By Christophe Bourbier, President of Limonetik.
We have seen an explosion in wonderful inventions in the area of payment. Yet the real challenge isn’t there… The real battle ground isn’t over the area of technological ingenuity and innovation; it’s the “deployment strategy”.
Innovation is the ability to create value by bringing in something new in a specific area, all the while ensuring the new thing is appropriated by users: it therefore prescribes to an applicative outlook (Source Wikipedia).
What do we see as regards payments?
A priori an explosion in wonderful inventions: we can now pay with our mobile, soon with our finger, with or without card, with or without contact, with a QR code or a simple photo of a bank card, in town, remotely, on the bus, on the underground, in front of a computer, in front of the TV, etc. Innovations, often technological, which make life easy for the user and from time to time traders too, but also strengthen security and immediacy or mobility of payments.
An impressive quantity of resources is invested to build the “killer app” for payment, trendy innovation which will be able to replace bank cards, cheques and notes and which will dominate globally. Incidentally, the more trendy the innovations are, the more fund raising seems significant…
Yet the real challenge isn’t there… The real battle ground isn’t over the area of technological ingenuity and innovation; it’s the “deployment strategy”. The question shouldn’t be “what is your innovation?” rather “what is your strategy to ensure an effective deployment of your innovation?”. You need to spend 1 % of your time on the first question and 99% on the 2nd!
Yet this 2nd question in the world of payment is even more complex as:
1) There are two deployments to ensure simultaneously: a deployment for users, those who pay and a deployment for traders who are paid. To be quick you need to adapt to existing uses and to be the most “technologically compatible” with the systems in place. Of course with different uses and compatible technologies depending on the regions and the countries it is necessary to adapt to each case.
2) These two deployments depend on each other and the critical mass of users (payers and payees) converted on both sides: in order for the “paying customers” to use a new payment method, it needs to be accepted by a maximum number of “trader customers” and to be used by traders, you need to prove that this payment method is used by a maximum number of “paying customers”.
In the case of mobile payment, smartphones which are open, compatible and already used by over half of the French population simplify the deployment but that isn’t enough.
Let us imagine a new trendy payment app which allows you to pay with your mobile in all stores, contactless, in a secure way, without having to enter long boring codes, let’s imagine it is downloadable in two seconds, compatible with all smartphones, with a bonus introductory offer of a €10 discount offered on the next 137 payments. This new app has the opportunity of generating a big buzz and getting downloaded a lot.
However, if for the trader, accepting this new trendy payment requires installing a new module on his cash register, which, moreover, perhaps isn’t possible without changing tills and that may also require updating the existing fleet of point of payment terminals, or worse still replace them, or it involves a new cashing procedure that he needs to link to his accounting system … then it is highly likely that he will take time to adopt this system, certainly more than a year.
During this period customers wait, spend all of the 137 discounts in the few “pilot” stores then move on to a new payment system that is even more trendy, then it’s a failed deployment.
Therefore yes, technology is important but the real battle, the R&D efforts, innovation itself, must reside in the deployment strategy whether on the Internet or in the physical world, you need to know how to respond to the following questions:
1) Why will the trader make the effort to install the new system? How many new clients will it bring him and when? How much additional turnover can he generate? What improvement in his conversion rate or what increase in his average basket will he see? What customer retention and communication options will it bring him? The bigger the trader the more significant the barriers to installation will be and the more the added-value will have to be proved.
2) Can this system be adapted technically quickly? Is it immediately compatible with his accounting system? What about his cashing system? Whether they are a franchise or independent, online, offline or both, is its interface different to the traditional cashing interface?
If tomorrow Apple and Amazon wanted their payment method to be accepted by a large number of traders, their deployment would be facilitated due to the fact that they already have a critical mass of paying users. They would no longer need to convince the trading sites.
This is also the case for flash’N pay by Oney Banque Accord allowing payment by mobile via QR code developed by and for Auchan. Auchan equips both its tills and its customers with this new wallet …
In the physical payment sector we can take the example of the success of US by Square. They have equipped traders with a payment system via a low cost bank card, as simple as using Point of Payment Terminals, but without having to buy the terminal: the only tool necessary to accept payment is a smartphone or a tablet. Square is dedicated to professionals who are often independent and don’t have cashing equipment. The magic of the system relies on the fact that purchasers, or payers, are the ones already equipped with bank cards: there was therefore no double deployment to ensure, no critical mass to reach because it was already there. This also caused no complication in the payment experience for them.
Online the rapid deployment of new innovative payment methods in many stores, in many countries and with new payment rules can be a real route to growth.