01 September 2014

Ward Hagenaar Qhuba Consulting

Ward Hagenaar - Qhuba Consulting

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Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

The True Value of Mobile Transactions

05 November 2012  |  4262 views  |  0

It is easy to think that attractiveness of mobile transactions is in the embracement of near field communication (NFC). Banks, telco’s, manufacturers, the Forresters, Javelins and Gartners have put in on the agenda since 2006 and promised the infrastructure would be there in the next year, or the year after, or...

Smartphones equipped with NFC could act as a payment or loyalty card and used to replace card based transactions. However, in such a mature infrastructure that exists in western Europe, replacing the form factor is not the true added value. Sure, it will bring slightly more speed and some minimal interactivity between store and visitor. But most of this will be offered better by a variety of other applications. The true value of NFC is restricted to the security of the contactless transaction and potentially a universal way to perform these transactions. It takes all players to long to bring such a technology to the market, as main benefits are already tackled by other techniques.

Enhanced competition

Real added value enforced by the smartphone is enhanced competition. The smartphone enables disruption in every sales channel. We've all heard of the success cases from Starbucks with 70 million transactions since 2011, Square with two million card readers in two years, and PayPal who already have 10 percent of their turnover via smartphone initiated transactions. These players reached large scales with mobile initiated transactions and with relatively small investments at high speed.

The advantage seen throughout these success cases is the fact they each have a large following. Worldwide we see new Square-like initiatives popping up, at least once a week. I am still wondering why banks don’t see it more important to reduce the usage of cash than their focus on NFC. Multiple large retailers continue to investigate app based payments, order and delivery functionality. The front runner role from PayPal in mobile, made card giants Amex, MasterCard and Visa invest heavily in the acquisition of technical platforms. With these platforms they will enable banks to offer multi-channel services from one application, the digital wallet. Finally, the customer becomes centric again as technical restrictions are bypassed by new players that do not respect the old rules.

Transactions

The digital wallet concept enables the consumer to pay with one click checkout online, via his or her smartphone and at a payment terminal with NFC. This is a very usefull evolution of the 15-year old classic internet checkout flow, reducing the number of forms and fields to bare minimum, to a true one-click checkout.  We know this is as one of Amazons golden eggs, licensed to Apple. This will now become broadly available in extended mode to every retailer! This will bring true added value to retailers and consumers: higher conversion and higher turnover due to increased convenience.

Consumers will be able to configure their wallet with their preferred payment methods, loyalty cards and vouchers. This is no rocket science, but a convenient logical development. These wallet like customer applications will also hold their preferred delivery information such as: home and work address, specific time slots for convenient delivery, their neighbor of choice if they are not at home, pick up points, et cetera.

The smartphone will enhance the user experience across channels, forcing  large stakeholders to speed up developments as the competition enters from the cloud.

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name

Ward Hagenaar

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Business Consultant Cards and Payments

company name

Qhuba Consulting

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2011

location

Utrecht

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Payments and cards expert with experience on all perspectives (financial institution, processing,...

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