June 20, 2019

By Steve Villegas, vice president of partner management at PPRO

The payments landscape looks far different than it did even five years ago, and it will likely undergo even more rapid changes in the next five. We are moving further into the digital age where a large portion of consumers include Gen Z, or those born after 1996. This group will make up 40% of all U.S. consumers by 2020 and shops far differently than previous demographics.

Born into the digital age and experiencing the rise of the gig economy and on-demand retail, Gen Z consumers seek instant and seamless online shopping experiences. They have grown up in the digital revolution and because of this, demands superior experiences through technology as it's all they have ever known. The payments industry needs to follow the lead of other sectors to innovate solutions that meets the needs of a changing consumer base. How Uber revolutionized ride services and the rise of direct-to-consumer brands cutting out third-party middlemen is a great example. Payments must look to chart a similar path.

Gen Z consumers are looking for instant gratification in their purchases. If they see an interesting pair of shoes or handbag on the street, they can pull out their phone and order them in real time.  Our payments infrastructure must make this a viable process on every corner of the globe. A consumer in Belgium should be able to order goods in Australia instantly by the payment preference of their choice.

Too often, the focus on the digital consumer is lost in the entire payments value chain. Payment solutions are created without factoring in the specific needs of consumers in different regions across the globe. Consumers should be the first touchpoint in the value chain, not the last. The payments industry must craft solutions backward, working from the consumer out. This channel first mindset must change as omnichannel thinking is a concept of the past and consumer-centric is the way of the future. Payment solutions must cater to consumer preferences region by region to keep pace with the next generation of shoppers.

Local payment methods are a key to unlocking global e-commerce and ease the payment process for consumers. LPMs are those outside of your traditional credit card and brands such as Visa and Mastercard. They help facilitate the needs of different geographies, cultures and domestic economies across the globe.

Worldwide, card penetration sits at a shockingly low 18.4%. This is proof that scaling globally requires thinking outside of just card payments. The highest growing markets in the world have large populations who continue to conform and adopt everything digital, including the way they shop and pay online.

The payments industry also has the ability to drive financial inclusion and connect the global economy — only if they keep the end consumer top of mind. LPMs are creating the gateway to a more connected global economy, but it is up to merchants to offer these payment opportunities. Digitally minded consumers have seen innovations across many industries fundamentally shape how they live and work. It is time for payments to take this same approach.

Consumer needs

How can we best mirror our services to fit the changing needs of a growing, global consumer base? One way is to focus on the consumer throughout the entire payment process. Almost 50% of consumers will end a transaction if their preferred payment method is not available, so being able to meet the needs of the consumer is vital. These needs vary from region to region, which means offering a cookie cutter solution will not work when selling in separate countries. For example, in Asia the preferred payment methods are mobile e-wallets making up 40% of online transactions. While in North America, credit cards are preferred at 57% of all online transactions.

Reaching Asian consumers means offering more mobile-focused payment methods. In China, there is a 56% smartphone penetration and 80% of the population is banked. In this case, cash and card payments are not effective ways to target these consumers. Ideal payment methods to reach consumers in this region are mobile wallets like Alipay and WeChat Pay. Offering these payment methods will lead to more success and usage. A young, growing middle class is largely developing in Asia, so taking these needs into consideration is imperative. These consumers are making instant mobile purchases, so U.S. merchants must cater to the way they pay to tap into this growing spending power.

However, not every region pays the same. For this reason, it's not opportune to take an approach in one region and duplicate it across others. For example, Mexico is heavily reliant on cash, making up 26% of their online transactions. The country also has a low banked population at 37%, compared to the global average of 68%. Online merchants looking to sell cross-border to Mexican consumers need to consider these needs when crafting solutions, and avoid forcing different payment solutions in hopes those become adopted.

Oxxo is an LPM that allows many unbanked or cash dependent Mexican consumers to participate in global e-commerce through a cash voucher system. Solutions like Oxxo can help further connect the global economy while catering to the specific payment needs of various consumers. The mindset of putting the needs of the consumer first can drive financial inclusion across the globe.

Cultural and business differences across regions lead to stark changes in payment preferences across the globe. From how consumers pay to the methods they trust is all built into their specific regional culture. In many parts of Europe, card use is far lower than in the U.S. as many countries opt for mobile e-wallets or bank transfers instead. In the Netherlands, an astounding 70% of transactions are completed by bank transfers.

Many of these consumers do not trust card-based payments and prefer the security that other digital methods offer. The new wave of consumers value efficiency and speed of payments, just as much as feeling secure with how they pay.

Regional differences

Local payment methods are the key to globalizing commerce, data seems to back up this claim showing by 2020, 80% of cross-border ecommerce will be facilitated by a local payment method. As well, by 2021 U.S. cross-border ecommerce will reach $203 billion yet only 36% of U.S. online merchant currently sell cross-border. With innovations in payments making transactions simpler and frictionless, it is now up to the merchants to expand and connect globally.

LPMs serve many purposes and can also be the rail to drive financial inclusion. There are solutions that cater to the needs of both cashless and cash-heavy populations — it is simply a matter of implementing different solutions according to the needs of various regions and their specific consumer behaviors.

With the advancement of technology, it is clear that all industries must shift to become consumer centric. Payments is no different and the solution providers and merchants who fail to change their mindset will be left in the dust. This industry is tied to innovation. What is needed is more players stepping up to shape the consumer experience from the inside out, keeping the consumer as the primary focal point throughout the payment process. At the end of the day, the payment experience will continue to define which companies that consumers choose to engage with. Those that cater to the needs of digital consumers will capitalize on this global shift, while those who stick with channel centric strategies will pay a very steep price.

Topics: Mobile Payments, Trends / Statistics

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June 19, 2019

Democratic congresswoman Maxine Waters, chairwoman of the House Financial Services Committee has called for Facebook to halt development on its cryptocurrency Libra until Congress has had time to take a look at it, according to a report by BBC. Facebook recently announced plans to launch its cryptocurrency and Calibra wallet in 2020.

"Given the company's troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a crypto-currency until Congress and regulators have the opportunity to examine these issues and take action," Waters said.

Other Congress members expressed concerns about Facebook becoming too powerful.

"We cannot allow Facebook to run a risky cryptocurrency out of a Swiss bank account without oversight," Sherrod Brown, U.S. Senator, said in a statement.

"We look forward to responding to policymakers' questions as this process moves forward," a Facebook spokesman said.

Topics: Bitcoin, Mobile/Digital Wallet, Mobile Payments, Regulatory Issues

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June 19, 2019

Mobile security firm Trustonic said it entered a partnership with fintech Rubean AG and payment solutions firm CCV to develop a mobile point-of-sale solution that accepts high value transactions using a PIN code on a range of smartphones.

The company said that using smartphones as mobile POS devices would allow small retailers, traders and SMBs to save money on expensive hardware for payment acceptance, as well as boost staff efficiency and customer satisfaction.

"The trend of using smartphones as mPOS terminals is disrupting and democratizing the payments ecosystem, but hacking and malware threats are real concerns,"a spokesperson for Trustonic told Mobile Payments Today. "Without strong app security, cybercriminals can steal sensitive data used in smartphone transactions to commit payment fraud."

Rubean and CCV are set to launch a smartphone only payment terminal with PIN functionality with multiple card networks and partners throughout Europe.

Topics: Handsets / Devices, POS, Region: EMEA, Security

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June 19, 2019

Tally, a San Francisco-based fintech that uses automation to helps consumers manage debt and save money, said it raised $50 million in Series C funds led by Andreessen Horowitz.

Prior investors, including Kleiner Perkins, Shasta Ventures, Cowboy Ventures and Shay Ventures, all participated in the round, according to a press release. The company has now raised $92 million to date.

Company officials said the new funding will be used to grow the business and build out a fully automated consumer finance platform.

"We take automation for granted in so many areas of our lives, but automation has been slow to come to financial services," Angela Strange, a newly named director from Andreessen Horowitz, said in the release. "Too many Americans are drowning in credit card debt, in large part because the system is too complex — by design."

Topics: Mobile Apps, Mobile Banking, Mobile Payments

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