Move beyond your point of sale
The global payments industry is flourishing, non-cash transactions volumes grew to reach more than 433.1 billion transactions, according to the 2017 World Payments Report. Yet the industry has optimized electronic payments facilitation for credit, debit, and prepaid accounts during the past 30 years to the point that such facilitation — whether payment acceptance, authentication, authorization, settlement, charge-back processing, or account statement generation — has essentially become a commodity. What this means for merchants and payment providers, is that there is an increased expectation of the entire customer experience.
Dozens of non-Financial Institutions (FI) have entered the market with new value propositions, innovating beyond traditional transaction processing to offer pre- and post-purchase services and causing leading payments players to re-examine their current offerings. Milo, a company acquired by eBay, for example, performs online searches for specific products in stores near its users, offering product ratings, reviews, and price comparisons. Services like Facebook and Google allow consumers to immediately uncover the cheapest price for that product, whether online or at nearby retailers; users may then purchase the product online or visit another merchant. Others like Youtap offer post-purchase mobile loyalty and reward services.
Major retailers are getting into the game as well. In early 2009, Starbucks launched the most successful US mobile payments and loyalty app. It reduces the payment transaction fees the company must pay to FIs; the app now accounts for 15 per cent of all U.S. retail sales. Apple and Samsung’s respective mobile payment services, use near-field communication antennas to allow payments with just a finger on the mobile sensor. Apple Pay and Samsung Pay has already shifted a portion of interchange fees to Apple and Samsung, and will act as a potential catalyst for a new category of mobile interchange rates, and is expected to be a platform for future innovation.
So the real question is what can you do?
Most of these new services appearing in the payments space, from search through post-transaction, are being fuelled by the vast and complex data sets now generated by social, location-based, and mobile technologies. Successful players are aggregating, analysing, manipulating, and combining this data with existing transactional information to offer innovative value-added services to consumers. They are also gaining an improved understanding of the consumer, which they are leveraging to help merchants grow their businesses — whether boosting prospecting through the delivery of targeted offers or improving retention with the creation of next-generation loyalty and reward solutions.
As pressure on traditional payments revenue mounts, FIs have the opportunity to leverage their own wealth of cross-merchant consumer transaction data, in combination with data from external sources, to provide enhanced customer experience solutions — offering services across the value chain while improving their core operations. This abundance of data, like a company’s brand and its culture, is one of the few proprietary assets available to a business today. Though the future is yet to be written, several incumbent FIs are already using this invaluable proprietary data asset to advance their core payments business, boosting customer acquisition through improved targeting, underwriting, cross-selling, and up-selling.
An added benefit to FIs of leveraging their data as an asset is that data as an input and factor of production will cost substantially less in the future, with the price performance of data storage doubling every 12 months. In 1980, for example, the hard-drive cost per gigabyte (GB) was approximately $1 million; today, it is less than 10 cents. In fact, Google charges just two cents per month for 1 GB of storage.
New opportunities in customer experience
When Jack Welch was running GE in the early 1980s, he famously challenged his managers to define their business as only 10 per cent of a broader market, looking at adjacent markets for new growth opportunities. As FI leaders look to the external market for new data-driven revenue opportunities, they would benefit from taking this same perspective, challenging themselves to think of a world of zero interchanges and then imagining how they will create value going forward.
In this effort, FIs should first look to aid merchants and their chief marketing officers (CMOs) in the pursuit of their perennial “holy grail”: traceable and precise marketing ROI. Without that, CMOs may hesitate to explore new and innovative services. CMOs have made progress in the online world — where a consumer’s digital path to purchase can more easily be tracked. However, in the offline world, in which 90 per cent of retail transactions take place, CMOs have struggled to link a given marketing stimulus to a specific purchase transaction.
In the future, this situation will begin to change when two recent payment innovations gain scale, together enabling accurate marketing ROI attribution. The first is from Square, a San Francisco–based payments company that has effectively moved the retail point-of-sale into the mobile cloud, blurring the lines between “click” and “brick.” The second is mobile payments from Google, Apple, and others that allow a consumer ID to be linked directly to a transaction ID, thereby closing the marketing loop between stimulus and sale.
Successful players are aggregating, analysing, manipulating, and combining this data with existing transactional information to offer innovative value-added services to consumers.
Niche players are already forging a path to measurable ROI. Scale players are developing new and innovative services, such as JPMorgan Chase’s “intelligent solutions,” created to offer its customers products based on data and analytics. In addition, MasterCard has acquired Truaxis, a provider of credit and debit card-linked offers to consumers through merchants and financial institutions, to provide combined payments and commerce propositions to merchants.
For payment providers in a modern environment, payments are non-negotiable, security is non-negotiable and now value-added services are non-negotiable. Providers and FIs need to demonstrate that they can arm merchants with the tools necessary to gain a holistic picture of the customer experience from awareness to purchase and post-purchase.
Youtap’s holistic platform gives your merchants the tools necessary to drive more transactions, customer engagement, and most importantly ROI.