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World Retail Congress 2014: The Future of Payments

One of the stream sessions on the first afternoon, Sarah Quinlan, Senior Vice President, Market Insights at MasterCard Advisors, and Bernie Brooks, CEO of Myer, looked ahead to what the future may hold in the payments space.

Quinlan began by noting that the way the payments space is evolving is all driven by the great recession following the global financial crisis. It is more likely that two people in a household are working rather than just, while people are living closer to cities. Quinlan said that time pressure on peoples’ lives is key, so when it comes to payments the consumer is in charge.

Quinlan manages MasterCard’s SpendingPulse research, and was asked about how data collected can help retailers. Her opinion was that while there has been a growth in online for retailers, but bricks and mortar still dominate. In the US, for example, 20% of apparel retail sales are online, while in the UK this is just 11% - in this example, the statistics show that there is an opportunity for UK retailers.

Quinlan said one of the biggest trends she is seeing is that consumers love experiences, such as travelling or dining out. Retailers need to learn how to use their online store as a content delivery platform for the consumer. Brooks made the point that in the retail environment you get many types of data. Loyalty card data is one example of this. What he as a retailer finds really valuable is data on what else consumers are buying. Companies such as MasterCard collect data that can show retailers where they are missing out, where consumers who may have a loyalty card product are shopping elsewhere and which types of items they are purchasing from elsewhere. This allows the retailer to go back and remarket to these consumers.

Quinlan described how she sits down with a number of MasterCard’s retail clients each month to talk about the spending patterns that the SpendingPulse tracks. In one example, a retailer wanted to launch a high-end luxury store in London’s prestigious Bond Street. However, the spending data showed that luxury spending in London had been negative for 17 consecutive months, and so Quinlan were able to share this information and prevent the retailer from making a potentially costly error.

The panel noted that certain countries have a young population with access to digital technology. In this environment there is the opportunity to insert a payment system, not just for online shopping but for people’s everyday lives - the ability to settle utility and other bills, for example. National ID card programmes can be of use here if they have payment card technology embedded.

Brooks made the point that cash still plays a role, for example around one-third of transactions at Myer are still in cash. However, he made the point that there is a good business case to move away from cash. Brooks suggested that digital gift cards on phones are a good way to get consumers used to the digital wallet concept.

Security emerged as another key theme for the future of payments, and the panel pondered how retailers could make payments more secure. In Quinlan’s opinion, they need to make the investment. She made the point that there has been a lag in business spending, but that retailers must invest as they are in race with the fraudsters. Retailers can’t afford to stand still. While bricks and mortar reputation is important in building trust online, this can be lost quickly, so investment can help mitigate this reputational risk. Quinlan explained that MasterCard Advisors has an arm that helps retailers implement new solutions. However it is important to remember that every retailer is different and a one-size solution will not fit all - it is critical to understand the business.

Looking in the crystal ball and predicting what the payments space will look like in 2025, Quinlan made it clear that she believes cash will still exist - using the example that if you try and get a taxi in Hong Kong you can only pay in cash today, and she couldn’t see situations like that changing any time soon. She also noted that there will also be an increase in security measures around payments, they will be seamless and it will be simple for consumers to carry multiple payment forms on their person at all times. Mobile payments will be much more common, in the B2B space as well as the B2C space. The point was made that the method of payment used is a personal choice, and so all forms need to be seamlessly accessible to the consumer. Quinlan mentioned that there is a lot of talk about Apple Pay right now, but this will be just one of a variety of payment methods in the future.



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