Expert Roundup: How Are Mobile Payments Transforming? Part I
What a transaction looks like is rapidly evolving these days, and that’s true not just of the technologies that power the point of sale but also of the way brands and retailers are leveraging the point of sale to increase revenue, collect data, and differentiate themselves from the competition.
The Covid era has accelerated the trend as mobile payments piggybacked on broader inflections in e-commerce. Mobile wallets, BOPIS, and curbside pickup were all well suited to thrive amid Covid. Other technologies such as flexible payments and cashierless stores also benefited from the heightened consumer desire for convenience.
To define the current state and future trajectory of mobile payments, we’ve rounded up top industry voices and thought leaders. This is part of Street Fight’s new monthly ritual in which we tap our community to provide insights on each month’s editorial theme.
Starting here in Part I, below are the insights we were able to gather from the community.
Jordan Fisher, Co-founder and CEO, Standard, on the virtues of a “Customer-Present” payment model
We’re entering the age of autonomous checkout, otherwise known as cashierless checkout. This involves computer-vision systems that let people walk in the store, take what they need, and walk out. Because payments are a key aspect of the customer experience, we see the potential for computer vision to create a sea change in retail payments.
For decades, retailers accepted payments within a binary world of ‘card present’ versus ‘card not present’ transactions. Payment processing fees are higher for card-not-present transactions, ostensibly to offset the much higher levels of fraud seen for those transactions.
While innovations such as EMV (chip cards) and NFC (contactless cards) have helped reduce card fraud, payment processing remains one of the Top three expenses for retailers. In the U.S., such fees are up to 7x higher than they are in Europe. At a time when physical store expenses are rising and margins are compressing from COVID, we believe solutions that can reduce costs are more important than ever.
As the retail industry adopts computer vision, we believe the card-present model can be replaced with a ‘customer present’ payment scheme.
Because computer vision can confirm that the customer is present at the time of a transaction (without facial recognition), it is highly unlikely that a fraudster could fool an AI-based camera system into believing that they are some other specific person. Thus, a customer-present payment approach could reduce in-store payment fraud dramatically.
This technology offers a once-in-a-generation opportunity to fundamentally change the economics of the payment industry. It’s a really exciting moment for retail.
Jeff Lentz, Founder and CEO, Elevated Franchise Marketing, on payments as a valuable CRM input
During the pandemic, it has become important for brands to market smarter, not harder. There’s the old marketing adage that it costs 5x more to acquire a new customer than it does to keep an existing one. While that may no longer be quite as true, as sales and marketing strategies have shifted over the last several years, Customer Relationship Management (CRM) marketing has become more important than ever in fighting off increased competition and helping struggling brands market more effectively on tighter budgets.
For some of the larger automotive service brands I’ve worked with, existing customers make up about 65-70% of their revenue. While spending dollars to acquire customers didn’t fall by the wayside, a strategic shift led to placing greater importance and budget on increasing customer retention rates and driving repeat/return visits. For other brands, similar to those I’ve worked with in the financial services space, increasing customer retention by 5% increased profits by 25% to 95%, according to research done by Frederick Reichheld of Bain & Company. At the heart of their CRM marketing efforts, brands and retailers are leveraging the point of sale itself to increase revenue, collect data, and create a better overall customer experience.
Effective CRM marketing is only successful if you’re able to capture the right data accurately during the online or offline transaction process and in a unified way. Data pours in from more sources and comes in different forms than ever before. Salesforce predicts that marketers will leverage a median of 12 data sources in 2021 and found that the average number of data management tools used in 2020 (six) has doubled since 2018. In addition, nearly 80% of marketers say they use data-driven customer engagement, according to Salesforce. Analytics is key in making the most of this data. A Gartner survey found that 85% of marketing executives said “significantly more” marketing decisions will be analytics-based by 2022. Given the many streams feeding into CRM efforts, managing and using data will be critical and require solutions with features robust enough to support those needs.
Customer and transactional data captured at the POS is the ultimate fuel that drives a brand’s CRM marketing program success and delivers revenue back to their local stores. You’d be surprised at how even the simplest customer and transaction data can help move the needle for your business. Something as routine as capturing a valid email address from a customer during the payment process at the POS system while they’re in your store or online can have profound effects on increasing revenue. This may be easier said than done with customers hesitant to share too much info. But offering them an immediate discount, or the convenience of an emailed receipt, in return for an email address has proven effective. This was especially effective for large automotive service franchise brands I’ve worked with whose multi-channel CRM program was built around automated triggered service reminders via email and direct mail. It’s been proven that households with a valid email address spend more.
How much more? As an example, a single store with a 13% valid email collection rate could expect approximately a $100,000 lift in annual incremental revenue by increasing their valid email capture rate to 50%. A tall task? Maybe. But, worth the effort? Heck yes.
Janelle Estes, Chief Insights Officer, UserTesting, on the interplay of fintech and traditional banking
Despite the growing popularity and impressive technological advancements driven by fintech, consumers are using both traditional payment and banking methods in addition to new fintech platforms. This happens for one simple reason: The customer experience is still paramount, and neither method meets all consumer needs. In a recent study of consumers in the US and UK on their experiences with traditional banks and fintechs, we found that nearly every person was currently doing business with both, citing benefits and drawbacks with each and workarounds often fulfilled by the other.
Technological innovations and fintechs have made mobile wallets, instant transfers, budgeting, trading, and centralized bill-pay arrangements much easier. With fast and easy payment processes, consumers expect similar experiences from every financial institution they do business with. And with the ease of opening a new account or switching fintech providers, consumers often have shallow relationships with these providers over traditional financial institutions. For this reason, loyalty and trust tend to be higher with traditional institutions over fintech companies.
Mark Ellis, CEO, Liftoff, on the rise of finance apps
The pandemic drove a year of intense change and subsequent innovation across the digital and mobile landscapes. Amid economic uncertainty, consumers around the world turned to mobile devices to help make sense of their financial standing. As a result, finance apps saw record installs and engagement.
Our 2021 Mobile Finance Apps Report, released in partnership with App Annie, shows that payments and finance were at the forefront of our minds. In 2020 alone, finance apps were downloaded 4.6 billion times (up 15% year-over-year) across investing, banking, cash transfers, and government aid verticals. Notably, users took to fintech apps with gusto, with the category outperforming even the best banking apps by a factor of up to 10.8x by monthly session per user. Investment and trading apps like Robinhood were among the top downloaded finance apps worldwide as many consumers explored day trading in the COVID era: in the U.S. alone, mobile users spent 135% more time in the top five investment and trading apps in 2020 compared to 2019.
With many exploring new financial interests, leveraging this data has helped mobile marketers start to consider tactics to offer resources to new users, encouraging retention and increasing confidence in in-app actions.
Stay tuned for Part II of this series next week.