Are Frictionless Mobile Payments Right for Issuers?
Black Friday 2016 was an important day for mobile payments. Online shoppers in the United States made $1.2 billion of purchases via their phones and tablets, marking the first billion-dollar mobile shopping day in U.S. history (and a 33 percent increase from the previous year), according to estimates from Adobe. Clearly, mobile payments are growing, and are here to stay.
I recently participated in a webinar, Reducing Payment Friction Through Mobile Technology, where we discussed the challenges and benefits that mobile brings to eCommerce, particularly in the area of frictionless payments. In the webinar, it was acknowledged that Uber is currently the “poster child” for frictionless mobile payments, and the question was raised whether the Uber model should be something that everyone should aspire to.
The idea around frictionless payments is that a consumer only needs to set up payment credentials once during a digital buying process; the consumer can easily make subsequent purchases without having to choose a method of payment for each successive transaction. The Uber model does this particularly well.
But with respect to card issuers, my feeling is that while providing a frictionless consumer experience is important, issuers stand to lose quite a bit if frictionless payments becomes their sole focus.
According to a recent FICO study, 49 percent of Millennials hold between three and five credit cards, which means that issuers are competing for share of wallet. Issuers must continually find ways to deliver value across the whole payments process, a significant portion of which is not made through mobile payments.
As such, supporting frictionless payments is really an exercise in staying relevant and maintaining strong relationships with the customer. Issuers achieve this by providing security, rewards, and other elements in the customer buying journey so that when a frictionless situation is presented, the consumer chooses the issuer’s card to support that ongoing payment type.
A big part of staying top-of-wallet is the need for FI’s to differentiate themselves and engage consumers with their brand, not just from other issuing competitors, but also from tech providers as well. Issuers need the ability to rapidly bring to market new payments products and features and react quickly to market feedback—in other words, swiftly taking payment ideas from sandbox to scale.
Moreover, customer engagement is crucial for issuers seeking to enhance their customer relationships and build brand loyalty. With frictionless payments, issuers lose both the immediate interaction with cardholders and chances for additional upsell opportunities, not to mention the loss of relevance to the issuer’s brand.
Staying top-of-wallet must always be the top priority for issuers. While frictionless payments are important, they are but one aspect of the larger payments ecosystem. Rather than focusing exclusively on frictionless payments, issuers should keep their eyes on the larger prize of maintaining top-of-wallet status and adding value-added services and products before, during, and after the purchase itself through contextual payments.
Learn more about contextual payments in this.