update on developments in mobile payments vol. 4 issue 7 ...€¦ · mobile payments are hot –...

1 | 12 www.thepaypers.com Copyright © The Paypers

Update on developments in mobile payments Vol. 4 Issue 7, 27 May 2013 Bi-weekly

The Paypers Specials: Merchants take a stand in the m-payments space 3

Mobile-enabled loyalty solutions provide value

for merchants & consumers alike 7

Experts take the stand: Wolfgang Berner, VP Product & Integration, PAY.ON 2

Dodd Roberts, Member of the MCX Executive Team 4

Nils Winkler, Chairman of the Board, Yapital 5

Marc Barach, CMO, Jumio 9

Bernhard Lachenmeier, SIX Payments Services 11

The current issue of the Mobile Paypers newsletter aims to take a close look at the current state of affairs in the global mobile commerce ecosystem, with particular emphasis on the unique opportunity brought about by the advent of mobile devices for merchants and consumers alike.

As far as merchants are concerned, mobile has gradually emerged as a new channel that allows them to learn what customers want and when, a crucial aspect in developing and enhancing customer experience. Against this backdrop, merchant involvement emerges as essential for the success of any mobile commerce initiative. At the other end of the m-

commerce equation, mobile devices are also revolutionizing the consumer shopping experience. As a general trend, the shopping experience seems to be moving from the online environment (where consumers stayed at home and ordered products online) to the in-store environment, a transition made possible by the many innovative functionalities of mobile devices which have become our ever-present companions.

In this week’s Mobile Paypers, we have gathered exclusive insights from a number of key market players, all debating the latest developments in the mobile commerce space. Wolfgang Berner, VP Product & Integration with PAY.ON examines the importance of merchants providing an omni-channel (in-store, online and mobile) shopping experience

for their customers, complete with consistent and comprehensive reporting, risk management and business intelligence. Be sure to check out our interview with Mr. Berner on page 2 of this newsletter.

In two exclusive interviews, The Paypers brings you unique insight from two of the most significant merchant-let mobile payments and commerce initiatives globally – the US-

based customer-focused, mobile-commerce platform Merchant Customer Exchange (MCX) and the first European cashless cross-channel payment solution, Yapital.

Dodd Roberts, member of the executive team of Merchant Customer Exchange, provides a closer look at what MCX aims to achieve and its vision that mobile commerce provides a unique opportunity to improve the shopping and purchasing experience for both customers and merchants (page 4 of this newsletter). Nils Winkler, Chairman of the Board with Yapital, focuses on presenting the Yapital value proposition and the way in which it fits into and answers the essential need of German (and European) merchants: the need to implement a real cross-channel payment solution that is easily integrated into the payment infrastructures they already have in place, rather than one that requires an overhaul of their payment systems (page 5 of this newsletter).

The newsletter also features an exclusive interview with Marc Barach, CMO at Jumio, which deals at length with the findings of Jumio’s recently released 2013 Mobile Consumer Insights survey (page 9). Finally, in an exclusive expert opinion, Bernhard Lachenmeier of SIX Payments Services examines the need for traditional banks to develop innovative m-

banking solutions to satisfy the needs of their tech-savvy customers (page 11).

A WORD FROM THE EDITOR A CLOSER LOOK AT WHAT THE FUTURE HOLDS FOR THE GLOBAL

M-COMMERCE ECOSYSTEM: ARE MERCHANTS TAKING OVER?

Bi-weekly Update on developments in mobile payments


Vol. 4 Issue 7, 27 May 2013

Wolfgang Berner is an expert in payment product development and leads many complex payment integration projects around the globe as part of his roles with PAY.ON. His current focus is rolling out PAY.ON’s new merchant experience which includes COPYandPAY and mobile pay-ment initiatives from mPOS to mCommerce. Wolfgang has a technical background in agile and lean software development in various roles as a

developer, project manager and heading PAY.ON’s product development.

Mobile payments are hot – perhaps hotter than ever. In this context, establishing a presence in mobile payments and mobile commerce has become a must-have for leading companies in that area. How has PAY.ON, a provider of payment technologies and processor of online transactions, managed its transition into the mobile payments market? What has been PAY.ON’s strategy in adding a mobile component to its products and services? Wolfgang Berner: At PAY.ON we constantly analyse market trends, technology developments, consult with clients and industry experts. Regarding mobile payments, we decided pretty early to develop suitable solutions for and with our clients. We wanted to make a difference with our solution by combining our existing payment platform – originally an e-commerce solution – with a broad range of mobile payment options, thereby creating a true multichannel platform.

Back in 2011 we set up a dedicated department for handling all mobile-related product developments to guarantee a strong focus on this complex topic. We further invested heavily in infrastructure, for instance, in our own Hardware Security Module (HSM) to guarantee our clients the flexibility to choose the most suitable acquirers and devices in

chip and PIN setups. Due to our early investments, we now generate all the advantages of technical leadership and strengthen this further with our powerful infrastructure – the integrative, global and multichannel processing platform PaySourcing.

How do you see mobile payments / m-commerce impacting the business of PAY.ON over the coming 12 months?

Wolfgang Berner: One of the main market accelerators is the fact that consumers want to seamlessly interact with numerous different shopping channels – for example, on smartphones, tablets, desktop computers – and brick and mortar stores. Very often shopping is started in one channel and completed in others. Merchants need to follow consumers across these channels with consistent and comprehensive reporting, risk management and business intelligence. Hence, it has become a simple necessity for payment providers to offer this service – providers on our platform certainly can. Additionally, we continuously expand our portfolio and constantly integrate new POS acquiring solutions, devices and innovations in multichannel business intelligence.

Do you think that the mobile device will eventually replace the wallet in consumers’ pockets? If so, what challenges does this shift in consumer preferences (towards mobile) present for a company like PAY.ON? Wolfgang Berner: Yes, it is quite conceivable that some form of mobile device combined with a virtual wallet will achieve that. The challenges are of course technical, especially with regards to security as well as compliance aspects. Due to our constant investment in our products and infrastructure, e.g. the switch to our hot, hot data centres in London last year or the setting up of the complete mobile infrastructure, we are very well prepared for all technical aspects. As such payments become more popular, more regulatory aspects will be put into play to protect various interests. For us, coming from the much regulated card payment area, it will be easy to adapt to these changes. This is what we have always done – fast and reliably – over the years in the industry.

The m-payments ecosystem is still emerging and is very fragmented, with many players joining the playing field all the time. In your opinion, does the fragmentation of the

EXCLUSIVE INTERVIEW WITH WOLFGANG BERNER, VP PRODUCT & INTEGRATION, PAY.ON

“Merchants need to follow consumers across multiple channels with

consistent and comprehensive reporting, risk management

and business intelligence.”




mobile payments ecosystem leave it more vulnerable to fraud and security risks? If so, how can this be prevented?

Wolfgang Berner: Yes, some players go LIVE without necessary security measures in place. This is driven by high time-to-market pressure and in some cases the lack of industry knowledge. This fragmentation, however, also has a positive effect: it drives and creates a lot of innovation. The continuous output of new services is solving consumer problems faster. However, it is best handled on top of an approved state-of-the-art payment infrastructure. And that is what the players in the mobile application area, such as open tabs, are good at and should focus on. They cannot make the difference by wrestling with the gritty payment details and related security, fraud prevention and compliance aspects. It’s a very time-consuming and complex burden, and if things go wrong, you could be thrown out of business as a result of fraud and security risks. At PAY.ON, this burden is taken away by providing a platform with flexible fraud-prevention management combining third-party solutions with internal checks thus allowing tailored fraud-prevention solutions for a broad range of applications in local markets and on a global scale.

Do you have some recommendations that you would like to share with other payment processors and technology providers who are trying to establish a presence in the mobile space?

Wolfgang Berner: Due to the fact that there are so many solutions out there and it is hard to predict which solutions will prevail, it is better to trust a platform that enables a broad range of mobile payment options from mobile payment pages, mobile wallets, handover solutions to mobile chip and PIN. You want all those channels combined with your e-

commerce on one single platform – with consistent, comprehensive and overarching reporting, fraud prevention and analysis all in one. Going mobile, for instance in the chip and PIN segment, means that you want to retain your flexibility in choosing your devices or acquiring solutions. With such strong payment capabilities in the background you can focus on creating innovative mobile application solutions making the consumer’s life easier.

For merchants, mobile-enabled payments have the potential to be a total game-changer. Mobile devices – smartphones in particular - create a unique opportunity for them to engage consumers in commercial transactions using a device that (in most cases) their customers already own and are keen to use. As mobile-enabled transactions now have the potential to take place in-store, the mobile device becomes a true point of interaction between the retailer and the buyer, as well as a tool which can be used to deliver a better buying experience. Mobile thus emerges as a new channel for merchants to learn what customers want and when, a crucial aspect in developing and enhancing customer experience.

Merchant involvement is a mandatory for the success of any mobile wallet program. No such m-wallet offering will take off unless a high enough percentage of merchants offer it as a check-out option for in-store buyers. In a clear signal that retailers are getting serious about capitalizing on their must-have presence in this space merchant-led initiatives are surfacing intent on doing precisely that. The US took the lead with the set-up of the Merchant Customer Exchange (MCX), an organization bringing together a number of major local retailers - including giants such as Target and Wal-Mart – which joined forces and announced their intention to develop their own mobile payment offering for consumers. Later in the year, Germany-based Otto Group – one of the leading mail order companies worldwide – announced the launch of a digital wallet service dubbed Yapital, which is set to enable consumers to make payments in-store across multiple sales channels, mobile included.

With the active involvement of merchants in the m-payments space, the fight to capture that ever-elusive consumer confidence and drive consumers to use their mobile devices as payment tools is about to reach a whole new level. It remains to be seen whether merchants will prove themselves better equipped than their competitors to deliver a fast, secure mobile payments proposition to users – or whether their involvement will make the already fragmented m-payments ecosystem even more divided and a great deal more difficult to navigate.

MERCHANTS TAKE A STAND IN THE MOBILE PAYMENTS SPACE

http://www.opentabs.de/

http://www.opentabs.de/




A payments-industry veteran, Dodd Roberts is currently a senior executive with Merchant Customer Exchange, a mobile-commerce company launched in2012 with backing from many of the nation’s largest merchants with the goal of creating a customer-focused and widely accepted mobile-commerce solution. MCX’s merchant owners include Wal-Mart, Target, CVS, Lowe’s, Best Buy and Sears, among others. Dodd is former President and CEO of the Merchant Advisory

Group, a trade association of national brand merchants. While leading the MAG, Dodd was a vocal advocate for merchants, representing the merchant community on several industry boards and committees.

Could you please provide our readers with a little more insight into what are the main elements of the MCX value proposition? What is its mission & vision and how does it aim to position itself on the US mobile transaction services market? Dodd Roberts: MCX merchants believe that mobile commerce provides a unique opportunity to improve the shopping and purchasing experience for both customers and merchants, making it more convenient, interactive and secure. But that opportunity is only going to be realized if a widely accepted solution emerges. Right now, the market is extremely fragmented and confusing, which is an obstacle to adoption. As a consumer, once you can get up in the morning, get your coffee at Dunkin’ Donuts, your gas at 7-

Eleven, run your errands at Best Buy and Lowe’s, make your weekly Target or Walmart run, and enjoy your dinner at Chili’s or Olive Garden, and pay for all of those things on your phone the same way, things get a lot simpler. And when you are getting offers from the retailers where you regularly shop, using mobile gets a lot more compelling.

How exactly does MCX function and how are consumers enabled to carry out payments in-store across the mobile channel? Dodd Roberts: What we’ve disclosed to date is that the initial MCX solution will be

primarily barcode- and cloud based. It was important to MCX that the mobile application is compatible with virtually all smartphones and with a lot of the point-of-sale hardware already out there. We’ve also shared that we are working with Gemalto, and that the wallet will run on their Allynis platform, so we have every confidence that the payment technology will be worthy of the caliber of the merchants accepting it.

Consumers will be able to download the MCX app and use it to shop at any of their favorite MCX merchants. In addition, consumers that choose to download individual apps from any MCX merchant will benefit from the integration of the MCX wallet into the merchant app. So consumers will have a consistent check out experience either way they chose to shop with MCX mobile.

What market need(s) does MCX aim to address?

Dodd Roberts: From a consumer perspective, we think ubiquitous acceptance is going to be really important to adoption, because consumers want something that’s accepted where they shop, and they’re interested in relevant offers and loyalty opportunities with those merchants. Most of our retailers believe their customers and guests are going to be very excited to have something that improves their shopping experience in myriad ways.

From a merchant perspective, through MCX merchants are developing a solution that addresses all the critical factors of mobile commerce – data and customer relationships, security, payments efficiency, flexibility, integration with their own app, all while providing

a certain technology roadmap. Data is a critically important factor. Current mobile solutions are inserted in the middle of a transaction, which exposes the data to the third party. Once they have it, they have it forever. MCX believes that data ought to stay between the customer and the merchant, and that’s a major point of difference.

EXCLUSIVE INTERVIEW WITH

DODD ROBERTS, MEMBER OF THE MCX EXECUTIVE TEAM

“MCX merchants believe that mobile commerce provides a unique

opportunity to improve the shopping and purchasing experience for both customers and merchants.”




In the context of the growing popularity of e-commerce and mobile commerce, what role do you envisage for merchants in this space? Are merchants better positioned to answer the needs of consumers when it comes to buying online, via mobile and in-store? Dodd Roberts: We believe so. When you look at all the players in mobile, none of them understand the shopping experience and how consumers want to engage with merchants than the merchants themselves. Consumers by the millions already trust the MCX merchants with their business, loyalty and money today. And when you factor in the MCX merchants already account for something like USD 1 trillion in payments and 90,000 store locations, they also have the scale necessary to spur adoption.

What are the main challenges MCX is currently facing and what strategies are you planning to employ in order to address them?

Dodd Roberts: The most immediate challenge for us is simply bringing our offering to the market. We have tremendous scale and lots of momentum with merchants such as Southwest Airlines, Brinker International and Phillips 66 coming aboard in recent weeks. And, frankly, we don’t see much of a first-mover advantage for the folks that are out there now. We just need to be sure that we come to market in the right way.

When it comes to customer adoption, what are some of the main channels that you are using to raise awareness among consumers (end users) about the benefits of switching to MCX as their main channel for paying? Dodd Roberts: We’re not currently on the market yet, so we really haven’t unveiled our approach. (I’d hate to spoil the surprise!) That said, we believe the biggest appeal to customers will be that they will actually be able to use our wallet at the retailers they shop at most often. And , of course, they’re going encounter MCX on a regular basis in the stores they frequent most often. Our current merchants receive have 400 million customers each week, and receive about 300 million digital impressions each month. That’s a major advantage.

What are the next steps for MCX in the near future? Dodd Roberts: We’re continuing to work toward bringing our solution to market. I know

there are people who would like to hear more from us about where exactly these efforts stand, but I would just caution you not to confuse a lack of announcements with a lack of progress.

About MCX: Merchant Customer Exchange (MCX) was created by a group of the nation's leading merchants with a singular purpose: offering consumers a customer-focused, versatile and seamlessly integrated mobile-commerce platform. Development of the mobile application is underway, with an initial focus on a flexible solution that will offer merchants a customizable platform with the features and functionality needed to best meet consumers' needs. The application will be available through virtually any smartphone. MCX will be announcing additional merchants, as well as more details regarding its product offering and partners, in the weeks and months ahead.

Nils Winkler is Chairman of the board of Yapital. Previously, the renowned expert for developing new business segments and business models was CEO of Hi-media Deutschland AG. There, he was mainly responsible for the distribution of e-payment systems in German-speaking countries, primarily aimed at suppliers of digital goods. Prior to that, as Head of Sales and Chief Business Development Officer at ADTECH AG, he played a major role in the development and internationalization of the company’s ad serving business

(e.g. in the US market).

Yapital is currently being positioned on the European market as the first cashless cross-

channel payment solution that functions online, via mobile, offline and via invoice. Could you please provide our readers with a little more insight into what are the main elements of the Yapital value proposition?

EXCLUSIVE INTERVIEW WITH NILS WINKLER, CHAIRMAN OF THE BOARD, YAPITAL

“Merchants will only accept a real cross-channel payment solution that is easily integrated into payment infrastructures they already have in place.

Yapital aims to provide exactly that.”




Nils Winkler: For merchants, Yapital means quick and easy integration as it adapts into every existing payment infrastructure. Yapital is transparent and competitive: no setup, no monthly fee, no contract duration – all combined with reduced back-end costs. Yapital means guaranteed, real time payments to the merchant’s accounts – no chargebacks. The possibility of paying invoices via QR code speeds up transactions. Furthermore, Yapital converts marketing channels into sales channels, that way increasing revenue potential, too.

For consumers Yapital is free to get and free to use – and using it means being able to pay in a secure, easy and really fast way over all channels: in store, online, mobile, invoice. Yapital guarantees every transaction and offers real-time cost control through documentation of transfers and storage of receipts. Beginning with the registration process, it is simple and intuitive to use. Plus, it enables costumers to send and request money in real-time.

How exactly does Yapital function and how are consumers enabled to carry out payments across these different channels? Nils Winkler: Yapital works with all the usual e-payment-methods: NFC, QR-Code, card, user name and password. The one-time online registration process at www.yapital.com takes just a few minutes. The user opens a personal Yapital account and links one or several devices, i.e. smartphone and tablet, to the account via coupling. As soon as a source of funding has been registered, i.e. bank account or credit card, the user can pay with Yapital across all channels, online, via mobile, offline and via invoice, as well as send and receive money via the Yapital app or Yapital account. Registration and operation are easy and intuitive, transactions are secure and transparent and they are documented in real-time on all devices.

What market need(s) does Yapital address? Nils Winkler: Paying has become quite confusing: consumers are alternately asked to pay cash, take out their credit card and give their signature, fill in some forms online, or visit their bank – either online or at the branch. By now most consumers would appreciate less

complexity. Yapital brings simplicity to payment because people can use it everywhere they go, at the supermarket check-out as easily as when paying their bills at home – or when shopping online on the train during their commute. Yapital directly touches the impulse to buy: the decision to buy and the act of paying come seamlessly together.

Especially in the German-speaking market the breakthrough of mobile payment is yet to come. Like their customers, merchants are waiting for a solution that, besides guaranteeing transactions, and being fast, secure and transparent, makes payment easier instead of more complex. Merchants will only accept a real cross-channel payment solution that is easily integrated into the payment infrastructures they already have in place. And they are on the lookout for a solution that adds significant value to payment processes.

In the context of the growing popularity of e-commerce and mobile commerce, what role do you envisage for merchants in this space? Are merchants better positioned to answer the needs of consumers when it comes to buying online, via mobile and in-store?

Nils Winkler: Using Yapital means easier payment processes for both merchants and their costumers. Especially for multi-channel merchants it is an important benefit to be able to receive payments via the same fast, easy and secure method, whichever channel their costumers choose. Here the development of more and more merchants using multiple sales channels and the merging of payment channels (online/mobile) come together to create a much more convenient payment culture.

What are the main challenges Yapital is currently facing and what strategies are you planning to employ in order to address them? Nils Winkler: Yapital is going to be really easy to use. The creation of simplicity in a short time frame can be technical quite a challenge, but we are sure to satisfy the users’ needs completely. The other challenge is, of course, forging the right partnerships. Thanks to us being part of the Otto group with its deep integration into the online and offline markets, we have been able to make a very good start.




When it comes to customer adoption, what are some of the main channels that you are using to raise awareness among consumers (end users) about the benefits of switching to Yapital as their main channel for paying?

Nils Winkler: To raise awareness among customers about the benefits of switching to Yapital as their main channel for paying we will create visibility for Yapital via all channels: online and offline. This includes of course social media channels, a free hotline, and personal support on IT level and for questions on the presentation as well as visibility at the point of sale together with our partners. Yapital is looking forward to meeting you cross-channel!

What are the next steps for Yapital in the near future? Are you planning for a European launch at some point in the next year? Nils Winkler: From the beginning Yapital has been created as pan-European cross-channel payment solution. We are looking forward to sharing more details in good time.

Nowadays, more and more consumers in developed countries rely on the internet and their mobile phones to make purchases, enjoying the convenience and value-added services associated with e-commerce, mobile commerce and social commerce. The value of mobile payments in Western Europe and the US doesn’t seem to rely in the mobile device as a tool to make payments, but on the additional services associated with payments as such. Surprisingly, in emerging markets where m-payments need to solve problems and ease pain points, such as helping unbanked / under-banked consumers gain financial inclusion and access to basic financial services, the importance of mobile value-

added services is also set to grow in the following years. For example, in India a research report titled ‘Future Thought of Business: MVAS’ and issued by Wipro Technologies and the Internet and Mobile Association of India (IAMAI) has revealed that the mobile value added services (MVAS) market will reach USD 9.5 billion in 2015, from USD 4.9 billion in 2012.

Compared with consumers’ current reliance on smartphones or the internet to make purchases, in the 90’s for example, buyers had to go to the store, pick up the products they wanted to buy and stay in line at the cash register in order to pay for those products. Although mobile loyalty is desired to be one of the top value-added services provided by merchants/ retailers to engage consumers in developed markets, cards still rule the payments ecosystem. One cannot overlook the fact that traditional loyalty programs and promotions are limited to special offers which are clearly available to everyone. The possibility of personalizing those offers for each consumer is close to none. The plastic cards give the customer a discount at the actual moment of purchase. The customer has to show the card and an id-card to get the actual discount. This system has been working for a long time and it has been effective in a way, but as we move in time naturally it will become outdated and mobile devices have developed a series of new functionalities over the years that would change the payments landscape and contribute to their widespread adoption. Smartphone sales showed strong growth worldwide in 2012. According to IDC (February 2012), total shipments in 2011 were 491.4 million units up 61.3 percent from 2010.

About Yapital Financial AG

Yapital is the first European, cashless cross-channel payment solution across all channels: stationary, mobile and online as well as via invoice. It is sim-ple, quick and secure to use: after online registration, the Yapital user can immediately make payments across all channels and also send and receive money.

Yapital is a guaranteed payment method - this provides its business customers with pro-cess security and reduces their administrative costs. In addition, Yapital seamlessly covers all trade and service channels, allowing marketing channels to be turned into sales chan-nels. Business customers can therefore not only reduce their costs with Yapital, but can open up sales potential at the same time. Yapital was founded in 2011 as a wholly-owned subsidiary of the Otto-Group. Yapital Financial AG is licensed as an electronic money insti-tution in Luxembourg.

MOBILE-ENABLED LOYALTY SOLUTIONS CHANGE THE PAYMENTS ECOSYSTEM, PROVIDING VALUE FOR BOTH MERCHANTS AND CONSUMERS




Furthermore, Gartner predicts that 821 million smartphones and tablets are expected to be purchased worldwide in 2012 and pass the billion mark in 2013. Smart devices are expected to account for 70 percent of total devices sold in 2012 and their number is estimated to grow throughout 2013. With smartphone devices being ever more sophisticated, companies developed services that transform the mobile telephone into a POS, facilitating the transition between the offline POS and the mobile POS for retailers and at the same time helping them to create targeted marketing campaigns based on a consumer profile and his/her consumption affinity.

Mobile loyalty – a means to create personalized offers and incentivize customers Merchants now have the ability to segment and qualify their customer database and develop promotions to target specific groups and individuals. The whole idea of today is to be able to follow the customer within the store premises. As opposed to years ago when consumers barely had the chance to talk to the sales agent usually during checkout, now the shopping experience has become more personalized. Today, merchants can determine the what, where and how of their customers’ behaviour. Smartphones are fitted with sophisticated sensors such as GPS, gyroscopes and accelometers which measure everything from location, to movement, speed and angles. This information can be used to figure out the context their consumers are in, at that precise moment and send them push messages with offers or discounts. This is how a consumers who doesn’t have the slightest intention of entering a particular store, ends up in that store after receiving a message that a 20 percent off discount will be available for the next hour. In other words, retailers can deliver uniquely tailored discount offers based on the consumers’ proximity to their

location and their knowledge of their interests and needs. Finally, by integrating social media data with merchants’ mobile analytics, they can create an even stronger emotional loyalty with their customers. They can send offers that help them support a cause or charity they’re interested in, or provide articles or videos that relate to their hobbies or pastimes.

It is also important to understand that, as the online channel has been used by consumers to make purchases for several years, the possibility to have the mobile phone as a point of interaction and as a way to incentivize consumers through mobile loyalty programs, mobile payments create an opportunity for merchants to engage their customers that they might have otherwise lost to online shopping. So as a general trend the shopping experience seems to be moving from the online environment where consumers stayed at home and ordered products online, to the in-store environment and this is possible thanks to the innovative functionalities of mobile devices which have become man’s best friends and the companies providing the value-added services associated to payments.

Some examples of companies providing mobile-enabled loyalty solutions

In November 2012, US international coffee company Starbucks started to accept mobile payments start-up Square’s mobile payment application dubbed Square Wallet in participating company-operated locations across the US. With Square Wallet, consumers can pay at Starbucks as well as browse menu information, store hours and transaction history on their mobile phones. Customers need to download the Square Wallet mobile application on their iOS or Android devices to set up an account. Square Wallet is linked to their debit or credit card. Customers tap “pay here”, scan their QR code and their digital receipt appears instantly. Users can manage their Starbucks card account, track rewards, reload their balance via credit card, and locate stores.

LevelUp provides an iPhone and Android QR code mobile payments application for consumers and a terminal system for merchants to process payments. Users “unlock” loyalty credit when they use the LevelUp app to spend a certain amount of money at a business.

In July 2012, US software-based financial services provider Wipit entered an agreement with Punchcard, a shopping application that allows customers to earn personalized rewards where they shop.

Under the agreement, Wipit was set to allow mobile consumers to pay for purchases in mobile applications or online using cash and Punchcard makes it possible for these




consumers to get rewarded for their loyalty. In order to get rewarded, consumers who shop at local retail businesses where Punchcard is used need to take a photo of their receipt with the Punchcard application to verify their purchase and earn “punches” on a punch card for that business. By accumulating the punches, consumers earn free rewards or cash back for being loyal customers of that business.

In June 2012, Apple rolled out Passbook, a new application built into its iOS6 mobile operating system. Passbook is intended to store and organize a user’s ‘passes’, which may include boarding passes, store cards, gift cards & coupons and well as movie tickets.

The main objective of Passbook seems to be to encourage consumers to digitize these passes and replace the physical, plastic versions with digital counterparts. In addition to helping users organize their cards, boarding passes and movie tickets, the app is set to use the iPhone’s geolocation functionality in order select and bring up various passes based on the user’s location in real time.

Apple demonstrated two scenarios: in one of them, a customer enters a Starbucks coffee shop and the user’s loyalty card is automatically brought up and updated with the payment balance by the Passbook app; in the other, the application is launched when a user enters an airport, functioning as both electronic boarding pass and as a source of information for flight details such as gate number, etc.

Conclusion

These are only few of the companies that have integrated mobile loyalty into their payments offering. The benefits for both consumers and merchants are clear but the question is: will consumers abandon their traditional loyalty tools in favour of mobile-

enabled ones? As mobile loyalty turns into a valuable proposition for both merchants and consumers alike, the chances that traditional loyalty tools will gradually be replaced with mobile are pretty high. And why not? Consumers carry around mobile phones all the time, they love using and discover new functionalities, they have the possibility to use them as wallets. On the other hand retailers have already begun replacing traditional POS devices

with tablets in order to engage customers in-store and gain their loyalty. It all sounds like a recipe for success with the condition that retailers continue offering customers a choice. Some may want to pay using their mobile phones, some may choose to have a traditional checkout experience while others may want to use different services. Retailers need to keep in mind that online-offline convergence for payment is a unique opportunity for them to create a closer relationship with their customers as well as differentiate themselves through the experience and service level that they offer. That is why retailers need to process payments on all three channels (online, offline and mobile) in order to be successful.

What key take-aways should consumers / readers consider as a result of the recently released 2013 Mobile Consumer Insights survey published by Jumio?

Marc Barach: At the highest level, this is a very optimistic report, given the fact that all systems and technologies worldwide take a long time to become, for lack of a better word, perfect in terms of functionality, with everything being streamlined and working as well as possible. This level of streamlining does not usually happen in day one or year one or even in the first decade for new technologies and new processes. One of the most optimistic

EXCLUSIVE INTERVIEW WITH MARC BARACH, CHIEF MARKETING OFFICER, JUMIO

“Consumers love making purchases via their mobile devices, but there is a big opportunity to improve how this is done today – especially the check-

out and payment processes.”

Marc leads Jumio’s worldwide marketing efforts and brings over 20 years of marketing innovation and operational experience in emerging technol-ogies and the financial sector to Jumio. Previously, he served as CEO of mobile applications company Emotive, CMO of enterprise search SaaS pioneer Marin Software and CMO of Ingenio, where he sparked creation of pay-per-call technology; a multi-billion dollar adtech product which lead to Ingenio’s acquisition by AT&T in 2007. A frequent speaker at pres-

tigious conferences worldwide, Marc has been widely quoted in national and business press.




finds of our survey is the fact that we as consumers love our mobile devices and we love the things that they enable us to do more conveniently. The data from our survey reflects the fact that consumers are actively using their mobile devices for increasingly higher-level functions. The lower-level functions we can access on a mobile device would be texting or checking out email, for example. A little higher up from that would be making a purchase and acquiring a service or product and even higher would be applying for loans, checking bank statements, making deposits in a bank account – basically, all the things that we would do in our home office from our desktop or laptop computers. What we’re seeing is more consumers engaging in such higher-level activities – and more significantly, over 60% of respondents indicated that they, in fact, plan to do even more such activities with their mobile devices in the near future. On the whole, the appetite for using mobile devices, smartphones in particular, is huge. But of course, it’s not yet all quite perfect.

Among other things, at Jumio we’ve focused our attention on the process of shopping via a mobile device, and even more specifically on the checkout process where our goal is to help our clients increase the number of completed sales. It’s here that we see quite a bit of room for improvement – and this is what the data from the Harris Interactive survey points out. According to the research, 41% of consumers have failed at least once to make a purchase via their mobile device (tablet or smartphone) because they find the process of entering their credit card data online too onerous.

We have to keep in mind the fact that the quality of the credit card number entry process is determined by what the consumer is doing and where he / she is at the time – whether they are, say, on a bus that’s moving around or in their office, with perfect internet connectivity. The fact remains that as far as mobile devices are concerned, they allow consumers to make purchases on the go, which means that they have to offer a great experience in a wide variety of environments. As such, the design of the user interface has to be built for attention-deficit situations, where the consumer’s attention is split between more then one activity while on their mobile device. This greatly differs from the user experience associated with a desktop computer to select items you wish to buy and then attempt to check out. Another issue that affects the consumer shopping experience via the mobile device is the small form factor; we’ve all made “fat finger” entry errors and this occurs on tablets with virtual screens as well.

For the most part, what most app providers have done has been to design and enable a beautiful browsing experience via mobile apps that differs considerably from the user shopping experience via a desktop or laptop computer. However, when it comes to the checkout pages, they generally look just like they did back in the late 1990s – and this is where the process breaks down.

Will mobile wallets eventually replace physical wallets in consumers’ pockets? Marc Barach: When people talk about mobile wallets these days, what they actually talk about are mobile payment mechanisms. But a wallet is actually so much more than just a payment tool or mechanism – it includes all sorts of important credentials such as IDs, loyalty cards, payment cards and more.

The move towards digital wallets essentially has to combine payment capabilities with everything else that’s in consumers’ wallets today. Let’s define in broader terms what a digital wallet means – because today, it mostly mean paying with your mobile phone via an app and a true wallet offers so much more.

So the question becomes, are we really going to see consumers move to having a truly digital version of their physical wallets, that includes a digital equivalent to everything that is currently found in their physical wallets. I am hesitant to put a timeline on this transition from physical to virtual but. I do think it’s inevitable, but I also think we can expect it to take quite a while to gain wide adoption. That’s due in part to the reason for that the present focus of the industry is primarily on the payment part – however, for the digitization of the wallet to become a reality, this focus has to broaden to encompass the wider functionalities that these wallets must deliver, including ways to identify yourself and present other credentials at the point of transaction; whether physical or digital.

We also have to keep in mind that, in order to get to the point where consumers will start using digital versions of their wallets – payment and ID credentials included – we have to make it more convenient than using cash. Cash usage, especially for small purchases, remains very popular and actually rising about 10% per year in developed nations. Our view is that once a person is authenticated and you know for certain that the person is who they say they are, then access to their stored credentials – whether it’s their credit




card, driver license or loyalty cards – becomes relatively straightforward. This is a different way – an integrated way – of looking at what it actually means to have a truly digital wallet stored on your mobile device.

Does consumer demand shape how players in the mobile ecosystem design their mobile shopping & payment offerings?

Marc Barach: As consumers, most of us focus on identifying problems but less so on developing solutions. One thing that became survey brought to light are the areas where there is process friction. The survey shows very clearly that consumers have difficulties in the area of completing transactions on the checkout page – problems specific to the payment aspects, and even more specifically to the credit card data entry aspect. On average it takes a consumer nearly 60 seconds to correctly input their credit card number so it’s no wonder purchases are abandoned due to this. The metrics tell the story of consumer displeasure – rather than coming out and saying directly “I would like to have a better, more streamlined checkout experience”.

However, when it comes to overall consumer satisfaction with mobile, we have seen time and again that it is very high. We love making purchases and conducting other transactions on our mobile devices, but there is a big opportunity to improve how it is done today – especially in the checkout and payment process. And this is what technology providers and merchants have to work on – a better, more fine-tuned process that will address the very high rate of shopping cart abandonment and offer a more streamlined buying experience. Jumio’s approach is to harness device cameras to enable apps and websites with credit card and ID scanning and validation. It’s fast, accurate and actually fun for consumers to use. We know we’re on to something given the improved conversion metrics our clients experience and the high satisfaction rates their buying customers express.

Gone are the days when customers would keep their money safely stored in the same bank throughout their lives, too busy or too ignorant of their wider banking options to bother moving it elsewhere. With innovative banking start-ups popping up on the scene, offering customers attractive technologies that ease the banking process, customers are starting to be lured in by the appeal of alternative finance options. What’s more, with drastic account switching legislation just around the corner, it will soon be easier to ditch technology-shy banks than ever before.

Customers have become increasingly disillusioned with banks since the height of the financial crisis in 2008, and many banks are consequently relying on little more to keep their customers than the 31 day headache involved with account switching. But when new legislation comes into play in September this year, customers will soon be able to switch accounts hassle-free in just seven days. With the government even toying with the idea of letting customers take their account numbers with them in the future, banks will soon have to keep up with the innovative banking products offered by their smaller counterparts if they are to hold on to their customers.

Jumio offers next generation online and mobile credit card payments vali-dation and ID verification products for e-tailers, financial institutions,

online marketplaces and governmental agencies. Designed to increase revenue, reduce fraud, and streamline customer experiences, Jumio utilizes patent-pending computer vi-sion technology to validate and facilitate transactions while providing unprecedented levels of consumer convenience and data security.

EXPERT OPINION

BERNHARD LACHENMEIER, HEAD OF PRODUCTS & MARKETING, SIX PAYMENT SERVICES

“The time is ripe for traditional banks to develop innovative mobile

banking solutions to satisfy the needs of their tech-savvy customers.”

Bernhard is head of products & marketing at SIX Payment Services with over ten years of experience in the cards and payment systems area. Pres-ently, Bernhard is responsible for SIX Payments Services’ global product strategy and overall marketing initiatives. Its focus lies in the area of Euro-pean multi-brand acquiring, including the challenges of enabling services at the point-of-acceptance, as well as transaction processing for issuing

banks. Bernhard previously spent over a decade in various international companies, in Switzerland and overseas, and held leadership positions in product management, key account management and marketing.




Many banks are put off by the red tape often involved with taking on new technologies, but in a time when falling interchange fees and increased competition are impacting on banks’ profits, there is little room for further loss through a declining customer base. It’s clearly a worthwhile investment: digital tools, such as mobile banking, mobile payments, and mobile-enhanced banking sites were rated in a Bain & Company survey as the services which are most likely to make customers happy and encourage them to recommend a friend.

Today one in seven people across the globe rely on smartphones. Consequently, people increasingly expect to be able to do everything on the go and taking care of their finances is no exception. Some UK banks are already taking full advantage of this digital age, such as Barclays with its Pingit mobile payments application, which allows customers to send money using just a mobile number. Yet the UK is falling behind with just 26% of UK banks embracing the opportunity to connect with customers on this ever-growing platform.

But all hope is not lost for traditional banks. Recent research from PwC shows that despite the large number of innovative finance companies entering the market, 61% of customers still trust traditional banking institutions over these newcomers. So the time is ripe for traditional banks to develop innovative mobile banking solutions to satisfy the needs of their tech savvy customers, before the use of fresh-faced alternative companies moves into the mainstream.

In the next editions of the Mobile Paypers, we will focus on delivering in-depth overviews of services providers, business and revenue models in specific areas of the mobile financial services market, such as mobile banking and the mobile wallet ecosystem.

Other areas of interest to be explored in the coming issues of this newsletter are the rise of the “omni-channel” business model, the challenge of converting mobile bankers into mobile payers, along with providing in-depth overviews of specific m-payments markets such as Germany, Brazil and the Netherlands. As The Paypers was present at the Mobile World Congress in Barcelona in February 2013, we will dedicate an issue of our mobile newsletter to this very important event.

If you would like to contribute with an expert opinion on any of the topics above, do not hesitate to contact us at [email protected].

About: Mobile Paypers is a bi-weekly update on developments in mobile payments by The Paypers,

the portal for payment professionals.

Editors: Adriana Screpnic, Monica Gaza, Sabina Dobrean and Mélisande Mual .

Website: For more information, please visit our websites: www.thepaypers.com

Contact: For more information, you can contact us at: [email protected]

Subscription info: Mobile Paypers is a product of The Paypers and is published 24 times per year.

Year subscription price: €495

Copyright: 2013 © The Paypers. All rights reserved. Reproduction or redistribution in any form

without explicit prior written permission of The Paypers is prohibited.

Disclaimer: The Paypers sees to the utmost reliability of all its news products. Nevertheless we do

not accept any responsibility for any possible inaccuracies.

YOUR OPINION IS IMPORTANT TO US

About SIX Payment Services

SIX Payment Services provides financial institutions and merchants with secure and inno-vative solutions, thereby setting industry standards in terms of flexibility and customer focus.

The company supports financial institutions with highly secure solutions for the pro-cessing of card transactions and interbank payments (in Swiss francs and euro), as well as for cash withdrawals at the ATM. As one of the largest acquirers and transaction proces-sors in Europe, SIX Payment Services ensures the acceptance of all common credit and debit cards at the merchant locations, provides modern payment terminals, e-commerce solutions, everything for card payments at the POS and over the internet, mobile top-up and electronic billing.

update on developments in mobile payments vol. 4 issue 7 ...€¦ · mobile payments are hot –...

Documents