I was recently at a restaurant just outside of London with my wife and when we got to the usual payment experience, we sat and waited… and waited. While this experience can be better or worse in different areas of the world, there’s plenty of room for improvements to the process. Checking out at dining establishments is, of course, only one of many payments experiences that call out for new solutions and a re-engineering of the process. There are plenty of companies attempting to bring new solutions to market. Some would say too many.
Too much choice only leads to confusion. For physical, in-store payments, the “confusion threshold” is much lower than online. Online payments buttons are very convenient and, in my opinion, within limits, the more the merrier. This certainly is not the case for in-store check-out, where too many payment options slow down the check-out experience.
What we need are new technology solutions that ease the check-out experience and we need the market to consolidate on a selected few to avoid confusion. Before any of this can happen, we need to accept a few facts.
Trust is paramount to payments, much more so than most other technology application scenarios.
First, trust is paramount to payments, much more so than most other technology application scenarios. Payments have to work and for consumers to use a solution or technology, they need to trust it. Establishing trust requires fluency, familiarity, and of course, the solution must work as expected. It also matters how quickly a transaction goes through. Have you ever questioned if an online transaction went through “too fast” or involved “too few steps?” A trusted solution requires enough steps, not too few and not too many, to feel familiar and fluent. I would argue that of the payment methods I’ve used, outside of cash and cards, the ones I trust the most are Amazon’s online experience, and Apple Pay as well as contactless cards for in-store payments.
With such a fragmented and scattered approach to approvals, we are bound to have many co-existing solutions in the market
Another fact about the payments industry is the many approval authorities which are involved such as PCI, EMVCo, the card brands, and the processors/acquirers. With such a fragmented and scattered approach to approvals, we are bound to have many co-existing solutions in the market. This is only exacerbated by the fact that some of these approvers are also market players.
The final thing I will point out about our situation is the strong cash position among the market players. If you have very cash rich market players, “losing” solutions can stay in the market for very long, while making massive losses as long as their other business areas continue to provide them with significant positive cash flows. A good example of that is Microsoft with Windows Mobile. Microsoft has kept that solution alive well beyond the time of what a less cash rich company would have been able to. A lot of the players in the payments space are very cash rich and with the big Silicon Valley companies entering the foray this is obviously even more the case. They can keep a losing solution in the market for very long and unless it hurts their brand, such solutions may stay in the market as long as the winners. Having losing products in the market only adds to consumer and merchant confusion, and slows down the process of consolidation and settling on an industry standard.
Luckily, in the Payments space we have seen a couple of recent developments pointing in the direction of consolidation of choice. One is in Denmark where the two competing P-to-P platforms, MobilePay and Swipp, are now effectively one. As much as I would like to claim grandeur for my home country of Denmark, it is a very small market. Another case from a much larger market is when Apple Pay and MCX fought it out in the US, with Apple as the eventual winner. However, since then plenty of others have entered the market such as Samsung Pay, Google Pay, and as of very recently, IBM Pay and Ingenico’s TapHero.
Today, while Apple Pay could arguably be the most successful of these alternative payment methods, it still falls short in some areas. In next week’s blog, we’ll take a look at what the perfect payments solution looks like and see how close some of today’s leaders are to getting there.
Insights from Lars Pedersen, Creditcall CEO