Peter Guidi's Blog

Posts Tagged ‘POS’

Three emerging trends in payment

In Uncategorized on April 8, 2013 at 4:17 pm

Consumer payments will experience accelerated change in 2013. Multiple disruptive and innovative companies, particularly 3rd party app developers and retailer branded mobile solutions, will enter the market to challenge the incumbents. Traditional payment processing networks and financial institutions will struggle to keep pace with nimble, tech savvy competitors. “Payments incumbents will leverage their market power to battle disruptors. MasterCard’s new fee structure for “staged” digital wallet providers such as Google Wallet, PayPal and Square” are an early shot-across-the-bow in a fight that will set the stage for payments over the next decade. The legacy technology managing the current payment processing network will be unable to keep pace as new POS and cloud based programs enable merchants and consumers to pick winners and losers.  Mobile solutions; coupled with low cost alternative payment, in conjunction with retailer funded rewards, will become more abundant, more accessible, and deliver greater value.

The eco-system is changing. A new “Retailer-Consumer-centric” payments paradigm is emerging. The future of the new paradigm will be shaped by three disruptive digital (POS based combined with IP communication) trends:

◾The POS Payments Cloud:  The last 10 years has brought major change to the POS and communications.  Less than 10 years ago the POS was a relatively limited device and communications were slow and arcane, at least by today’s standards.  The traditional legacy payments processing network relies on processors, associations and financial institutions in conjunction with POS vendors and a “heavy” communications systems like the Hughes satellite network to enable electronic payment. Unlike the consumer and their expectations, change within this eco-system is difficult, time consuming and expensive.  POS vendors are setting the slate to disintermediate the traditional network through the introduction of the “payment cloud”. Today’s POS is a powerful device built with open standards capable of supporting a wide range of payment and loyalty solutions. The internet changed the nature of communication allowing low cost, reliable, fast, and secure connectivity. Emerging payment models leverage the combination of POS capability and the internet to disrupt traditional payment economics. “Merchants have a growing set of payment options that do not adhere to the traditional interchange or processing fee model. Some of these options even deliver additional value above and beyond payment processing. As merchants adopt these new payment methods, their expectations will reset and they will expect lower costs and greater value from incumbent payment service providers. Traditional economic models will not disappear overnight, but it would be a mistake for payment incumbents to dismiss the growing number of unique pricing schemes and the disruptors who are moving aggressively to gain scale”. Watch for the emergence of these POS payment platforms in 2013.

◾Mobile Payment: Mobile payment and digital wallets will change the nature of the relationship between the consumer and the retailer. New technology will enable a robust “dialogue” between the consumer and the retailer during the “purchase cycle” allowing the retailer to engage the consumer before, during and after the transaction.  Technology “will drive adoption by integrating capabilities that remove friction and transform the payments and commerce experience in contextually relevant ways. These wallets will embed capabilities that can create a more convenient commerce experience for consumers and give merchants a growing set of potential benefits — that may provide a distinct competitive advantage — to evaluate and weigh against the additional costs of wallet acceptance.”

◾ACH & Merchant Issued Rewards: The advantage merchants have in mobile payment is two-fold. First, merchant control access to their mobile payment environment, they will decide what forms of payment are available to the consumer. Secondly, rewards are the key driver for consumers as they choose their method of payment and rewards are controlled by the merchant.

 

Low cost alternative payments in conjunction with merchant issued rewards will appeal to a broad base of retailers and consumers. The loyalty industry in the US is significantly more than $10 Billion dollars and growing. Current card acceptance fees are in the two percent range adding up to billions of dollars. Merchants who leverage the combination of these two line items will offer consumers powerful incentives. Clearly, Merchants can have a lot of influence regarding payment choice with this type of spending. “Disruptors are creating better, lower-cost alternative products and services that deliver more value and meet broad-based payment needs.” Retailer services will provide consumers with personal, relevant offers designed to drive a more profitable purchasing experience.  ACH payment will lead the way towards low card acceptance fees. Retailers who recapitalize these fees as consumer rewards will see increased sales and profits.

 

It will take a few years before we see the full force of this disruption. Retailers will be hesitant to make the technology changes necessary to support the new payments paradigm. Some will wait as end-of-life requirements make change inevitable, others will jump in early and gain leverage in their market.

2013 will be an interesting year for the payments market, what changes do you see in your organization?

Big Data and Mobile Payments: Three priorities.

In Uncategorized on March 28, 2013 at 9:11 am

The three high-level goals of a Big Data program are:

  1. Collect information: The objective is to collect information that deepens the understanding of customer’s plans, intentions and behavior so the organization has a basis for decision and action. The first step is to collect and save all of the digital breadcrumbs. The challenge is, since we can’t understand consumer behavior that we don’t have, we need to collect everything. Since it’s impossible to know the future value of data we must hang on to it for a very long time.
  2. Conduct Analysis: Big Data really means Big Data Analytics. The challenge is to find relevance in an ocean of information. There are multiple trends occurring within the consumer base, some evolve quickly, some play out more slowly. The goal of analysis is to provide insight and opportunity to the decision makers managing the business.
  3. Take action: More tactically, it is what you do with the information that counts. The key to Big Data and mobile payments is the dialogue that occurs between the consumer’s mobile application and the POS during the purchase cycle. The objective of action is to promote more profitable consumer purchasing behavior.

The success of mobile payments begins with transactions. Transactions are a result of consumer enrollment and adoption. Enrollment and adoption require constant visibility and consumer incentives, in ways similar to advertising typical of the current payments paradigm. The difference is that Retailers rather than Financial Institutions are promoting the method of payment. The key to ROI is engaging consumers and creating demand using Big Data solutions during the purchase cycle. This is the connection between BIG Data, mobile payments and the POS.  Access to Big Data during the purchase cycle requires an integration that is tightly coupled to the POS at the transaction services layer.

The retailer controls payments in the mobile environment. Retailers are being very careful about who they allow into the wallet…MCX is an outgrowth of this concern. Retailers are concerned that the current card fee structure will become the standard in mobile payments. Retailers are asking, “How do mobile payments make me money or even justify the infrastructure investment”. While the current focus on mobile payments are POS enablement and transaction fees, tomorrow the focus will be driving new business through consumer engagement. Big Data is the backbone of demand generation and the POS controls how Big Data solutions are enabled.

Smart phone technology changed the expectations of consumers, merchants and eco-system partners. The smart phone has also changed the way consumers do business; integrated mobile payments at the POS is the last frontier.