The customer experience of payment is undergoing a revolution
Prepare to see a huge shift in the way you pay for goods and services as the battle for dominance in the payments processing market heats up considerably. PayPal, Google, Visa, Mastercard, and EFTPOS are all pushing hard to become (or remain) the first choice for consumers when paying for things. That battle is spreading in typical vertical integration fashion to include the payment transaction itself. (Basically, if you want to gain dominance in processing payments, dominate the payment mechanism itself.)
Our big four banks in Australia all offer credit card and EFTPOS payment terminal services, gaining revenue from transaction fees. Such services also act as ‘anchor’ products for business customers, with an increased likelihood of a terminal services customer maintaining a transaction account (at least) with the service provider. That is, a customer utilising Westpac’s terminal service is more likely to pair it with a Westpac transaction account (usually due to reduced settlement times).
The Reserve Bank of Australia has been concerned about the heavy reliance in Australia on foreign-controlled credit card schemes – Visa and Mastercard particularly – and has encouraged Australia’s banks to develop their own payment systems, EFTPOS and BPay, as strong competitors in retail outlets as well as online (yet to really happen). Whilst use of EFTPOS is widespread, online shopping continues to rely on Visa, Mastercard, American Express and Paypal. Recent developments from Google and Apple in the electronic wallet and payments space won’t give the RBA Governor any cause for celebration, only more concern.
For Australian providers – EFTPOS, BPay, and our major banks – technology alone won’t be enough to compete against the offerings from the likes of Google, PayPal and Apple, and the way they integrate payments into their existing ecosystems. Nor, I think, will the focus on speed and convenience (the tap-and-go and contactless payments concepts) be enough to provide long-term differentiation.
No, the challenge for our local providers will be to find a way to leverage their local position, and their more direct financial relationship with consumers, to provide a new ecosystem of services more geared towards the financial health and wellbeing of the individual or business. Payments – and the transactions they generate – remain a strong fixation for our banks, and this ignores the impact each transaction has – positively or negatively (i.e. whether I pay or receive money) on the state of my finances.
Instead of treating the processing and recording of transactions as an end in and of themselves, financial institutions can use that data to provide us with intelligence about our finances – in the way our heart beat can help a Dr tell us something about our physical fitness. This is a starting point, and opens up a wealth (sorry) of service-oriented opportunities that are layers of information and intelligence above the singular movement of money. Not just for the consumer, but for the retail and service merchants, and the financial institutions themselves.
Keep an eye out in this space. Mobile technologies in particular are being brought into the technological mix around the payments space, but the real winners will be those who can align their technologies with the needs of consumers and businesses for richer customer experiences.