Rene Pelegero has long-year experience as seasoned payment innovator. Having worked with many leading players, including Amazon and PayPal he developed first-hand experience in payment innovation, both from a conceptual and operational angle. He is one of the panel members of the Disruptive innovation panel to be held on March 21st 2013, during the EPCA Payment Summit, directly after the keynote session with IMD professor Michael Wade.
The Paypers sat down with Rene Pelegero for a pre-conference interview to discuss his perspectives on the convergence of payments and loyalty, as well as innovation and challenges in the mobile payments space.
The mobile device has emerged as a useful tool that facilitates not only payments as such, but also for user authentication (can be used as a security token), loyalty, advertising and couponing. Is convergence the IT trend for the years to come as far as mobile financial services are concerned?
Very much so. The newest mobile phones are small, powerful and portable computers after all. They can do most of what we could do with our computers at home with the difference being that we can take all this functionality with us, everywhere we go. The convergence of e-space with the physical space will be the key trend for the next few years and developing mobile applications that leverage these capabilities will demand a lot of resources, not only from IT, but also from business and product managers as the problems to be solved will be more about the business models than about the technology.
Given the fact that the world of commerce is now fully embracing mobile technologies, is it realistic to expect that the mobile device will replace the wallet in customers’ pocket? What is your vision on the emerging mobile payments ecosystem? Where are we now, how is innovation taking place and where are we headed next?
The word we must remain focused on is “commerce”. Commerce is many things, not just payments. Commerce is helping consumers find what they are looking for; commerce is offering goods and services at a competitive price; commerce is merchandising and offering coupons and discounts; commerce is tracking usage and loyalty; and commerce is also helping buyers track and administer purchase information whether for accounting or tax purposes.
For mobile payments to be successful, they must be successful on mobile commerce first. What does this look like? Imagine the following scenario. Joe is driving through town when he spots a new gelato shop he has heard good things about. He finds a nearby parking spot and is unconcerned that it is a metered spot even though he does not have loose change. He pulls out his mobile phone, launches his Mobile Commerce App, scans the QR code in the meter, and selects the length of time he wants to park for. Joe likes his new smartphone but recalls that he could have also made the same transaction using SMS with his old phone.
The gelato turns out to be fantastic and Joe decides to buy a quart. As he prepares to check out, his Mobile Commerce App advises him that he has a discount coupon, which he received via e-mail the previous week, to get a second quart at half off. Joe grabs another quart of a different flavor and enters the discount as an additional tender. To check out, the Mobile Commerce App generates a bar code, which incorporates the discount and which the gelato merchant’s POS scanner reads. This exchange causes the POS to send a message to the Mobile Commerce App’s service provider to authorize the payment. No credit card number is sent from Joe’s phone to the merchant’s POS.
The service provider checks Joe’s payment settings. Even though he has a credit card stored, Joe prefers to make low value payments like this one from his checking account and, because he does not want to pay a debit card use fee, he has authorized his service provider to directly debit his checking account. Joe receives a message on his mobile asking him for his PIN to authenticate and confirm the payment. When the service provider receives Joe’s PIN, the transaction is approved and the merchant gets an immediate confirmation of payment in a message similar to a credit card authorization reply. The merchant receives the funds the following day through an ACH credit initiated by the service provider in the same manner as a credit card payment but at a much lower cost.
Joe is happy with the transaction. It went smoothly and he received a discount as well. He also is satisfied that none of his financial information was shared with the merchant. Additionally, he is glad that the Mobile Commerce App will automatically upload the receipt information from this purchase to his Personal Finance Manager eliminating his weekend chore to enter receipt information.
Mike, the gelato merchant, is also happy. He was able to add-on the discounted sale of a second quart at the POS, and the transaction took the same amount of time as processing a credit card transaction. Using an intelligent device such as a tablet computer at the POS, Mike can actively manage his marketing campaigns and check coupon redemption in real time, minimizing the possibility of fraud and eliminating the manual work of looking up printouts. Mike can also get information back from the Mobile Commerce App service provider on whether the customer is new or repeat and, if the latter, he can offer discounts or “free” products in recognition of the customer’s loyalty. With this new device Mike not only accepts a new, potentially less expensive, method of payment but he can still continue accepting credit cards through a card reader adapter.
Many other functions could be included in a Mobile Commerce App, such as geolocation services where, consumers could be directed to the closest (or least expensive) location to find a desired product. Also, with the proper consumers’ permissions in place, a merchant could send discount coupons to consumers who happen to be near a merchant’s store in real time. Another highly desired function from a consumer perspective is a coupon management facility so that coupon availability and value are evaluated when searching for a product or checking out at the POS.
Readers may argue that most of the functions described are already available through different mobile phone applications and this is a correct perception. However, many of these functions are being developed as stand-alone, “point” solutions. There are stand-alone parking payment solutions; there are also couponing and discounts that can be used on one’s mobile at the POS; and there are indeed a number of loyalty solutions. However, the point of the above scenario is to demonstrate that integration delivers value that extends far beyond payments and that a comprehensive solution providing a compelling proposition to both consumers and merchants simply does not exist in the marketplace yet.
As far as the adoption of m-payments by consumers is concerned, where do you think the main challenges come from? In your opinion, how far are consumers willing to trust their mobile phones for financial transactions / payments? Consumers are not “turned on” by m-payments any more than they were “turned on” by e-payments. Surveys continue to demonstrate that consumers are, at best, lukewarm about m-payments. As noted above, consumers will adopt m-payments when consumers adopt m-commerce and consumers will adopt m-commerce when a compelling value proposition is presented to them; such value proposition being an integrated offering that help find an obtain goods and services leveraging the capabilities and portability of mobile platforms, as noted above.
EPCA Payment Summit 20-22 March 2013 BrusselsStay up to date on mobile payments, e-payments, e-identity, e-invoicing, e-finance, infrastructures, corporate payments and more. The EPCA Payment Summit is an excellent way to learn and stay in touch with new concepts, strategies, alternative techniques, global best practices and fundaments of payments and transactions. The 2,5 day program consists of dedicated pre-summit workshops followed by a plenary program and in the afternoon a specialized track program (of choice). Top professionals and thought leaders from all over the world will present key developments in payments and transactions with ample room for in depth discussions.
Please feel free to contact the organizers with any questions:TransactivesMireille Steenkamer, Conference & Event ManagerT +31 (0)20 6580651 E info@transactives.com W www.epcapaymentsummit.com
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now