Payments, Payments Everywhere

In order to sell a new product, you have to solve a problem.  Emerging payment methods, by themselves, aren't really solving any problem.  What's the pain point? Credit and debit cards work just fine (although EMV certainly helps reduce fraud, and retailers would love lower rates). Yet over the last couple months there seems to be a new announcement in this area every week, and they get lots of attention.  As Rick Oglesby, a senior analyst with research firm Aite Group LLC., puts it, "This is not about payments -- it's about something bigger."

At stake is the relationship between the consumer and retailers, banks, CPG companies, telcos, and card brands.  Steve Ranger over at CNET put it best when he said, "Right now, the mobile payments market reminds me a lot of the old cartoon show Wacky Races."  I've described some of these solutions in past postings, but for a quick summary refer to Paula Rosemblum's recent posting.

Payments are table stakes.  The jewel is the digital wallet, which typically contains value-added services beyond the payment itself. For a consumer it might be nice to put all her cards "in" her mobile phone, but its when loyalty cards, coupons, and offers are added that things get interesting.  For a retailer, its all about two things: lowering fees and bettering the customer experience.

PayPal and Square are injecting much needed competition into the payment space, which in turn may lead to lower fees for retailers.  Retailers aren't looking for zero because they know that card-based transactions lower their cash handling cost and decrease checkout time.  There's value that's justifies reasonable fees, but I stress the word reasonable.

But its customer experience and that relationship I mentioned earlier that is the driving force here.  Mobile phones suddenly make it possible to reach consumers as they shop, much like retailers do online.  And thus they can be enticed with offers, coupons, and product information across channels. Payments are along for the ride.

So each time you read another announcement touting NFC or cloud-payments, look past the payment and consider the impact to customer experience.  That's what will separate the winners and losers.

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David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.


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