Lessons from overseas

Payment systems are not developing at the same rate around the world. Some are growing rapidly in some markets, but barely getting traction in others, as Rod Newing reports


A recent report by First Data and Market Strategies International argues that since the interests, attitudes and behaviours of consumers around the world vary greatly, financial institutions, technology companies and other organisations must understand regional differences to be successful.

“Payment solutions, whatever form they take, are about empowering the consumer’s existing payment experience,” says Chris Cox, vice president for product development at First Data, an ecommerce and payment processing company. “When launching new payment solutions into a particular market, it is important to take into account how users are used to paying, which is based on the existing payment ecosystem in that market.”

He cites Africa as an example, where peer-to-peer mobile money transfer systems have thrived. Most consumers do not have a bank account and point-of-sale terminals lack functionality. It does not take much, therefore, for their mobile telephone to become their bank account.

In contrast, in the US mobile payment solutions are geared around existing debit, credit and prepaid accounts. “They have taken paradigms that consumers are used to and migrated them to a device in a way that creates new value,” says Mr Cox. “The developing world doesn’t have that paradigm, so it develops differently.” The report shows that consumers in the Middle East and Germany prefer cash, while debit cards are more popular in the UK and Ireland, and credit cards take preference in Australia.

Overall, some 45 per cent of international consumers say they would like the convenience of being able to pay for goods without the hassle of carrying cash, debit cards and credit cards. Consumers in the Middle East are the most willing to adopt newer payment methods, as more than three-fifths like the idea of paying without using cash or cards.

Developed markets can learn from the poorer parts of the world

Gabriel Hopkins, head of ecommerce products for WorldPay, says UK and French merchants trading in Holland need to accept iDEAL, the preferred method of payment among Dutch shoppers, which has a market share of more than 60 per cent. Similarly, UK and Dutch merchants must offer Carte Bancaire to access the full French market.

The First Data report suggests retailers can persuade consumers to choose a specific payment method by offering a discount. This is important because, despite the popularity of cash and cards, many consumers indicated they might be ready to move beyond traditional ways of paying for goods and services.

Lessons from the Mobile Payments Leader: What the World Can Learn from the Japanese Market, a recent report from Celent, backs this up, arguing the financial settlement component of mobile payments is irrelevant. Consumers want incentives and merchants want to use mobile technology for promotions and sales growth, it suggests.

In Japan, the major electronic money players are mobile operators, merchants and transport companies, not financial institutions. “The Japanese experience has shown that non-financial institutions with US analogues, such as Apple, AT&T, PayPal and Verizon and even merchants like Starbucks or Walmart, have the potential to usurp the traditional financial services industry,” says Red Gillen, the report’s author.

Samee Zafar, director at payments consultancy Edgar Dunn & Company, is frustrated that in developed markets, such as the UK, new payment technologies are sometimes debated for years without getting anywhere.

He cites the debate in the UK around scrapping cheques, where opponents of the move – which was abandoned earlier this year – argued older people would not be able to use new methods, when Kenyans who can hardly read or write are able to send electronic payments to each other. The onus is on payment providers to roll out new systems properly and work with customers to help them understand a new product, says Mr Zafar.

“Developed markets can learn from the poorer parts of the world, which have committed to new systems and might just leapfrog them,” he warns. “What is needed is the vision and then a commitment to invest the right amount of money to achieve critical mass.”