Non-cash payments: five minutes to revolution
At the end of XIX century, Edward Bellamy, a writer and fantast, allowed his novel’s characters to receive money into payment cards. For almost a hundred years non-cash payment models and client identification methods were improved – from mechanical reading of the card’s surface to microchip data storage. Retailers aimed to record operations faster and more accurately, and for the clients cards were very convenient and allowed credit purchases. Today we see a new transformation in the field of non-cash payments – payment card and mobile phone integration.
As smart phones become more and more popular, new ways to make them „work for you“ are popping up in order to make the owner’s life even more comfortable (and additional data flow for the mobile operators). Capacity of phone processors already allows for secure mobile payments, but market players are yet experimenting with various mobile payment models, let’s call them eWallets. Let’s review six main models:
„Prepaid wallet“ – it‘s a program (application) on your mobile phone where any user can create an account and make payments to any other owner of such „wallet“ or store with such system, after adding funds to own „wallet“. A few examples of such „wallets“ – Paysera, PayPal. MokiPay. The main disadvantage of such system – the client has to take time to prepare and administrate the new account. Likely, the popularity of such solution will depend on its spread. Several people will need a „prepaid wallet“ that works in every tenth store.
“Payment card wallet“ – an app on your mobile phone, where any user can add own bank payment cards and make payments in stores or transfer money to any other user of such „wallet“. Some examples are V.me by Visa, WioPay. This solution is convenient, because it broadens the functionality of bank payment cards and the client doesn‘t have to create or open new accounts.
“GSM operator wallets“ we already use when paying for parking or other minor Services – it‘s a mobile app where you pay for goods or services when you receive your mobile phone bill. The system is convenient when paying for minor goods or services, but change in customer behavior might take time – bigger purchases might appear strange on your phone bill, and administration of additional payments probably will be a big headache for GSM operators. A few examples of such solutions: M-pesa, Isis.
“Bank mobile wallets“ – bank apps on your smart phone where bank clients can make payments to any other owner of a bank account. It‘s also possible to pay in some stores and online, and banks analyze these scenarios very carefully. Few examples: Medicinos bankas, Barcklays Pingit. It‘s probable, that these solutions will be the ones to transform payment cards into mobile wallets.
“Retailer wallets“ – a retailer‘s mobile app similar to mobile store, where one can chose and order goods or services and pay onsite. For example, „Starbucks, Coffee Inn. It‘s a one-retailer solution, and its expansion is as big as the expansion of the network itself.
“Loyalty and discount wallets“ – an app in your smart phone that allows to add many loyalty or discounts cards you have, accumulate and collect coupons, and use them in retail. Some examples – Lemon, Lwallet.
It‘s yet unclear which type of eWallet will dominate in the future. It‘s probable, that there will be several commonly accepted solutions and plenty of niche systems, developed by retailers. The popularity of the payment system will be determined by users – eWallet must create most benefit and least hassle. The priority factor is also important – the first eWallet to penetrate the consumers‘ lives has the greatest chance to settle there permanently.
Electronic wallets open up possibilities for the appearance of new functions. A couple of most interesting new functions are „self-service payment“ and „remote payment“.
„Self-service payment“ is intended for people who‘d wish to pay for lunch, gas, cup of coffee or even a bigger purchase with their mobile phone without the help of cashier or waiter. Just imagine all the situations when you‘re forced to waste time because you can‘t get your waiter‘s attention, or can‘t pay for your gas at a station, because there‘s a bunch of people paying for hot-dogs, or you‘re in a hurry and the long line irritates the hell out of you. „Self-service payment“ allows you to pay on your own and be on your way in no time. Test payments were done in Lithuania (at Basilico and TakeWay restaurants), and not a single customer said it was inconvenient and they wouldn‘t want to use this service again.
“Remote payment” – a way of remote ordering and payment or money transfer. Suppose, you want to order water at a sports arena, but it’s far away. If the retailer agrees to bring the water to you, you can order and pay for it without leaving your seat. “Remote payment” would allow you to give money to your kids, pay for their purchases via internet or pay in other situations, when the owner of the wallet is one person, and the buyer – another.
If we look through the customer’s eyes into the reasons for using eWallet (why is cash or cards so bad?), we should take into account innovation and convenience. eWallets allow for such payment scenarios that aren’t possible with other means of payment. Physical contact is essential when paying with other means, but is not necessary when using eWallets. Some of the scenarios:
- Lunch time at a restaurant or a café and you just won’t get the attention of the waiter to get your bill. You can pay by yourself with eWallet.
- You pumped gas at a gas station and don’t’ have to go to the register to pay. The receipt is received in your eWallet, you just enter your PIN and pay.
- You’re enjoying the match at a sports arena, but in order to get drinks or snacks you have to wait to half-time and stand in line that goes on forever. Using eWallet you can order and pay while sitting in your seat just by scanning the thing you want from the back of the seat in front of you.
- Outdoor advertising or coupons provide additional sales possibilities with eWallets. Just print the item’s QR code containing all the information, the customer scans the code using eWallet, receives a receipt that has to be paid – the goods or services are ordered.
- Self-service in retail is probably one of the more interesting scenarios. You come to the store, chose an item and in order to pay for it, scan the item’s barcode with your eWallet, enter your PIN code – and that’s it! No more queues.
- How often do you have trouble searching for cash for your kid’s lunch in the morning? When using eWallet, you just have to choose your child’s phone number from your address book and transfer the money. The funds will reach your kid’s bank account or your sub-account if the child is underage.
- You’re on your way to work and want to get your favorite coffee. eWallet allows you to order and pay while on the road, you just have to drive through to get your steaming coffee.
- Your child is buying things online, but doesn’t have a credit card. eWallet solves this problem. The receipt will come to your eWallet, you just have to enter the PIN code even though you’re on the other side of the planet.
- Last, but not least, all loyalty or discount cards become virtual, with eWallet all discounts will be applied automatically.
Marketing consultant A. Savickas says, that eWallet can radically change the established retail business models. “In its time, IKEA presented a revolutionary idea – offered to assemble furniture by yourself. As well as gather the merchandise in the warehouse. Part of the customers liked it, as it allowed to save money. If clients agree to be IKEA’s fitters and warehouse workers, I can’t see any reasons why they couldn’t be the cashiers” – considers A. Savickas.
According to the marketing specialist, contraposition between different sales channels – e-trade and traditional retail – is very apparent at the moment. Some e-retailers openly advise to use consultations of the traditional retailers, and then buy cheaply from their e-stores. “There’s no solution for this problem yet, I believe new sales methods should appear. Models that would satisfy the needs of the customers who want to see the item and want to pay less for it when buying online. eWallet could be a wonderful instrument in this case – let your customer into your showroom or even the warehouse, create the possibility to pay on his own – and you have a brand new business model” – A. Savickas shares his thoughts on the topic.
At this age of interesting technological breakthroughs, Lithuania is a perfect place to test new solutions. We have a great internet infrastructure, working business models, sharp competition and demanding customers. Solutions created and tested in Lithuania, can later be successfully implemented in other countries to achieve greater scale. WoraPay has already created the infrastructure allowing for eWallet payments in Lithuania. Every day new payment spots and scenarios appear. Banks and other financial institutions change their mobile apps into eWallets.
Aurimas Bakas, WoraPay CEO, mobile: + 370 650 72202, email: email@example.com
Audrius Savickas, marketing consultant, mobile: + 370 698 33115, email: firstname.lastname@example.org