With a fog of electronic payment options, which platform will become dominant is unclear. What is certain, however, is any economy that wishes to remain vibrant must move towards more ubiquitous, frictionless payment systems, writes Dave Howell
Electronic payments are accelerating. According to the UK Cards Association, in March UK consumers spent £109 million using contactless payments. However, as the electronic payments landscape is so fragmented, choosing which service provider to partner can be difficult.
“The acute challenge for those businesses investing in electronic payment services today is balancing the customer experience with the requirements for security and resilience,” says Deloitte partner Stephen Ley.
In particular, development of a secure, fast and convenient mobile payment method is vital. Will Jones, president Europe, the Middle East and Africa at Monitise, says: “In February, Yankee Group predicted the mobile economy is evolving at an even faster rate than expected and that by 2017 it will be valued at $3.1 trillion, $200 billion more than the $2.9 trillion Yankee Group forecast in October 2012.”
Moving away from legacy payment systems also has massive economic benefits. “Within a country, frictionless electronic payments aid economic growth as individuals, small businesses and large organisations can make and track payments,” says Jonathan Vaux, director of new digital payments and strategy at Visa Europe.
Payment systems are moving away from their traditional banking heritage. Service providers, such as iZettle, Square, Yandex Money, Alipay and mPowa, are all making inroads to become universal payment providers in their respective regions. What they all have in common is they can be delivered via multiple platforms.
The growth of contactless payments in Europe, which currently stands at 220 per cent annually, is a clear pointer that this technology is rapidly achieving traction.
The recent partnership between the three leading mobile phone operators and MasterCard, dubbed Weve, is telling in that it offers a payment provider which is well respected coupled with mobile connectivity. “MasterCard’s vision of a world beyond cash, maps neatly on to our own vision of a world powered by mobile,” says Weve chief executive David Sear.
New payment initiatives from the banks, such as Paym, could be disruptive as they expose large proportions of the population to electronic payments for the first time. Having a simple and safe method of paying family and friends delivers critical mass that other payment systems can benefit from. Paym could move electronic payments from a novelty to an essential service.
The growth of contactless payments in Europe, which currently stands at 220 per cent annually, is a clear pointer that this technology is rapidly achieving traction
The Payments Council’s Pay Your Way in 2025 report concludes that 42 per cent of UK consumers believe they won’t need a wallet or purse by 2025. More than half believe they will be paying by fingerprint scan.
Moving to electronic payments has been shown to result in higher economic performance and efficiency in all nation states that have adopted these systems. On a macro-economic level, the European Central Bank concludes: “If card payments increase by €1 million, which corresponds to an increase in the card penetration ratio of 1.2 per cent in the European Union, then the level of GDP would increase by 0.07 per cent or about €6 million.”
Researchers at economics organisation Global Insight go further and say that a move to frictionless payments can offer potential savings of 1 per cent of GDP annually. Increasing the electronic payments share of transactions by 10 per cent could result in 0.5 per cent of additional real consumer spending, says Global Insight.
A Visa International/Global Insight report concludes: “Real economic growth is driven by the combination of technology, capital, materials, labour resources and entrepreneurship – all real economic factors. But real economic transactions and payments cannot take place without an efficient, interoperable payment system. The clear implication is that electronic payments are critical in facilitating the growth process and that it is in the economic interests of all countries.”
Familiarity breeds confidence in consumers. It is vital for consumers and businesses alike to have a clear payment options without the barrier of several apps from various vendors. Reducing confusion, when it is time to pay, is therefore essential for national economic growth.