Cashless payment acceptance on the rise worldwide +++ User numbers in Germany still lagging behind +++ Most adopters in Middle East, Africa and Asia +++ Mobile payments in China surpass US
With mobile payment, EuroShop, The World´s No.1 Retail Trade Fair taking place from 5 to 9 March 2017, will cover a topic experts say will revolutionise retail in coming years. Mobile payments are fast, efficient for the retailer and convenient for the shopper. Few in the industry doubt that this innovative cashless payment method will prevail in the long run.
Shoppers using less cash
Acceptance of cashless payment methods is on the rise globally. Even German shoppers – traditionally rather devoted to cash – are increasingly paying with plastic. According to the latest credit card study by the Cologne-based EHI Retail Institute, the volume of card payments has tripled since the mid-1990s. Even in 2016, though, more than half of all sales are conducted as cash transactions.
Especially for small amounts. The majority of transactions in German retail ring up for less than €15. The EHI calculated an average purchase amount of €21.18 in retail chain stores across all industries. This figure falls well below the €25 threshold for contactless payments not requiring additional PIN or signature authentication. That rule is aimed at significantly reducing the time it takes to process the payment transaction at the register. For a long time, card payments haven’t been able to touch the average cash transaction processing times of 15 to 28 seconds, depending on industry, the EHI has calculated. Contactless payments using NFC (Near Field Communication) now make it possible.
NFC picking up speed
The technical perquisites for a more widespread dissemination of NFC technology are mostly in place now. The banking sector as well as credit card providers are in the process of issuing NFC-enabled cards. Things are already looking good from an acceptance point of view, as well. The EHI survey found that 60 per cent of the largest retail companies in Germany will be able to accept contactless payments by the end of 2016, which means they’ll also take NFC-based payments via mobile devices.
Not all mobile phones are equipped with NFC technology yet. This includes even newer iPhones, which are NFC-enabled but can only be used for the proprietary Apple Pay process. Transition technologies such as QR codes or retrofits using NFC codes embedded in stickers must be used to reach all smartphone users today. The mpass service offered by the mobile providers O2, Telekom and Vodafone deploys the latter solution.
The shopper decides
The reason user numbers in Germany are negligible so far has less to do with a lack of technical capabilities and more with a lack of consumer understanding and trust. For consumers, the situation is confusing and not particularly transparent. The various methods are based on different technologies and usage instructions. The procedures are unfamiliar and haven’t been learned yet. Making matters worse are security and privacy concerns.
A breakthrough requires shoppers to understand and accept the benefits of these new rapid payment methods, concludes the EHI study. International examples show that customers are principally willing to accept the new technology. A recent MasterCard study found that 41 per cent of consumers in the UK prefer mobile payments. A fifth of all credit card payments are already contactless in that country.
Market growing internationally
The payment provider has also discovered that acceptance is greatest in the Middle East, Africa and Asia. Looking at mobile payment amounts, the Euromonitor says China doubled in volume with $235 billion last year, surpassing the US. The market for mobile payment systems in that country grew by 42 per cent to $231 billion. By the end of the year, a total of about $600 billion in sales will have been handled using mobile payment. Current forecasts predict that volume to at least double over the next five years.
Providers positioning themselves
It’s hardly surprising, then, that lots of providers would love to grab a piece of this rapidly growing market. Besides the banking industry, mobile network operators and payment service providers, they include big data companies such as Apple, Google and Microsoft.
Among them, Apple Pay has probably made the biggest splash so far. Following a successful launch in the US, the NFC-based system exclusively for iPhone users has been made available in eight additional countries to date, including China, the UK, France and Switzerland; Russia was added in early October.
Other major competitors positioning themselves in the payment market include Google with Android Pay and Microsoft. It’s generally expected that they’ll gain a foothold in Germany, too. Because of our country’s complex banking system and the large number of partners with which conditions must be negotiated, that process will probably take a bit longer than in other markets.
Scoring points by adding value
In June of this year, Payback leapfrogged all of them. Germany’s leading bonus programme with 28 million customers stepped up to shake up the mobile payment market. Payback users shopping at retailers such as dm Drogerie Markt, Real, Galeria Kaufhof, Aral and Alnatura – plus future partners such as Rewe and Thalia – can now use a smartphone app for cashless payments while simultaneously earning points.
The emphasis, though, isn’t mobile payment per se, explains Payback’s managing director Dominik Dommick: “Entering the payment market isn’t Payback’s primary goal. Instead, we aim to reflect the entire POS benefits chain, from finding the store to collecting points, couponing and paying to electronic receipts. We use a customer mindset to digitally support this entire process.”
Payback is very pleased with the results. According to the service provider, the app has been downloaded nearly 10 million times. About 90 per cent of customers installed the update, which lets them make mobile payments. A majority of retailers use QR codes to facilitate this process, but NFC is also a possibility – that’s the solution implemented by Aral.
Dirk Königsfeld, Real’s marketing director, talks about his experiences from a retailer’s perspective: “The system works flawlessly; it’s fast and simple. Our customers have responded even more positively than we expected.” He’s convinced that Payback can take hold as a firmly established mobile payment system in Germany in just a few months. “That’s because we’re approaching the issue with a service mindset, not like others before us who wanted to set a standard”, says Königsfeld. “As a multi-partner programme, Payback is present in half of all German households. Who else could make mobile payment a success and a fixture in German retail”, he says, discussing Real’s involvement.
More than just numbers
Mobile payment plays a secondary role for Edeka, too. The retail group has introduced a shopping app enabling fast and easy purchases at its discounter Netto and a growing number of Edeka stores. Shoppers can make mobile payments while automatically redeeming coupons and earning points. The application was developed by Valuephone, a GK Software subsidiary. Managing director Stefan Krüger considers mobile payment a necessary feature for what he calls “mobile customer engagement”: “It’s all about giving customers who are digitally navigating retail a comfortable way to get information along with personalised offers and easy-to-use transaction functionality. Mobile payment is on that list.”
Krüger is convinced that the mobile payment market will slowly but surely gain steam both in Germany and internationally. An ever-tighter network of locations accepting the payment method is developing. PR efforts and incentives will help to boost the number of transactions – but only if the solution is an integrated one which offers more than just a payment method. “It must make sense for the customer and represent a combination of benefits”, as he puts it.
Volker Steinle, Germany director for payment service provider Adyen, also considers the issue as one component in a larger context. To him, mobile payment is the last missing piece in omnichannel retailing. “Retailers must abandon their silo mindset and merge their systems, which includes payment”, pleads Steinle. The provider’s product enables retailers to accept payments online, in-store and in-app using a single integrated solution.
Steinle advises retailers to refrain from saving sensitive financial information on their own computers since data breaches could lead to stiff penalties and enormous damage to the company’s reputation. The systems deployed by financial institutions and payment service providers are much better suited for that task because they comply with the highest security standards, which are constantly checked and adjusted.
The future is mobile
Smartphones are increasingly becoming shopping companions for consumers, who use them to save shopping lists and compare prices, search for products and reviews, collect coupons and vouchers, and shop online. More and more often, they also want to use them to pay. Retailers have to adjust if they don’t want to lose future sales.
Now is the time to create the conditions that will enable mobile payments at the check-out arear. EuroShop 2017’s Retail Technology area (EuroCIS, Halls 6 and 7a), offers the ideal platform to learn everything there is to know about market-relevant solutions.
EuroShop 2017 is open for trade visitors from Sunday, 5 March 2017, to Thursday, 9 March 2017, daily from 10.00 am to 6.00 pm. 1-day tickets cost EUR 70.- (EUR 50.- purchased online beforehand (e-Ticket)), 2-day tickets cost EUR 90.- (EUR 70.- purchased online beforehand) and season tickets are EUR 150.- (EUR 130.- purchased online beforehand). Admission tickets include a free return trip to EuroShop on public transport marked VRR (Verkehrsverbund-Rhein-Ruhr).
In 1966 EuroShop was organised for the first time by Messe Düsseldorf and is held every three years. The EHI Retail Institute acts as the event’s conceptual sponsor. The last EuroShop in 2014 registered 2,229 exhibitors from 56 countries on over 116,000 m² of net exhibition space and 109,496 trade visitors, 63% of whom came from abroad.
For further information go to www.euroshop.de.
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Correct as of: October 2016