, except transit. The contactless promise was, “no more lines”, but removing the need for a signature on all transactions suddenly made traditional magnetic stripe transactions just as fast as contactless. Many people are working at linking the tap and go transaction to interactive information on the handset, to enhance the customer’s experience. Something may in time produce an exciting promise there, but there is a very high likelihood that it turns out that the value is in the application on the handset, and that the promise will be deliverable with traditional payment methods as well.

On the other hand, with loyalty and prepaid cards, Taggo’s promise is, "no more fat wallets". This is a much easier promise to deliver. As soon as one retailer is equipped, that retailer's card can disappear from your wallet. Poof. Gone. Whereas credit and debit cards will stay in your wallet for many years to come.

I see loyalty and prepaid cards going onto phones first, then pulling credit and debit cards on in a second phase. The promise for doing this would be, "no need to pull out a payment card when you use your mobile phone for loyalty".

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