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Comment: M-payments haven't yet met consumers' needs

Mobile phones were once used simply as a means of communication but in recent years as phones have become smarter and function-rich they have become social tools that rule our lives.

Now, in this increasingly technological age, the possibility of using mobiles to make payments has become very appealing for the consumer but, to date, no-one has really managed to tap into this enormous business opportunity.

In the UK we have seen a bewildering array of potential solutions developed to make payments around a supply side model from banks, mobile network operators, hardware suppliers and start-up companies. Technical solutions based on NFC, QR codes and barcodes are on the increase, yet none have managed to deliver the scale required to achieve mass adoption by consumers or retailers. 

Most blame the lack of technical standardisation, or a failure to deliver an acceptance infrastructure that will allow all of these solutions to be accepted at the point of interaction. But it is more fundamental than that; in truth, solutions are held back by a systemic failure of parties wanting to collaborate to address the technical and operational barriers that persist, coupled with an even greater failure to develop commercial products that meet the real needs of merchants and consumers.

As Steve Jobs said in 1997, before the age of the smartphone, "you've got to start with the customer experience and work backwards towards the technology – not the other way round". 

A common feature of the m-payments landscape in the UK has been the misguided assumption that suppliers can push the technology on to the consumer and that retailers will invest in the underlying technology that supports it. It could be argued that this is a primary reason in explaining why m-payment solutions have not gained the kind of critical mass or traction that has long been predicted.  

The simple truth is that the needs and wants of consumers have not been met, and this in turn has forced retailers to make a speculative punt on which technological interface is most likely to succeed. Little wonder then there is an underlying reticence amongst retailers to engage in such a strategy!

There are parallels here with the slower than expected adoption of contactless cards in the UK. What looked like a compelling customer proposition failed to gain scale until key retailers, and in particular Transport for London, were convinced of its value and consumers found a reason to tap their card instead of reaching for the cash in their pockets.

The idea that offering m-payments alone will create a compelling consumer proposition has also proven to be misguided. It has become clear that m-payments must be offered as one part of a 'suite' of value-added services in a wider digital engagement with consumers. This means that payment service providers need to work collaboratively with other providers to build an environment where technical solutions can support multiple functions.

Such collaboration has been difficult to achieve with service providers working in their individual silos without much thought being given to making systems work together. It is clear that without collaboration or partnerships between key-players, the task of building the ecosystem in which mobile services can flourish will be impossible unless solutions are fulfilling a specific and limited demand.

If we want an example look no further than the successful m-payment app from Starbucks which combines loyalty with payment in an app that is both sympathetic to the needs of the consumer and the existing point of sale technology.

With over ten million users and 11% of sales coming through the app, Starbucks has proven that a simple approach that looks beyond the transaction and into the wider customer experience can produce the results we are all looking to achieve.

Other enlightened retailers are rapidly following suit; Amazon and big hitters in the UK market like Tesco and Argos are building their multichannel digital engagement programmes to include payment as part of a broader and more dynamic interaction with their customer base. Amazon and Tesco are even going as far as providing the consumer with the proprietary hardware (e.g. Tesco’s Hudl tablet) through which to build the engagement. 

Common to all is a deep and underlying understanding of the customer and their shopping behaviours, as well as a focus on simplicity. It is a model that the traditional payment providers should take heed of and it serves as a wake-up call to those who continue to dabble in pilots and proof-of-concepts.

The retail payments environment is changing. To remain relevant in the mobile and digital payments age, traditional players must collaborate to provide the products and services which form part of a broader world of digital engagement that offers-up a seamless array of interactions with the customer's chosen brand.

Payment alone – in and of itself – does not provide a compelling reason for adoption, but alongside other value-added services it might well yet transform the point of sale.

David Baker is head of the payment innovations unit for The UK Cards Association. He will be writing a regular column for Essential Retail on the evolving payments landscape and its impact on the retail industry.

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The UK Cards Association