Driving Contactless Payments — WIFM? (What’s in it For Me?)

By Lisa Stanton, Executive Director, Global Alliances, Monitise

Consumers are creatures of habit. If you think about your daily routine, there will likely be similar, familiar habits that continue throughout your day – the toothpaste you brush your teeth with everyday that you’ve been buying for years, the special brand of coffee you brew at home, your favorite morning show that you catch before heading in to work with the trusted anchors you enjoy. There are, of course, some limited opportunities for deviation – for example, the glorious weekend day when perhaps you can sleep in and then head to your favorite coffee house for a special latte.

Ultimately, however, consumers typically need some sort of motivation to alter their usual common and comfortable routines. Our behaviors and purchasing decisions are driven by our impression of what will suit us best, and straying from them requires a convincing response to the often subliminal question, “What’s in it for me?”

This question drives all of our purchasing and many of our behavioral acts, and, as such, should be the primary driver for how payments service providers help design, build and introduce new payments capabilities for the coming decade. And as contactless payment initiatives emerge from infancy into the mainstream, this understanding is more relevant than ever.

To illustrate the need to put the consumer’s reactionary question of “WIFM” first, I can reflect on a sizable project that I was spearheading more than 6 years ago with a major US issuer who agreed to become the largest issuer of debit cards with contactless payments capabilities.

2004-2005 were the years of the first wave of contactless payments frenzy, and I am willing to admit that I was among a large group of industry players who believed that the tipping point to contactless payments was likely to happen in the coming 24-36 months.

With the network’s moral (and financial) support, we went through the certification process to both issue and process contactless payments and then reissued millions of debit cards with the ability to “wave and go”. The project included a detailed marketing and communications plan so that our customers would understand “HOW to use it”. But the true question on their minds, “WHY do I want to?” was largely ignored.

What we surmised at the conclusion of the analysis period were a number of key learnings that are worthy of another look as we prepare once again to drive consumers to take up contactless payments:

 

a) Learning One – A card is a card is a card

Consumers really are very happy with swiping their cards. Since we were not changing the medium for payments with contactless, many customers just didn’t ‘get’ why it might be worthwhile to “wave and go” rather than swipe. (More below on how the mobile device delivers on this opportunity to create incremental convenience.)

b) Learning Two – If you pay them, they will come

What I mean here is that things like doubling rewards points for contactless payments, for instance, encourages usage. Thankfully, this was not surprising to anyone, although it also became the ONLY motivator that was effective in driving the new behavior of “wave and go”.

c) Learning Three – Merchant training is a must

Just because a merchant has contactless acceptance terminals does not mean that the sales clerks have any idea how to use them or even what they’re for. This reality led to uncomfortable initial experiences for cardholders, which likely detracted from any interest in trying again. We may find that this is a persistent condition, even for merchants who installed contactless readers a long time ago, given the low adoption that they’ve seen in recent years.

d) Learning Four – Engaged users equals sales volume
The retail merchants where contactless was used saw dramatic increases in sales volume from those who were actively engaged in using it (for example: consolidating purchasing activities from a number of different home repair stores to the one where they could use their contactless cards and earn double points). Average ticket value for these subject transactions was up 45% using contactless payments vs. traditional swipe – an impressive number by anyone’s measure. This fourth learning helps to support the business case for merchants to engage, but still leaves the serious question from customers: “WIFM?”

Many years later, we are now embarking on what most believe to be the beginning of mass marketization of contactless, but this time via phones with contactless capabilities rather than cards. We would be well-served to consider the learnings of Round 1 as we embark on Round 2. Answering “WIFM” will be what drives the speediest conversion from swipe to wave, and a well-thought-out approach from the start will benefit all parties in the food chain.

 

Reason 1: Convenience
Mobile phones, as the payments medium, are more convenient. Anyone who says that accessing their credit card is more convenient than accessing their mobile device is either over 70 or has their iPhone plugged in to their car stereo and, therefore, would prefer to use their traditional plastic at the drive through. The rest of us are likely holding our phones in the palm of our hands approximately 50% of the time that we’re on the go.

Reason 2: Added Benefits
Mobile phones are intelligent, meaning they can deliver information that our plastic card cannot. This is a critical component to driving behaviors and one that I am not sure has gotten as much attention as it should. Just enabling a phone to perform a contactless payment is not enough. Consumers expect more (in fact, they demand more to make a change in behavior) and will quickly grow to anticipate a payment transaction that allows them to also move funds to and from select accounts, confirm or authorize the transaction, avoid an unnecessary overdraft or fee during the actual purchasing event, or benefit from a merchant discount. Many stand-alone contactless payments pilots that are being conducted – even today – are missing this important component and, therefore, threaten to fall short on consumer expectations.

Reason 3: Added Security
For years consumers have confirmed that anything that can deliver improved personal and financial security is a magnet for adoption. We must ensure that our solutions in this area include unquestionable security enhancements for users and that they understand what those are.

Reason 4: Rewards
Recent legislations that are dramatically changing the funding flows of the payments industry will likely, at least short term, put dampers on expanding issuer-led rewards programs. That is not to say that those who will ultimately benefit from the changes (i.e. acquirers and merchants) can’t or won’t recognize the never-before opportunities that this shift represents for them. Moreover, merchants who are able to then provide immediate redemption on rewards programs at the point of sale will, in my opinion, seal the deal and drive massive uptake. Contactless is a great facilitator of this opportunity in particular, and the timing and opportunities for merchants in this regard have never been greater.

We are all creatures of habit. We will stray from those habits only when either forced or encouraged to. Those of us involved in introducing new, habit-forming opportunities are encouraged to consider our own behaviors as buyers when creating the payments opportunities and methods of the future.

All that said, the good news is that shifting some habits are easier than others. Thank goodness no one is asking us to stray from that morning cup of Joe.

Lisa Stanton, Executive Director, Global Alliances, Monitise

lisa.stanton@monitisegroup.com

Lisa Stanton is the Executive Director, Global Alliances for Monitise’s partnership with Visa.  Lisa serves as the primary liaison with Visa Innovation, Products, and Corporate Affairs Teams on potential product launches and collaborative ventures around the globe. 

Lisa joined the ranks of Monitise in early 2007 to help establish the US joint venture Monitise Americas.  She served as the Chief Executive Officer of Monitise Americas as it established partnerships with networks, processors and issuers, becoming one of the top providers of mobile financial services in the market.

Prior to joining Monitise Americas, Lisa spent the previous 16 years in various leadership roles with Citizens Financial Group (the US Division of RBS), most recently managing the payments and ATM businesses.  She has an extensive knowledge of the US payments networks, affinity programs, and innovative payments advancements, including contactless transactions.  Lisa has served in leadership roles on many related Boards, including the MasterCard Debit Advisory Board, the STAR Marketing Advisory Board, and the NYCE Network Oversight Board.  She is also a licensed Commercial Real Estate Broker and a member of the RI Community Food Bank’s Board of Directors.