In the first post in this mini-series, we introduced how and why Scandinavia is the clear leader globally when it comes to mobile payments. I also spoke about some key learnings when introducing a mobile payment solution to market.
The next step: It’s not about retail payments
Following a successful launch of person-to-person (P2P) payments the scheme owners quickly started to look at actual payment problems that their growing install base of customers were facing.
In sharp contrast to what Apple, Google and most other mobile and contactless payment initiatives have been focusing on, the actual success from mobile payments comes from addressing a different payment situation altogether.
It’s not about your everyday retail payments. Even though such situations represent huge volumes, most consumers (and retailers) are NOT actually experiencing any problems. New payment options at the “Point of Sale” would not bring in more revenue from fees because nobody bothered to adopt a new payment method that didn’t add any real value.
Sure you can add a synthetic value to such payments, such as a gift, a bonus or 20% off. These things have been tried by most schemes already, in order to drive adoption. But the problem is that such incentives cost money and thus are counterproductive to the goal of making more money.
As long as the solution actually does not provide any real and sustainable value to anyone, there is no reason for the customer to build a new habit. The old habits work perfectly, and the incentives die out just as fast as the strange concepts of paying with your face or your clock.
So what did the Scandinavians do?
They solved problems for under-served merchants
With a popular and still growing P2P scheme the mobile wallets of Scandinavia started to address payment situations that were plagued by two main problems; cash and scaling issues.
Flea markets, charity events, school cantines and sports clubs are (or rather, were) all typically cash driven merchants. All the customers already had the new app so the problem could be addressed simply by enabling a super easy merchant enrollment. Bringing the two sides together.
The merchant doesn’t even need a phone, they can just validate the payment on the screen of their customers phone and hand out the product. This solves the problem of cash. No change, no cash box, no loss, no paper receipts. It’s all accounted for digitally and you can focus on generating revenue for your club, school or organisation.
By adding digital menus to the system, the customer can browse a menu, pick a product and pay for what they want and then simply validate their purchase with a digital voucher. This enables festivals and sports arenas, for example, to handle thousands of customers at express points. All you do is hand out product and validate vouchers. No hardware required.
People already used the P2P feature a few times a month to replace cash or cumbersome bank account based transactions. With the ability to use the system at school, at the sports club, when paying a handyman and in most other situations that were normally hindered by having to pay with cash and/or queuing, you’ve found the two important corners of the magic triangle.
Key learnings about introducing mobile payments to under-served merchants
- Offer a super easy merchant enrollment
- Enable 100% self service solutions
- Build best practice use-cases with known merchants
- Do massive, nation wide advertising which focuses on the benefits for both sides (no cash, no hardware, no standing in line)
From flea market to retail
With high frequency of use, convenience and actual revenue from the under-served merchants who gladly pay to avoid cash and sell more, you can start to look at retail payments. First online, then in-store.
With a huge install base and all the new areas of convenience covered, the customers start to expect that they can use their new favorite shopping tool in stores as well. And because you already have the concept of digital menu and express handout as part of the concept, you may get retailers supporting that – bringing actual value to both sides.
And that’s how they have done it in Scandinavia. Now that the services cover even more merchants of all sizes you get new features like bill payments, spending insights, digital receipts, offers and eventually a whole ecosystem of brand engagement.
Key learnings about introducing mobile payments to retailers
- Introduce fast tracks and pre-purchase
- Introduce one click online payments
- Incorporate loyalty schemes
- Introduce clickable print ads
So, finally, what’s in it for banks?
So, consumers and merchants clearly enjoy the new ways of paying – in Scandinavia that is. But what’s in it for retail banks?
Firstly, by following the Scandinavian model, we believe you are more likely to succeed with your mobile wallet strategy than with any other model. Secondly, when you succeed in getting your app into the pockets of half the population and more importantly, you enjoy high frequency of use; you have successfully secured a new revenue stream from merchant services (that you are alone in providing).
Furthermore you have built and now control a sales channel for millions of customers. This channel is probably the best and cheapest way to acquire new customers. If you sell traditional bank products or more interesting real time credit products… that is up to you, but the Customer Acquisition Cost is unbeatable since it’s your own channel. We know it’s true, but feel free to do the math.
If you would like to enjoy similar success and release your own mobile wallet in your market, AUKA has delivered this success solution to 17 banks already. New features are added to the platform as the Scandinavian market leads the way for next generation financial services. You can benefit from our key learnings.