When asked which of the logos for contactless payments people recognised, an overwhelming 71% could not identify any of them. As with any technology education is key but despite ongoing investment in technologies, infrastructure and even branded television adverts, the consumer awareness gap has yet to be bridged. The following notes have been taken from a program run by Informa entitled, Mobile Financial Services & NFC.
Da-Inge Flatraaker (DNB Bank) observed that in 1987, 97% of Norway’s banking was paper based, yet by 2007, 97% of Norway’s banking became digital. This flip, as Gerhard Romen (Nokia) observed, marks a distinction between revolution and evolution. With more than 5 billion mobile phone users, only half of them currently bank – in one form or another – today. Thus mobile financial services, along with proprietary solutions such as NFC are fast becoming a feature of our landscape.
It is projected that by 2016, 85% of Point Of Sale devices will be capable of NFC. But what is NFC? Peter Van Leeuwen (KPN) pointed out that even those in industry struggle to understand the acronym, as many view it as a product when it is in fact a technology. Near Field Communications is a standard that allows objects to communicate, either when they touch or are in close proximity to one another.
As a technology NFC relies heavily on consumer behaviour. James Davlouros (Mastercard) observed that the current common methodology is defined as ‘taps,’ stressing the importance of ensuring common behaviour across multiple geographies. James provided the case study of Turkey which, once again, has become a leader, a testing ground for innovation prior to roll-out elsewhere in Europe. There, the mobile phone network operator Turkcell and Garanti, one of their leading banks, have rolled out the most advanced NFC offering yet.
The digital wallet
For the convenience of definition and service management, NFC capabilities are often bundled into a ‘digital wallet’ description. Meaning, just as I refer to my own wallet as having 2 bank cards, a train ticket, a drivers license, etc. NFC enables a digital wallet holding all of these ‘services.’ Thus the Turks now have a multi-card, multi-issuer digital wallet which gained more than 210,000 users in 6 months – a dramatic uptake – where the average payment is 25 Euros. All the while here in England, just 30 minutes from London, my local train station doesn’t even support the Oystercard ticketing service!
It is believed this process of digitization will extend to include more secure items such as national ID cards, a voter election service, even potentially medical records. After all, Ruairidh Roberts (Google) observed that the Chairman of Google, Eric Schmidt is of the firm belief that when a person falls ill in the future, they will turn first to their mobile phone, not to their General Practioner; which, as troubling as it may sound, may not be too far a stretch of the imagination, particularly given that there are already more than 200+ million health applications available for mobile phones.
But as research shows, yet again, awareness of the core technologies is poor.
During the conference roundtable session, participants asked, ‘If a digital wallet is lost, who does the customer call? Their mobile phone operator, as it is their phone? Their bank, as it includes their credit/debit cards? The local government, as it includes their ID, and drivers license?” These are very real concerns, for which there was no clear answer but it raises another issue. Who do we trust with our information?
Craig Oldroyd (O2) observed that the network operator O2 has applied for an e-money license. They already offer a variety of services, including a very good coupon redemption offering named ‘Priority Moments.’ And like other suppliers they believe NFC will create new opportunities for which they are positioning themselves. As yet they have no plans to merge their coupon redemption program with their NFC payment program, however while both can work in isolation, they can also work together. A similar message was also offered by Karen Walsh (Everything Everywhere) who showed her network operator’s commitment to what she defined as ‘the next big thing’ by describing her team which last year comprised of just 2 people, and today, she has 30.
While there is an 800% year on year increase in couponing, financial services fit into a very different category. David Sayer (KPMG) described the loyal-customer paradigm. Here, the consumer shops around for the cheapest price-point e.g. 0% interest for 18 months, and as soon as that offer expires, they move to the next. And where students once graduated with little debt, started working then sought a mortgage, thus allowing a bank to cross sell a variety of financial products over a period of time, students today are graduating with debts larger than deposits required to buy a house. Things are changing.
Insight understanding product segmentation
From my own perspective I believe banks need to re-look at how they price some of their services. Typically today, a high earner will receive additional services e.g. a dedicated number to call, separate seating areas in a bank, free tea and coffee while waiting in a premier lounge. But this model has been proven wrong in other industries. The consumer who buys an Apple product isn’t necessarily wealthy; and at the other extreme (some of) the unemployed spend their disposable income on expensive shoes, or the latest phones. While mobile in of itself will bring down costs, the next generation of bank will understand that some customers will pay to have extra services, even if it is just a gold card to show off to friends. Segmentation should not be on income alone, rather on income and desire.
Transactions and growth
Irrespective, as Shailendra Pandey (Informa) observed, the fastest growing segment in the market today is mobile money transfer, where the average is at $200. The smart opportunity? Many suppliers charge 10%, but other payment service providers, such as Google, charge less than 3%. As mobile financial services expand, as the cost of a mobile service infrastructure is cheaper than one reliant on physical office space, as regulation changes to allow more players on the pitch, there exists an opportunity for any service provide which has garnished the consumer’s trust, to position themselves between the 10% and 3%.
As Arun Dehiri (Red Dawn Consulting) observed, significant focus today is on ownership. Who owns the customer? Who owns the virtual shop front? Who owns the wallet? His answer? Ownership is of the platform, not of the customer; a sentiment echoed by Greg Marshall (Western Union).
Despite success in many countries, mobile financial services and NFC solutions are in their infancy. Many service providers appear to be distracted by the customer ownership conundrum, all the while, as with all internet empowered digital solutions, it is ultimately the consumer’s choice, and their individualism which ensures that they alone own themselves. Thus, success will not be based on which brands I as an individual am aligned to specifically, for as a consumer I am generally indifferent. What will however secure my loyalty is an offering which delivers a set of services that I can personalise, while delivering a conductive user interface to ensure that whether I am banking, shopping and/or making payments, the experience is flawless.
As the chart shows, it is less about being a leader or offering the best service, and more about trust, building relationships, word of mouth and reputation.
For the time being, begin by asking yourself how many of the logos in the first chart you recognised? In the UK at least, continued education and awareness in products and services should be viewed as a priority. For not only is the desire to deliver better financial services and mobile wallets empowered with NFC present, but the roll-out has already begun.