Alternative Payments at Contactless Intelligence Conference 2016
This year was the 10th Contactless Intelligence Conference, held in London each April. It continues to be accompanied by the Contactless and Mobile Awards and what immediately struck me was that it was even better attended than in recent years, highlighting the role that it plays in getting the industry talking and recognising the work that it does to promote this.
I was more than happy to reprise my role as a lead for one of the work groups that are run during the afternoon of the conference. These were:
- GROUP 1: Charity – How can contactless technology be harnessed by the charity sector to increase donations? What support is still needed from the contactless industry? Can the mobile phone (NFC, mobile wallets, apps etc.) add a new dimension to interaction with donors?
- GROUP 2: Beyond bricks & mortar – What benefits can contactless/NFC really provide to small businesses, street traders, taxi drivers and vending operators? How can the different sectors build on each others’ success stories? What still needs to be done for contactless to become the payment method of choice
- GROUP 3: Services within the mobility sector – Will the UK transport sector really be able to agree on a countrywide scheme? Can we learn from other countries? Can the commuter/traveler ever hope to make a cashless journey from door to door (parking, train, bus, bike hire etc.)?
- GROUP 4: Alternative payment methods – We’ve been hearing about “disruptive players” in the payment industry for many years now, but who are those players? How can the consumer benefit from new technologies/processes/ecosystems? What might our ecosystem look like in the future?
- GROUP 5: The future of wearables – With major brands launching their own smart watches, wristbands and NFC enabled clothing, is this a technology fad or a natural evolution for contactless technology? What are the potential business cases? Will the older generation be left behind? How can the functionality move beyond payment and integrate multiple applications and services for the user?
Last year I ran the group discussing focusing on Usage, this year I had Group 4: Alternative Payment Methods and I wanted to share a summary of the discussion with you. It was a large group , consisting of nearly 20 people, and one in which everyone wanted to contribute, share and hear the thoughts of others so I will do my best to keep this concise.
What Do We Mean By Alternative?
The first question posed to the group to consider was “what do we mean by alternative?” We decided that it is not always tearing everything up and doing it completely differently; sometimes alternative is taking what we have and using it in a different way. It was noted by the group that when it comes to payments, consumers are not too bothered about how it works and what goes on in the background from a technology point of view. Instead they want to know that it works and that it is a simple, convenient, quick, trusted and secure procedure and experience.
Taking the alternative/different question forward, the group highlighted the following possible options, with them falling into both camps. Using existing details but via a different payment mechanism was an interesting area to start:
- Carrier billing: MNOs have customers’ personal data, financial information on file and they can add location as a security factor, combining this all with their existing billing infrastructure in place. This could allow (digital) payment services to be made available to users who don’t have a physical card or a bank account
- Loyalty: looking at taking loyalty schemes to the next level, allowing customers to redeem them, in effect cashing them in for goods and services – possibly crossing over different merchants and locations using a form of data exchange
- Personal Data: this point moved ahead a stage further, instead of loyalty points it could be possible that the consumer could allow access to and use of their own personal data in exchange for goods and services. In a way, similar to how we accept that Facebook and Google use our data but we get use of their services for free in return. It was commented on that such a move would need a trusted exchange to cut through existing layers to enable payments in such a new way, similar in the way that Uber and AirBnB have cut through the existing structures to change their structures and layers
- Re-using our infrastructure: Could we use the traditional schemes and networks in new ways? For example, Vocalink opening up with PSD2 coming into effect, much as Trustly is doing to allow payments directly from bank accounts
- Tokens: alternatively, using new mechanisms to change the old systems in place, e.g. more use of tokens which are like having card on file
- App-based payments: not to be confused with in-app payments. These could change the payment user experience and possibly allow apps to act as a means of payment in non-related establishments. For example, Amazon and Uber have your details, so why not pay by those when using (contracted) third party services, such as a restaurant? The new user experience is that the app (their own or external) can be used to check in, place and manage the order and then payment is made when or after you leave so there is no check-out experience. In effect, checking in is like placing a virtual card or token behind the bar which is debited when you leave.
- mPOS: not to ignore acceptance, could new secure hardware allow true mPOS without the need for a mandated chip and PIN device? Opening up the acceptance of payments on secure consumer devices (i.e. smartphones and tablets) would increase commerce opportunities and be one less hurdle for (small) merchants as well as boost P2P payments.
- Blockchain: it was of course mentioned. The new blockchain will be faster, more efficient and less (computing) power hungry. By offering a flat, fee-free value exchange it changes international remittances and payments across borders.
Removing Barriers, Separating ID and Authorisation
In a way, several of the discussed scenarios would see the new payment as being no payment. This led to discussion of future payments will be about removing barriers. If you check-in instead of checking-out then the merchant has much more opportunity to personalise the service, know your preferences, offer vouchers, act on loyalty points and history, etc. By removing the act of payment, the user experience can be advanced. By removing additional devices or layers to the payment network/infrastructure (without reducing security) you open the market up and increase competition.
Currently, payments consists of both the ID and the authorisation combined into a single act and process. If these are split up then it opens up new ways of providing payments.
Comfort, Convenience, Security and Simplicity
The group decided that using the old ways and means in new ways would be the likely way forward, at least in the short to medium term. The reasons for this are that these are what offer consumers comfort, convenience, security and simplicity.
New ways and systems may be more likely in the long term but there will be barriers that need to be addressed for them to move into the mainstream for mass market consumers. These issues are awareness, trust, level of interest, security and relevance.
Future Shape, Resolving Fragmentation To Suit User Preferences
It was noted by the group that the future ecosystem would likely be more fragmented than it currently is, likely as a result of new entrants and increased competition and alternative technologies coming into play. This would bring a need for a big aggregator to resolve this fragmentation and ensure that payments get through all of these different systems. Consumers will not want more accounts and more (digital) wallets; instead what they want is the ability to use their preferred details and account in multiple different ways.
From the discussion it can be seen that there are many different possible avenues that can be gone down. I think that it is very unlikely that there will be anything to tear up the rule book and introduce a whole new way of conducting transactions. Mainly because it would be too much of a change and too alien for mass market consumers who have proven time and again that they will not give their trust (and money!) to an unknown brand who says they can offer better payments. To illustrate this, how many times do you hear people well versed in the payments industry say that they have yet to fully get their heads around and understand blockchain? If those people can’t then how do we expect the average consumer to do so?
Is The New Payment, No Payment At All?
What I think we will see is the gradual evolution and removal of barriers that prevent us from making effortless transactions. More security will be added in the background and possibly in the foreground with biometrics being a good example – they add to the level of comfort and security that consumers have but without making them jump through hoops. The point was well made in the discussion – and I agree – that we don’t want to be accessing 20 different wallets (or cards); we have our preferred one or two (or three) and we want to use them as we see fit, in many different ways. In a few years I believe that we will be able to digitally introduce ourselves at the start of the “shopping” process, much as we do when we log-in online or in an app, and we will have a personalised experience, possibly combining our online and physical experiences, possibly augmented with other technologies (e.g. location, augmented reality, artificial intelligence) to aid our buying decisions should we wish to, before allowing us to leave without actually having to hand over a card or anything as rudimentary as cash. This way consumers will have the benefits offered by a digital user experience without having to completely learn new processes as it will be centered around them.
More information can be found on the Contactless Intelligence Conference here: https://contactlessintelligence.com/26-04-16-conference-agenda/
More information on the CMA Winners can be found here: https://contactlessintelligence.com/cma-winners-2016/
“I believe that we will be able to digitally introduce ourselves at the start of the “shopping” process, much as we do when we log-in online or in an app, and we will have a personalised experience, possibly combining our online and physical experiences, possibly augmented with other technologies (e.g. location, augmented reality, artificial intelligence) to aid our buying decisions should we wish to, before allowing us to leave without actually having to hand over a card or anything as rudimentary as cash. This way consumers will have the benefits offered by a digital user experience without having to completely learn new processes as it will be centered around them.”