Connecting to Consumers: Keys from Payments Innovators (March 2013)

By Kate Fitzgerald, Emerging Payments Editor

In the mobile landscape, the race to build close ties to consumers is intensifying as a broad range of players vie to become essential to individuals’ shopping, purchasing and daily financial management habits. Though still early in the game, at the Prepaid Expo USA in Orlando, Fla., last week, forward-thinking executives stressed the importance of gaining an early advantage in building close connections to consumers and their daily financial activity amid an explosion of mobile payment innovation.

While payments lie at the center of mobile money development, what’s at stake actually is much bigger than payments, Richard Crone, CEO of San Carlos, Calif.-based Crone Consulting LLC, said during a panel examining emerging and mobile payments trends. Companies that early on manage to create “a value proposition that engages a consumer’s many needs for [researching products in-store and online], shopping, promotions, payment, checkout and managing receipts” have a shot at winning long-term customer loyalty, he said. But the competition to achieve those goals that is coming from payment networks, financial institutions and card issuers, merchants and hundreds of third parties developing new apps and tools each year will be very fierce, he suggested.

Getting a head start in engaging a consumer via a mobile shopping application, digital or mobile wallet, or payment or banking platform could be a crucial advantage, Crone said. “You don’t get to play [in the mobile landscape] until you enroll the customer, and the one who enrolls is the one who controls” the relationship and valuable associated data and loyalty, he explained. Equally important is creating and maintaining consumer trust and impeccable privacy, while delivering useful services that will keep people interested, according to Crone. The holy grail, he suggested, is putting all of this together in a way that makes it easy for consumers to move from one purchasing environment to another, whether it’s inside a store, online or with a mobile phone or tablet, Crone said.

Protecting Consumer Privacy

An important piece of the puzzle to build close consumer connections is gathering consumer data, including transactions, physical locations and preferences—along with consumer involvement in social media—for developing sharp products and platforms to enhance shopping and payments, panelists agreed. But how companies handle that data could make or break their success, said Derek Colfer, a Visa Inc. business leader for global mobile payments, during an emerging payments panel. Visa is in the midst of building out V.me by Visa and other tools to increase convenience and security for shoppers, and all of them rely on gaining and keeping customers’ trust, he suggested. “At the end of the day, it’s the consumer’s data, and we must be very respectful of that and about how we use that data effectively with the consumer’s consent.”

MasterCard Worldwide made a significant move recently in the direction of smoothing the shopping process for consumers with its recent unveiling of MasterPass, said Ken Moy, MasterCard’s group head of emerging payments, during another emerging payments panel. MasterPass, which simplifies online shopping through various channels so customers need not re-enter specific payment account and shipping details, aims “to take advantage of existing banking relationships” while making compelling merchant offers readily available and easier for consumers to use. MasterPass’ features “all have to do with [enhancing] loyalty before, during and after each purchase,” Moy said.

No single organization has yet figured out all the keys to success in developing platforms that will encompass all of consumers’ needs for emerging and mobile payments, Moy suggested. “We’re seeing a lot of overlapping of roles that issuers and merchants want to take, and we’re still in the middle of defining what those will be” at this early stage of development, he said.

Removing Shopping ‘Points of Friction’

PayPal also plans to take a central position in consumers’ routine purchases by enhancing the shopping-to-purchase process in every type of shopping environment while also removing “points of friction,” said Patrick Gauthier, PayPal’s head of product strategy and business operations, retail services, during a panel discussion on the future of payments and innovation. “PayPal’s goal is to embed the payment within the shopping flow,” Gauthier said, adding that PayPal is working to minimize any “artificial boundaries” that various payment technologies might create. PayPal’s overall goal is to make payment a natural step “wherever a retailer is having a conversation with a consumer” in a store, online or through a mobile device.

While many companies seem intent on building proprietary wallets and platforms as a way to lock in consumer loyalty, other payment industry players are positioning themselves to act as hubs between consumers and merchants through intermediaries, such as payment networks. One such example is Palo Alto, Calif.-based Shopkick Inc., whose app rewards consumers for walking inside a store and interacting with featured products. Shopkick has announced partnerships with Visa and MasterCard, which each offer consumers rewards for purchases from specific merchants. “What we’ve done is created a new path to purchasing from [the consumer] sitting at home, to going to the store, to interacting with products” before making a purchase, said Aaron Emigh, Shopkick’s co-founder and chief technology officer. “Right now there is a lot of discontinuity in the shopping process … but we are offering a way to pay with the thing you’re using to shop,” smoothing out the overall process for participating consumers.

While mobile payment technologies—such as NFC, cloud-based and barcode—are  simultaneously in development and creating a significant industry distraction, consumers have little interest in which approach will ultimately dominate, noted Tim Attinger, Blackhawk Network Inc.’s group vice president for strategy and development, during an emerging payments panel. Merchants and payment providers caught up in the challenge of betting on the various competing technologies could lose sight of the end goal, he warns. “Consumers quite frankly don’t see the distinction between platforms. What we should aim for is giving them the ability to travel seamlessly in commerce, whether they’re shopping inside stores, online or through mobile devices.”