"In Germany, true mobile payment is still in its infancy"

© E-Commerce-Center (ECC) am IFH Köln

Svenja Groß: "The solution that best combines the channels will prevail."

Mobile payment solutions using smartphones and tablets have been said to stand before their breakthrough on the market for quite a time now. During 2013, the point shall be reached were they enter the mass market with force. In the interview with EuroCIS.com, Svenja Groß, Project Manager at the E-Commerce-Center (ECC) at IFH Köln, explains which solutions are in use at this time and which have the best chances to prevail on the market.

What is the current situation when mobile devices (Smartphones/ tablets) are used to pay in Germany and how else are they being used in the buying process?

Our studies show that more than one third of German online shoppers already bought items online with their mobile devices (e.g., “Success Factors in e-Commerce - Germany’s Top Online Shops Vol. 2“ or the new edition of our IZV, which is being released soon). However, for the moment, Smartphones or tablets play a rather informational role (e.g., getting info about providers, pricing, local inquiries). Unlike in Japan or Austria for instance, in Germany, “true” mobile payment (aside from online payments via the browser or In-App Payment) in particular, is still in its infancy, also in terms of sales volume.

The long announced breakthrough has not happened yet. You often get the impression, that retail and consumers are unsure about the potential and additional benefits, respectively. The solutions are lacking in parts and so far, there is no established standard on the market, also because many market players are working on many different solutions. Predictions range from very restrained to extremely positive.

Which providers/what solutions are currently successful in the market and how do the different approaches differ?

From a provider’s point of view, every approach has its specific advantages for retailers and consumers of course, but at the end of the day the question remains whether these unique selling points catch on with customers (in this case the retailers) or in the end with the end consumer, who is meant to use the system. At the moment, we almost weekly hear about new plans and systems that are entering the market or are scheduled to enter it.

By now, the different market players (banks, cell phone service providers, PSPs etc.) also come together to work on solutions and to promote existing ideas. This is certainly a good thing, however – unlike with e-Payment –no system was able to really come out on top, and we are presently still far from the masses paying with mobile phones. The technical requirements are there, but acceptance by both retailers and consumers can still be increased and without a mostly uniform standard hard to achieve.

What additional benefits does the use of mobile devices offer retailers and consumers?

Studies offer potential for mobile devices as it pertains to payments to retailers. This includes timesavings at the checkout for instance (the potential to reduce the length of the checkout process), reducing the costly amounts of cash needed in retail or potential image improvement by offering consumers a great experience.

Generally, Smartphones provide the end user with an additional information and purchasing channel. Today, already about one third of Smartphone owners get information several times per month directly at the store with their Smartphone (ECC study “M-Commerce in Germany – The Role of Smartphones in the Buying Process“). Retailers have the opportunity to re-connect the bricks-and mortar business with the online world at any time and provide customers with a target-group specific and channel-independent matching offer. Marketing measures such as couponing can also be used more easily with mobile payments.

The essential added benefit for the end customer with a Smartphone that is nearly always on you, is to be able to access all kinds of information (e.g., pricing) at any time and any place and to also initiate transactions.

What are the challenges retailers face to get aligned with the increasing use of mobile solutions?

Retailers currently need a certain amount of “willingness to take a risk.” An attitude of ”as long as the customer is not asking for it, we don’t see a need for action“ is understandable, but won’t promote the topic (the chicken-and-egg problem). During the process of introducing customers to new processes, providers are also asked to work jointly with the retailers during the launch to increase acceptance by the consumer. What’s more, previous methods (cash, credit cards, direct debits) already cost retailers a lot of money, which is why many of them don’t see the advantage or wiggle room for additional stages in the value chain (yet).

This requires retailers who are also willing to get involved in new processes and the risks that are involved. In addition, you also need to consider the different requirements by end consumers (among other things, data security, payment procedures, locations that accept the system, user-friendliness, additional benefits beyond the payment function) and align it with your own demands (among others, data and payment security, IT integration into existing processes, coverage and a flexible –transaction-based and fast- and transparent pricing model etc.).

The integration into retail checkout systems is certainly a big issue, if it does not build on an existing credit or debit card system. This is why for starters QR code apps are often preferably used to facilitate payments per Smartphone at the checkout. Unlike NFC, these are already available and more applicable. Alternatively, providers emphasize mobile card payment solutions. However, these usually temporary solutions do not have much to do with real m-Payment systems.

From your point of view, what solution/solutions for mobile payments are going to catch on in the market?

The one that succeeds in connecting channels the best way possible and that gives the customer a choice in every situation, be it when they choose the channel (online, Smartphone, local store) as well as when they choose the payment method that actually initiates the transaction. From my point of view, multi-channel payment systems are an important topic. Against this backdrop, I think the approach by ”Yapital“ is quite interesting.

For the most part, retailers and consumers are interested and acceptance is in the works. We notice the seriousness with which many companies approach this issue by various – and again concrete-market activities by different market participants/pilot projects. The technical capabilities already exist today; new and old approaches are put to the test. It remains to be seen, which ones serve as temporary solutions and which ones are actually catching on. However, I believe in solutions that actually include the Smartphone in the information and buying process and provide additional values beyond the payment function, like for instance wallet functions.

The interview was conducted by Daniel Stöter; EuroCIS.com