Changing customer behaviour is already causing a shift – not only in the way customers pay for things, but also how they expect to make transactions and payments. As a result, retailers as well as merchants and banks are being forced to revolutionise their payments models to provide a seamless customer experience and remain relevant in an increasingly changing landscape.
Ahead of the Payments Innovation 2016 conference in Sydney later this month, some of the biggest trends set to dominate the payments model evolution in the next 12 to 18 months are reviewed below, as well as the steps the industry is taking to lead payments innovation through the customer lens.
The New Payments Platform – known as the NPP – marks a significant shift in the Australian payments landscape. Set to launch in late 2017, it will provide faster and more flexible payments, allowing low-value transactions to occur in real-time.
Funded by 12 banks and payments providers – including the big four – the NPP has been designed to foster competition, in response to changing customer expectations and disruptive market forces impacting the industry.
So, what does this mean for retailers and banks? According to NPP chair, Paul Lahiff, the rollout of the NPP will have big benefits for both customers and banks, ultimately fostering a more collaborative and innovative economy.
“Whether they are retailers, small business or government – it would also benefit public policy,” Lahiff said. “Because faster and more efficient money helps GDP growth.” At the core of the NPP is the aim to provide data-rich payments in a simple, transparent way for customers. However, Lahiff observed that it will be up to the financial institutions and other payments service providers to come up with new services and products, such as an innovative app for retail customers, or something particularly beneficial for small business or large corporates.
Mobile here to stay
The rise of mobile technology is changing e-commerce, banking and payments, therefore understanding customer behaviour and providing a secure and transparent payments network that supports new technology will be central to shaping the future of payments.
Consumer intention to use new methods of payments – by age
According to a June 2014 report by the Australian Communications and Media Authority, a sizeable 77 per cent of Australian adults transfer funds using their mobiles, while 46 per cent use them to pay bills. Andrew Rechtman, senior director of new business and strategy at PayPal, said that the mobile phone is giving consumers more utility and convenience.
“Whether it’s how customers find products, how they research products and services, how they share that information with their friends, or then ultimately how they make payments – it’s all moving faster and faster to the mobile phone,” Rechtman said. The growth of PayPal’s mobile payments reveals how quickly things are evolving. In the full year of 2010, PayPal processed approximately $750 million in mobile payments, which increased to over $12 billion by Q3 of 2014.
The key to successful engagement in the payments space is creating a seamless customer experience when it comes to transactions via mobile channels, Rechtman said.
“It’s about ensuring all of your mobile experiences are fully optimised from a user interface perspective. It’s about making it so the payment itself disappears, creating a seamless experience.”
In 2016, collaboration and partnerships across the industry will remain paramount to the evolution of payments models. While the industry is becoming more competitive, no one single entity can own the customer. With the rollout of the NPP only a few years away, the new system is set to foster industry collaboration, essentially creating a more efficient and effective market place. “Once it’s rolled-out, I think each of the key players within the ecosystem will find it easier to interact with each other and collaborate,” Rechtman said. This sentiment is echoed by Lahiff. “For example, if someone is a customer of Westpac and another is a customer of NAB, we want to make sure those customers can make transactions with each other in realtime. Payments are a networked system, so collaboration is critical.”
Offering value to win customers
Australia’s appetite for contactless payments is on the rise. According to a global report released early last year by RFI, Australia has the highest rate of contactless payments usage globally on a per capita basis at 43 per cent. As the payments industry continues to become more competitive, Bendigo and Adelaide Bank have taken a new, value-based approach to their payments model, jumping into the contactless payments arena through the roll-out of their new ‘Redy’ payment app.
Launched in June 2014, the payment app for iPhone and Android smartphones allows users to scan a QR code on a merchant’s Redy terminal and pay for goods or services either using their Bendigo account or a Mastercard or Vis Card. Through the new payments system, merchants are charged a 1.5 per cent transaction fee, a third of which generates ‘cred’, which is collected by the consumer every time they use the smartphone system. This means that every transaction gives customers a 10c virtual ‘cred’ that can be donated to charities or spent at local businesses.
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