How to Influence Consumer Online & Mobile Payment Adoption

Transcription

1 How to Influence Consumer Online & Mobile Payment Adoption Also known as, Ten Ideas to Drive Emerging Payments Growth Paul McAdam, SVP, Strategic Thought Leadership, FIS Chris Burfield, Product Marketing Director - epayments, FIS

2 Consumers understand the pros and cons of traditional payment methods 2 WHEN USED DISADVANTAGES Cash Situations that require immediate payment When trying to constrain spending to cash on hand Have to have cash on hand Can be lost or stolen No paper trail Check Situations that require immediate payment Paying those who don t accept anything else When needing a paper trail Hassle to write checks Checks from others can be bad Worry about security of sending through mail Debit Card Credit Card Online Banking Easy way to make retail purchases and get cash back Easy way to make retail purchases Buy now, pay later Earn rewards points Pay monthly bills Transfer funds between accounts Can be lost, stolen, subject to fraud Can be lost, stolen, subject to fraud Can sometimes take days for transaction to occur Source: FIS and Ipsos Vantis, February 2013; 4 consumer focus groups

3 Segmentation of consumers by in-person payment preference 3 Credit carders 26% Cash users 27% Paper check writers 11% Debit carders 34% Innovators 2% Source: FIS, Feb 2012; n = 3,205

4 But for emerging payments, the advantages and disadvantages less understood 4

5 Financial institutions are expanding online and mobile channel payment solutions 5 Respond to threats from disruptive product innovators Update product portfolios to achieve growth Keep up with changing consumer trends affecting behaviors

6 Future customers, growth and earnings will not necessarily come from today s established products 6 Real Time Access Cross Border Loyalty Mobile Commerce Mobile Wallet Merchant Rewards Early Stage P2P Web Commerce Emerging Biller Services Prepaid Program Mgt. Retail Prepaid Processing Credit Card Bill Pay Debit Card Established Significant white space available New entrants to the market High CAGRs Initial M&A and partner activity Strong volume growth Competition on feature function Heightened M&A and partner activity Still significant white space opportunities Growth in volume slows Significant regulatory activity Competition on price/scale efficiencies Heighted competitor activity Persistent price competition

7 7 Ten ideas to drive emerging payment growth 1. Understand the sources of market growth 2. Focus on problems to be solved 3. Build awareness of revenue-generating services 4. Get the messaging right 5. Promote security and fraud protection 6. Tokenism: provide consumer education 7. Provide consumers greater control of payment timing 8. Have a plan for overcoming cost perceptions 9. Leverage being a regulated financial institution 10. Oh yeah focus on mobile!

8 1. Understand the sources of market growth Challenge of competitive threats from disruptive product innovators 8 Generally pursue niches sometimes very small Exploit change Solve problems but often for less attractive segments Capitalize on latent demand that end users often cannot articulate Gain traction and take share over time Percentage Conducting Transactions (Online consumers, past 30 days) A2A transfer (FI to FI) Electronic P2P (like PayPal) Prepaid card Online expedited bill pay Walk-up bill pay Money transfer service Prepaid card bill pay 3% 5% 9% 12% 12% 26% 25% Source: FIS, Feb 2012; n = 3,205 and March 2013; n = 1,508

9 1. Understand the sources of market growth 9 Personal checks and cash still dominate P2P 40% 30% How Made Most Recent P2P Payment Cash and checks combined = 55% Electronic P2P = 23% and exceeds cash 20% 10% 0% Personal check Cash Other Non-FI provided P2P service FI-provided P2P service Gift or prepaid card Online bill payment Money transfer service Money order or cashier's check Source: FIS and Ipsos Vantis, March 2013; n =300

10 2. Focus on problems to be solved Few consumers recognize problems with P2P payment methods they use 10 Problems Encountered in Making P2P Payments Have not encountered a problem 85% Had to get cash Hassle to write a check Lack of paper trail Had an insufficient funds charge No control over when check cashed 5% 4% 2% 2% 2% % experiencing problems making 7% A2A Transfers 15% 47% P2P Payments Foreign Money Transfers Source: FIS and Ipsos Vantis, March 2013; n = 300

11 2. Focus on problems to be solved But it s a different story when it comes to sending money overseas Problems Encountered in Making Overseas Money Transfers 11 Have not encountered a problem 53% Transfer was expensive Could not easily track the progress of the payment Process was inconvenient Not informed when money was received/picked up Transfer took too long Not informed about exchange rates prior to the transfer 15% 11% 11% 10% 9% 8% Source: FIS and Ipsos Vantis, March 2013; n = 300

12 3. Build awareness of revenue-generating services 12 A high percentage of consumers unaware Percentage of Consumers Unaware of Whether their Primary FI Offers the Payment Service (Among active online and/or mobile bankers) Offers P2P through online banking site 59% Offers online or mobile P2P 48% Offers expedited bill payment 38% Source: FIS and Ipsos Vantis, March 2013; n = 1,508

13 4. Get the messaging right Security, greater control and rewards are strong message points 13 Attributes Important to Consumers When Selecting Method of In-person Payments Provides protection against fraud and other crimes Provides protection against disclosure of personal information Allows control over the timing of when funds are taken out of my account Helps me to not spend beyond my means 52% 51% 70% 75% Provides loyalty points / rewards 36% Allows me to pay for the goods / services I purchase over time 26% Source: FIS, Feb 2012; n = 3,205

14 4. Get the messaging right 14 Messaging that resonates with consumers You can transfer funds At any time Safely and securely Cost effectively Deducted directly from your bank account Can access the money You won t incur late fees An online payment service like PayPal A substitute for entering checking account numbers Access funds quicker Source: FIS and Ipsos Vantis, March 2013; n = 1,508

15 5. Promote security and fraud protection Security is a dominant factor in consumer payment selection 15 Attributes Important to Consumers When Selecting Method of In-person Payments Provides protection against fraud and other crimes Provides protection against disclosure of personal information Allows control over the timing of when funds are taken out of my account Helps me to not spend beyond my means 52% 51% 70% 75% Provides loyalty points / rewards 36% Allows me to pay for the goods / services I purchase over time 26% Source: FIS, Feb 2012; n = 3,205

16 5. Promote security and fraud protection 16 Security concerns are still significant with mobile Reasons consumers do not use mobile banking 44% 43% 34% 47% 40% 45% 44% 41% 40% Security of mobile banking I don't see the value of mobile banking 25% 22% 20% The cost of data access on my wireless plan Source: Javelin Strategy & Research, June 2012, n varies: 2,072 2,367 Base = consumers who do not use mobile banking

17 5. Promote security and fraud protection Consumers have a host of security concerns Education is required 17 CONCERNS Security implications of using an address or phone number and worried about them being used fraudulently by others Worried about entering wrong address or phone number and sending funds to wrong person Account compromised if the phone is stolen Not clear that bank epayments provide the same levels of protection as credit card (fraud protection, purchase disputes, etc.) WHAT THEY WANT Security measures to fight fraud: o Unique consumer password o Setting transaction & balance limits o Sending alerts when reached Transaction tracking and providing confirmation once funds are received A confirmation step to ensure the amount and recipient information are correct Want ability to confirm/cancel a transaction before it goes through Source: FIS and Ipsos Vantis, February 2013; 4 consumer focus groups

18 6. Tokenism: provide consumer education Consumer concerns regarding tokenism must be addressed 18 Credential requirements for bank P2P today Effect of tokenism upon likelihood of real-time payments use Recipient's banking account information 50% 54% Recipient's address or mobile phone number 35% 9% 14% 10% 13% Don't know 15% Much more likely Somewhat more likely Neither more nor less likely Somewhat less likely Much less likely Source: FIS and Ipsos Vantis, March 2013; n =300

19 6. Tokenism: provide consumer education Although appreciating tokenism s simplicity, consumers have security concerns 19 ADVANTAGES Faster and easier to enter phone number or than entering recipient s bank account number Like the idea of having an option to use either phone number or address Would use to send payments if convinced of system s security and confirmation features protecting against errors Would use to send payments if recipient had the ability to accept or reject payment DISADVANTAGES Many confused as to how funds are transferred to the right account when only a phone number or address is used Concern about payer entering wrong number or address in error (system should ask for confirmation before funds are sent) Many are extremely uneasy about security concerns and the potential for fraud and don t want their or phone numbers linked to any account (e.g., would not use for e-commerce transactions) Worry about fraudulent claims involving personal transactions Source: FIS and Ipsos Vantis, February 2013; 4 consumer focus groups

20 7. Provide consumers greater control of payment timing Consumers want greater control of payment timing 20 Attributes Important to Consumers When Selecting Method of In-person Payments Provides protection against fraud and other crimes Provides protection against disclosure of personal information Allows control over the timing of when funds are taken out of my account Helps me to not spend beyond my means 52% 51% 70% 75% Provides loyalty points / rewards 36% Allows me to pay for the goods / services I purchase over time 26% Source: FIS, Feb 2012; n = 3,205

21 7. Provide consumers greater control of payment timing There is strong consumer demand for realtime payments 21 Among active users of these services, the average percent of transactions users would like to convert to real time through online/mobile banking 71% 47% 36% 25% Expedited bill payment Outbound foreign money transfer A2A transfers P2P payments Source: FIS and Ipsos Vantis, March 2013; n = 1,508

22 8. Have a plan for overcoming cost perceptions 22 Consumers perceive cost of paper checks low Perceive Payment Method Cost High/Very High Cash 2% Paper checks 6% Debit card(s) 7% Mobile payments 11% Prepaid card(s) 13% Credit card(s) 27% Source: FIS, Feb 2012; n = 3,205

23 8. Have a plan for overcoming cost perceptions Many consumers are willing to pay fees for the convenience of real-time payments 23 Willing to pay a fee Not willing to pay a fee under any circumstances Expedited bill payment 34% 66% A2A transfer 39% 61% P2P payment 59% 41% Foreign money transfer 94% 6% Source: FIS and Ipsos Vantis, March 2013; n = 1,508

24 9. Leverage being a regulated financial institution The primary FI is preferred over credit card or alternative payment providers 24 Preferred provider for real-time payment services including P2P, A2A, foreign remittance and expedited bill payments Would not use a real-time payment service, 12% No preference / don't know, 16% Alternative financial services provider, 7% Primary DDA provider, 55% Primary credit card provider, 10% Source: FIS and Ipsos Vantis, March 2013; n = 1,508

25 9. Leverage being a regulated financial institution Convenience and trust in the institution are significant advantages 25 More convenient and less time consuming to utilize online/mobile services as part of the bank rather than dealing with two different online sites Since bank already has personal information, wouldn t need to provide it to yet another service Consumers like the idea of one-stop problem resolution If their banks were to offer a fuller range of online/mobile payment services, many would consider switching over from services like PayPal, Western Union, etc. Source: FIS and Ipsos Vantis, February 2013; 4 consumer focus groups

26 10. Oh yeah focus on mobile! 26 Mobile is a catalyst for emerging payment growth Devices Through Which Want to Access Real-time P2P 74% Mobile phone 49% 48% Gen Y 11% 24% Gen X Younger Boomers Tablet 24% 22% 32% Older Boomers Matures 18% 4% Source: FIS and Ipsos Vantis, March 2013; n = 300

27 27 Ten ideas to drive emerging payment growth 1. Understand the sources of market growth 2. Focus on problems to be solved 3. Build awareness of revenue-generating services 4. Get the messaging right 5. Promote security and fraud protection 6. Tokenism: provide consumer education 7. Provide consumers greater control of payment timing 8. Have a plan for overcoming cost perceptions 9. Leverage being a regulated financial institution 10. Oh yeah focus on mobile!

28 How to Influence Consumer Online & Mobile Payment Adoption Also known as, Ten Ideas to Drive Emerging Payment Growth Paul McAdam, SVP, Strategic Thought Leadership, FIS Chris Burfield, Product Marketing Director - epayments, FIS chris.burfield@fisglobal.com