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Where Apple leads . . . value in mobile payments

Speed. Simplicity. Security. Satisfaction. The words that every marketing department will push repeatedly to promote their mobile payment solution. But when there’s so many similar possibilities what separates the market leaders from the also-rans?

All of the above equal value, and that is the key proposition. The library of value-added-services offered by any potential solution is the difference. Value has to benefit a series of stakeholders.

Value in mobile payments

Mobile payments was given a shot in the arm when Apple Pay was announced in October 2014. The new Apple Watch will allow consumers to pay at the POS with their watch.

Consumers need to benefit from ease of payment – enjoying gift vouchers, direct currency conversion (DCC), etc. during the payment process – while merchants must benefit from improved customer loyalty and brand enhancement.

Issuers and acquirers – with margins continually squeezed – are increasingly relying on value-added-services to maximise transaction revenues. Services such as DCC and loyalty schemes can add significant revenue streams and provide a competitive edge in acquiring new customers. This is the theory, of course, but the reality in an overflowing market is that to create separation there needs to be a lot of work done on value-added-services.

Even the most entrenched players in the payments market understand the need for an improved value offering. Take PayPal.

PayPal’s need for in-store loyalty

PayPal’s recent purchase of Paydiant – at a reported $280 million – was rooted in offering loyalty in-store. Take a look at the company’s own reveal of the deal:

“With the addition of Paydiant, PayPal becomes an even stronger business partner for merchants. Using Paydiant’s platform, our merchant partners can now create their own branded wallets to accelerate mobile-in-store payments and drive consumer engagement through mobile payments, loyalty, offers and the prioritization of preferred payment types, such as store branded credit cards and gift cards.”

PayPal has a problem in bricks-and-mortar commerce, it’s just not used in-store. The Paydiant deal offers PayPal a direct route to this market. This deal follows PayPal’s $800 million purchase of the online payments provider Braintree in September 2013.

As a result of the Braintree acquisition PayPal unveiled One Touch PayPal in August 2014. This feature allows shoppers who have downloaded the PayPal app to pay with one touch in the apps of participating merchants. The merchants, of course, will need to integrate with this feature but PayPal is evolving. Its Braintree deal was about getting traction in the online payments space, whereas the Paydiant deal is about mobile-in-store payments. And it’s all about competing with mobile wallets, or, more specifically, Apple Pay.

Value in mobile payments still in its infancy

The mobile payments market was given a shot in the arm when Apple unveiled Apple Pay back in October 2014. Where Apple leads . . .

On March 9 the functionality of Apple Watch was officially revealed – kicking off the year of the Apple Watch.

Here’s how Apple promoted using Apple Pay via their new watch on their own website:

“Every time you hand over your plastic credit or debit card to pay, your card number and identity are visible. That’s not the case with Apple Pay. Instead of using your actual credit and debit card numbers, when you add your card to Apple Watch a unique Device Account Number is assigned, encrypted, and securely stored in the Secure Element, a dedicated chip in Apple Watch. These numbers are never stored on Apple servers. And when you make a purchase, the Device Account Number, along with a transaction-specific dynamic security code, is used to process your payment. So your actual credit or debit card numbers are never shared by Apple with merchants or transmitted with payment.”

And just what is Apple Watch, essentially? Another layer of value for consumers in the Apple ecosystem. Let’s be honest,  Apple have redefined commerce before and the attractive odds are that Apple Watch/Pay will do likewise. How did the ‘app culture’ go stratospheric? Well, it did so when the iPhone was released in 2008. When did mobile payments become a reality? When the first app was released on Apple’s App Store.

And what a success the App Store has been: for Apple, and for app developers. Since July 10, 2008, App Store developers have earned $25 billion combined from the App Store sale of apps and games. In 2014 alone, developers earned $10 billion while the first week of 2015 was their busiest week ever with $500 million spent.

There’s has been no let-up. We are addicted to mobile payments.

Speed. Simplicity. Security. Satisfaction.

So, why has the App Store become such a phenomenon? Well, it’s down to speed, simplicity, security, and satisfaction. iPhone users can access the App Store anywhere, they can buy any app instantly, in a secure way, and this leads to instant satisfaction.

From a security perspective the advent of tokenization has ensured that mobile payments are more secure. Trust is a key factor in mobile payments and tokenization fosters trust. Tokenization is a process where the PAN is replaced by a token for transaction purposes. The token has no relationship with the PAN data it replaces. The token can be the same length and format as the original PAN, so it appears no different than a standard payment card number to back-end transaction processing systems, applications and storage.

Indeed, Ryan Mclnerney, global president of Visa Inc, speaking in early March at the Mobile World Congress (MWC) keynote on digital transactions and social interactions said that tokenization was becoming increasingly popular to address security concerns around mobile and online payments. He said tokenization was a “big deal” in driving mobile payments.

Offline to online and back to offline

There was a series of issues ahead of the key developments in the mobile payments market. Apple Pay is seen as a panacea for many of these perceived ills. There has always been an issue with acceptance of mobile wallets at the point-of-sale. Apple Pay will accelerate the convergence of online and offline (in-store) commerce.

But in this rapidly evolving world of payments walls are crumbling. Online-to-offline commerce is on the rise: take beacons, for example. Beacon technology provides consumers with information and benefits including various discounts, events, or points to be earned through mobile pop-up messages, even allowing them to make payments when they enter a particular location even when the app is not running.

We have previously blogged on data from Swirl Networks regarding the use of beacons in mid-2014. The data collected by Swirl Networks shows that beacons are influencing the way we shop. More than half of customers engaged with the deployments and many also redeemed beacon offers when making purchases.

Swirl’s data found that beacon marketing campaigns influenced shopper behaviour as:

  • 73 percent of shoppers surveyed said that beacon-triggered content and offers increased their likelihood to purchase during their store visit.
  • 61 percent said they would do more holiday shopping at stores that delivered mobile content and offers while they shop.
  • 61 percent said they would visit a store with beacon marketing campaigns more often.
  • 60 percent said they would buy more as a result of receiving beacon-triggered marketing messages.

Beacons are now shining a light on the future of shopping at physical locations. It goes a little something like this: a customer meanders through stores (after being enticed inside via a push notification), then they receive additional iPhone/smartphone push notifications of a ‘30% off’ sale two aisles down. Once they have satisfied their shopping appetite they pay with a tap of their new iPhone/smartphone. Simplicity, just what customers and retailers want.

This omni-channel approach – remember 90% of commerce still takes place offline – is a crucial strategy. This distinction between bricks-and-mortar stores and online stores is fading as more merchants adopt the omni-channel approach.

How do consumers get value in mobile payments?

For consumers:

  • Retailer reward points for mobile payment users
  • Special pricing based on customer’s past usage
  • Queue-busting in-store, if paying by mobile
  • Priority customer service
  • The convenience of P2P mobile money transfer

Where’s the value for merchants in mobile payments?

For merchants:

  • Increased knowledge of customer habits
  • Customer loyalty programmes: reward points, build customer relationship, repeat custom, etc.
  • Save on credit card fees
  • Quicker check-out process
  • Improved inventory tracking
  • Less fraud costs – more secure than POS

Where does Aviso fit in?

Our Novate/VAS offering gives our customers value-added-services in a cost-effective manner.

Novate/VAS connects your payment system to value-added-service providers – helping you profit from your payment system.

It provides a flexible interface that can be used to integrate new value-added-services without making changes to the existing switch. That’s the key here – minimal upset to existing internal systems while at the same time improving customer engagement through a range of new services.

It’s flexible interface simplifies integration with a wide range of value-added-service providers. Quicker implementation, of course, means a faster flow of new revenues.

Aviso’s merchant payment platform can empower merchants to deploy a flexible and adaptable payments infrastructure, which will deliver short-term benefits such as:

  • A reduction in payment processing costs (by giving merchants flexibility to dynamically route transactions on a lowest-cost basis)
  • Improved customer service (by enabling more payment types at the point of sale)
  • Incremental revenues (by enhancing the payment options at the point of sale for customers)

This infrastructure will evolve to support the merchant’s on-going requirements and to provide the business services and options. Consequently, this will allow companies to offer the services that they deem fit for their business model and to support their customer’s demands, while dealing with a single vendor.

This technology allows merchants to seamlessly integrate with acquirers across the globe, giving our customers much more power when it comes to negotiating acquiring contracts wherever the merchant chooses to do business.

We understand that a merchant’s payment processing budget can be tight, so we provide a variety of licensing options to fit your requirements. This enables you to upgrade your existing infrastructure by selecting appropriate modules that meet your particular needs.

Contact us

For more information on our products and services contact us at info@aviso.io, or follow us on Twitter and LinkedIn.

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