New ways of buying, new ways of paying
The last decade has seen significant changes in payment methods used by European citizens with the potential for new innovations as a result of the proliferation of mobile equipments (Smart phone, tablets). This creates the potential for new and innovative services, such as virtual train tickets or buying groceries with a tap of a phone, to become commonplace. In addition to this, the continuous growth of e-commerce creates new payments needs in order to buy goods anywhere in Europe (and in the whole world) with the same level of confidence that buyers have when they buy goods and services within their domestic market.
New Europe Regulations have come into force to allow more competition and more innovation on payment Markets. Two EU directives: the Payment Services and the Electronic Money Directives (PSD & EMD) enable small or medium sized companies to launch new payments services
Recently, the European Commission has launched a consultation to ensure that standards and regulation keep pace with these technological and behavioural evolutions and that Europe can be on the cutting edge of what “making a payment” means in the future.
Towards an integrated European Market for card, internet and mobile payments
In January 2012, the European Commission published a Green Paper seeking views from stakeholders on 32 questions to identify the hurdles to further single market integration in relation to card, internet and mobile payments. The objective is to drive further European market integration, which would in turn improve competition, encourage innovation, provide more choice to consumers and deliver better payment security.
Electronic payment methods
The European Commission identifies credit transfers and direct debits as the core means of payment instrument. This is an area in which pan-European payment schemes already exist, namely the Single Euro Payment Area (SEPA) rulebooks, the principal objective of which was to erase any distinctions between cross-border and domestic electronic payments.
However, there are a number of existing and developing payment methods for which there is more limited pan-European integration. These include:
- credit transfers and payment cards, which are the most frequently used electronic payment instruments;
- internet payment (e-payment) made by remote card transaction, by credit transfer or direct debit via an online-banking or through an e-payment provider; and
- mobile payment (m-payment) for which the payment is initiated, transmitted or confirmed via a mobile phone or device. This includes both remote m-payment, such as premium SMS, and proximity payments, such as those made using Near Field Communication (NFC). M-payments are the fastest growing market, expected to rise up to USD 200 billion in value in 2012.
Vision and objectives
The European Commission considers that further integration to create a digital Single Market in payment is a crucial change that could sustain the growth of e-commerce as well as brick-and-mortar economy. The SEPA payment instrument may be expected to serve as an example for more integrated and secured payment innovation.
More integration could lead to consumers being able to use a single bank account for all payment transactions and the same secure, efficient and innovative card, internet or mobile payments systems being available domestically and across borders.
Further integration would also lead to benefit for businesses who could simplify and streamline their payment processes and merchants who could benefit from cheap efficient and secure electronic payment solutions.
Payments are no longer markets exclusively managed by banks, New Competitors, from start-up to large companies are coming to the payment market thanks to the new EU regulation (PSD and EMD 2).There are a broaden type of competitors : First of all, some companies want to strengthen and increase their market position by launching their new payment services as they see payment as a key element to achieve their global objectives. They either leverage their knowledge on e-payment (like Paypal) or develop payment strategies out of their core business (Google, Amazon, Facebook).
The challenge for these pure player companies is to develop their businesses in the real world to compete with the historical players – i.e. banks
There are, at the moment, of lot of new initiatives (contact less payment – NFC, payment by phone, empty hands payment – the consumer enters his/her phone number and a pin code on the payment terminal, etc)… Trends show that building a strategy on new payment services only is not enough to be successful, new payment methods must be thought, developed and integrated at the beginning of the sales cycle so the whole marketing strategy has to be re-thought.
New ways of buying
As the boundaries between on line and off line world is about to disappear, new ways of payment have to be developed. As more and more people are equipped with a mobile phone, they are able to search, compare, buy and pay with this equipment anywhere, anytime. Mobile equipment really breaks the frontier between the on-line and off-line world.
So Retailers need to innovate and re-think their marketing strategy to include this new channel and not only by developing and accepting payment by phone:
A study shows (from interactive Avertising Bureau in the US) shows 73% of respondents have used their mobile phone in store and among these people 53% have stopped an in-store purchase as a result of using their mobile phone (38% because they found a better price online, 21% because they found a better item on-line, 11% because they saw a negative review, 11% because they bought a similar item instead and 11% because they couldn’t find information on the product they were about to buy)
In conclusion, deep transformations on the payment market are on going. All the elements are now in place to make this environment moves: New Regulations, New actors and Matured Mobile technologies.
This note has been written for CCI France by Bruno Joanides – New Payments services Director at SYRTALS helped by a note written by Sylvie Rousseau, Thibault Soyer and Justine Massera – Linklaters Paris