The Future of Digital Payments

Rethinking payments
Visa Innovation day
Prague | 06.22.2015

The world of payments is undergoing
significant disruption.

The empowered consumer
!
With seemingly unlimited knowledge, and
borderless reach, consumers choose what, when,
and how they buy. They expect:
!
• Engaging experiences
• Personalized service
• Instant gratification
• Seamless transition between channels
• Innovative relevant solutions
!
!
!
!

Fierce competition
!
New, financial and non-financial competitors are entering
the market and changing the competitive landscape:
!
• Telcos
• Retailers
• Tech giants
• Startups
• Banks
• Credit card companies
!
When we look at the competitors in the world of payment
we see many players - financial and non-financial
!
!
!
!
!
!

Regulatory changes
!
The dynamics of the regulatory environment demand
timely responses:!
!
• Interchange rules
• Consumer protection laws
• Compliance requirement
!
!
!
!
!
!

Profitability pressure
!
The reduction in Interchange Fees and
competing solutions are driving the profitability
down.
!
And then we have profitability pressure with
low interchange fees and competing…

Complex technology landscape
!
!
!
• Terminals
• Wearables
• Beacons
• NFC, HCE, BLE
!
Finally we have a complex technological landscape
which is changing every day
!
!
!
!
!
!

The world of payments is changing
at a fast and furious pace.
!

To understand the future of
payments we need to first look at
what makes a mobile payment
service successful.

Rethinking payment2015
The concept of a
“Digital Wallet” is
something the entire
industry has been
struggling with.
Google Wallet Square wallet
-$300M -$25M -$100M
Isis/Softcard
Terminated 5/2014 Terminated 3/2015

And this is not surprising, since successful innovations have always:
1. Delivered against a key pain point or
2. Added unique value
or both…

!
• Reaching for one’s wallet is easy
• CC companies are carrying the security burden
• Plastic is widely accepted
• Credit is mitigating the ‘abstract pain of payment’
!
It is a pretty good practice after all…
“Swiping a card at checkout is one of the
easiest things consumers will ever do”.
Bill Ready, CEO, Braintree
Paying with a card is not really a big
pain point

Furthermore, using the current mobile
payment offering creates new pain points:
!
54%Find it easier to pay with
debit/credit cards
(Infoscout)
85%Of iPhone 6 users in the
US have never tried
paying with apple pay.
(Infoscout)
70%Don’t want to transmit
sensitive information to
the merchants (BI)
62%Don’t want to store
sensitive information on
their phone (BI)

“For an entire week, I left all my cash and credit cards at home to
see how well wallet-free mobile services work in the real world:
On two occasions, friends had to buy me drinks. Another
night I had to borrow $43 in cash. And I prepaid for drinks at
one bar because I couldn't leave a card to keep the tab open.”
’No cash, cards, just mobile pay for a week’
Associated Press
!

Most digital wallets are defined by a literal translation of
the physical wallet, rather than a tool for what it actually
enabling - which is buying products or services.
!
Looking at the current landscape, we see that most
digital wallets are defined by a literal translation of
the physical wallet, rather than a tool for what it
actually enabling - which is buying products or
services.
!
By choosing the literal translation approach the
players restrict the value they deliver to both
shoppers and merchants.
!

Successful digital versions of analog products have never been
literal translations, but tools that enabled an action in a new way:
Telephones have been supplanted by
Skype
Stores have lost share to Amazon
It is not about a new phone,
it’s a better cheaper form of
communication from far.
It is not about a new store, it’s
about making millions of
products accessible from
one’s armchair.
CD’s have been replaced by iTunes
It’s not about a new CD, it’s
about a better way to consume
music.

Stepping outside our category, we see that apps that do solve a key
pain point and deliver customer value have 4 traits:
“Make something easier”
Efficiency
“Save time or money”
!
Effectiveness
“Use personalized insights”
!
Contextuality
“Fun & Cool”
Entertainment
Waze Skyscanner Spotify Candy crush

When we look at successful mobile payment
solutions we see that they too:
!
• Deliver against a key pain point
• Add a unique value
• Enable an action in a new way
• Share some of the 4 traits
In most cases, the core competency and added
value is not the payment itself.
Payment is an integral part of the value chain
which is usually seamless and may even be
transparent.

significant disruption.In 2014, 15% of all US transactions went
through the mobile app.
!
Pain point:
• Managing loyalty program
• Miscommunicating orders
• Waiting time
!
Added value:
• Personalization
• Seamless payment
• Pre-order
Starbucks

Starting in 2009 as a luxury car service, Uber is
now valued at $50 billion.
!
Pain point:
• Finding a taxi
• Not knowing when taxi is expected
• Awkwardness of payment and tipping
• Having to pay and deal with cash
• Fear of strange drivers
• Zero clout in relationship with driver
!
Added value:
• Information about driver
• Precise ETA
• Rating and review as tools for improved service
• Receipt management
Uber

When we look at banking apps globally, we
see that few actually make this cut.
!
Financial services are continuing to create
transaction based apps which are basically
digital versions of the credit card statement
or account management website.
!
!

But focusing on financial transactions alone
limits use, because consumers don’t live
their lives that way, they live in the moment.
82%of smartphone users turn to
their phone to influence a
purchase decision while in a
store.
90%of smartphone users have
used their phone to make
progress toward a long term
goal or multi-step process
while “out and about."
62%of smartphone users are more
likely to take action right away
toward solving an unexpected
problem or new task because
they have a smartphone.
(Google insights)

I would like to show you a short video created
by Google which illustrates this idea of
consumers living in the moment
!
https://www.thinkwithgoogle.com/
micromoments/index.html

Consumers want to live in the moment and
expect instant gratification to their actions.
If the utility offered is not relevant for the
particular moment they have no interest in it.
!
!

I Want What I Want When I Want It
IWWIWWIWI
In other words - consumers want what they want when
they want it

IWWIWWIWI
we need to understand what they want, when they want it,
where they want and it and how they want it.

IWWIWWIWI

IWWIWWIWI
I Want Where I Wai How I Want It

IWWIWWIWI
I Want Where I Wai How I Want It
Once we know this, we can start thinking about how
payment can be a part of it.

IWWIWWIWI
By listening to the consumers needs and
applying a user-centric approach, we can
generate payment solutions which are
relevant to consumers lifestyles.
!
Lets look at some recent innovation in
payments and explore how they fulfill
human needs and tap into moments of
desire, ultimately leading them to own the
payment itself.

Pinterest
Buyable pins
People create pinterest boards where they collect
photos, items and designs which can serve them
as inspiration for things they find interesting or
they would like.
A month ago pinterest added buyable pins which
enable consumers to buy items directly from
pinterest.
Reaching people at the moment when they have
already stated their interest and giving them what
they want
!
techcrunch.com/2015/06/02/pinterest-unveils-
buyable-pins-a-way-to-purchase-things-directly-
from-pinterest/#.phkool:gslO

Amazon Dash
Amazon dash is a new product
Amazon introduced which allows you
to order and pay for products by a
push of a button.

At the moment the consumer realizes
they need a product (they are out of
detergent), the solution is already
there anticipating there need offering
the solution.
!
Of course, payment is the least
interesting part of the solution, it is
completely transparent.

Jawbone UP4
Amex payments
Jawbone collaborated with Amex to
create wearable technology which
incorporates payment.

In this case it is about Realizing that in some situations
people prefer leaving their smartphones at home.
And so the answer in this case is adding the payment
solution to the technology which is relevant to the situation -
in this case a fitness tracker.

Open table
Open table started as a platform for
making reservations at restaurants.
recently they have added the option of
paying the bill for the restaurant through
the app.
Once you have ordered the table, you
are already in the system and when you
are done there is no need to order the
check, wait for the waiter and so on.
!
https://pay.opentable.com/#tour

Lets see a video illustrating this..
We see that our current restaurant experience is not giving us
what we want when we want it.
Open table not only helps people book a table, it enables them
to get up when you feel like it with zero additional effort.
By enabling this experience they own the payment.

Venmo
Venmo is a P2P transfer app handling 2.8B USD of
transactions annually. it is an example where
payment is the core competency but it is done
differently.
!
Instead of entering a long series of bank and
checking account numbers, the user can enter
recipient’s email address or phone number to route a
transaction.
Taps into consumer demand for fewer points of
contact – using existing methods to perform more
functions.
In addition there is an added social aspect to the
financial transaction with transfer being posted on a
feed - this answers the consumer need for creating
social network content and knowing about others

Facebook
Friend to friend payments
The feature is already hidden in the app’s code, so the launch is likely imminent.
When Facebook launches payments in Messenger, it’ll be tapping into 500 million monthly active users

Snapchat
Snapchat is another successful messaging app with over 100 Million users.
Snap chat is interesting because not only does it incorporate payment in a way which is natural to
consumers lifestyles, it does it in an engaging and entertaining way.

Eaze
Nod to pay
When we talk about interesting interactions,
Eaze is a payment service which uses google
glass and head nods for payment.
!
Lets watch a video to see how it works
https://www.youtube.com/watch?
v=Wu7tMD3ufKI
!

When we look at all of these solutions
disrupting existing industries, we see
that they all leverage technology to
create new connections, matching
consumer needs with value
propositions, ultimately leading to
seamless if not invisible payment.

I would like to end with an
amusing interview of the
comedian Louis C.K. to show
just how demanding
consumers are and what it
takes to keep them satisfied.
Desktop Research
The future of payments is uncertain,
unknown and impossible to predict.
Our only way for navigating successfully
through these uncharted waters is by
applying a strategical and human-centric
approach that will ensure that our ideas
address true and lasting needs of
consumers.

I would like to end with an
amusing interview of the
comedian Louis C.K. to show
just how demanding
consumers are and what it
takes to keep them satisfied.
Desktop Research
Thank you.

The Future of Digital Payments

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The Future of Digital Payments