If you are planning your online business, you need to think strategically as the payment part is the most important touch point with the consumer during his journey on your online/mobile business. The method of payment or currencies supported, channels versus payment methods and risk mitigation are the main topics to be analysed when you set your payment strategy. The other aspect is to analyse the market in terms of consumer profile and payment instrument penetration. Don’t forget, consumer seek the most convenient, secure and cost-effective way to check out rather than the most innovative one.
Let’s look at some statistics about Turkey to understand the market. Digitally savvy banked population is around 33 million out of 75 million. It is surprising to have approximately 10-12 million online shoppers in a country ranked as the second in Europe in terms of credit card penetration. The underlying reasons are twofold: a) online retail ratio is around 1.3%- is still lower than EU average (TUBISAD ecommerce report). This proves there is a large portion of untapped merchant market to move from brick-mortar to online space; and b) consumers should be convinced for the security aspect of ecommerce as half of credit card owners have still not placed an online order. Although overall fraud rates country wide is low, average consumer is heavily questioning the trust and security aspect of ecommerce. The recent issued e-payment and personal data protection legislation are expected to have a positive impact on the consumer readiness for ecommerce.
Current reports provided by leading retail banks in Turkey including Akbank, Garanti Bank and Yapi Kredi Bank show that 75-85% of banking transactions are originated from digital channels – ATM, Internet banking, mobile banking and call center. Mobile is increasing with 10% contribution and internet banking with 25%. The gap between mobile and internet banking penetration is mainly due to fact that smartphone penetration in the country is still below the average of EU and emerging countries. Also, it should be noted that most of the mobile banking apps are replications of Internet banking on mobile headsets without extra features such as wallet or location-based functionalities, UI design.
Based on above trends, banks and retailers are looking to integrate mobiles into retail economy. The challenge here is the increasing number of digital payments / wallet initiatives in the market that is confusing both the merchant and the consumer sometimes. Most are lacking a solid use case where the consumer may benefit from solving a crucial problem. In contrast, the e-wallet vendors creating a “problem” for themselves and then solving it in the context of “innovation” are differentiating from vendors who are trying to solve an existing problem in favour of the consumer. E-wallet vendors are recommended to focus first on finding the right business case to position their app. At the end of day, the real KPI for e-wallet providers would be the number of transaction as a metric for consumer adoption rather than the number of merchant signed or number of app downloaded. Let’s take an example: payment methods such as direct carrier billing that are positioned to solve the unbanked young population‘s problem to play online game have become successful by fulfilling an existing gap. On the other hand, we see mobile wallets claiming to solve consumer’s problem that do not offer a compelling experience and convenience, therefore struggling to gain consumer and merchant acceptance.
The payment ecosystem is mixed with telcos, banks, card processor, PSPs and headset manufacturers; each is pushing hard to take the right position in the equation to own the customer. We experience changing consortiums or value propositions from time to time. It is interesting to see the first movers such as telcos and PSPs which seem a little bit tired to gain traction while banks and card processors are moving slowly but maturely. It could be card schemes as the potential winners by providing digital wallet platforms to the issuer banks to re-market. Although we hear a lot of innovation in the card payment landscape, one part of the payments market has not changed – that is the payments processing infrastructure where the economics of payment have firmly set between issuer /acquirer and card processor. For sure, there are payment service providers that will also benefit from card processor’s digital wallet platforms through integration. The question would be if there is real value-added created by those companies. We see that some PSPs have been revising their strategies to position their app as “mobile commerce app” rather than “mobile payment app” with extra functionalities such as loyalty, digital coupon, targeted marketing and others.
About Erol KayaErol Kaya is Managing Director at Inseva Technology operating in Istanbul. He is a financial technologies, payments, risk and e/m-commerce executive with 17 years of global experience in the international payments industry spanning Europe and Middle-East. Prior to Inseva, he held senior roles from product management to business development at EastNets, a leading payment and security solution provider in GCC and Europe and MNG Investment, Dogan Holding companies.
Company description
Inseva Technology is a payment fraud prevention and mobile wallet solution provider serving to Turkish retail, ecommerce, payment gateway and banking sector. The company also provides consultancy services to leading local and international payment gateways to help them comply with Turkish e-payment law and directives and asses the market from consumer and merchant point of views.
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