Payment Context Will Matter as Much as Ubiquity
April 27, 2012
George Peabody
Mercator Advisory Group
This year’s lively Electronic Transaction Association Annual Meeting and Expo had just concluded and an issue frequently raised in conversation with attendees, especially from payments industry incumbents, was ubiquity, the property of a payment method’s widespread, if not universal, acceptance. This, of course, is a characteristic shared by cash and cards today and it is a competitive barrier for most alternative payment methods. To increase its transaction volume, to establish near ubiquity, PayPal is working hard, and investing heavily, in broadening its acceptance at the physical point of sale.
However, mobile-based applications have the potential to obviate that need for ubiquity when transaction context drives the value of the approach. For example, Austin-based Tabbedout is a mobile app that allows a bar and restaurant patron, after having registered and provided a card number or PayPal account to the firm, to enter an establishment, open a tab through its app, get served, and leave the establishment without having to wait for the check and the waiter to return with the receipt. Because Tabbedout is integrated with popular POS systems like MICROS and Aloha, the establishment knows it’s been paid through its existing POS system. The patron can rush off to the game, movie, or next party. It enables a transaction work flow that is convenient for both the consumer and the merchant.
Tabbedout believes, and has some evidence for, the proposition that its context-specific approach, for this well defined niche, trumps the canon of ubiquity. A major implication for industry incumbents has to do with branding. In most cases today, and in the digital wallet world to come, the accountholder’s card account or DDA will be the true method of payment but not the transaction origination technique that provides the lion’s share of the user interface to the consumer. The brands of both the card network and the issuer, in particular, will have very limited presence during that transaction sequence. We are already seeing this in the Amazon One Click context. We know which card we have active within our Amazon account. We don’t, and don’t need to, see a brand logo or an issuer name.
Given the relative ease with which such apps and niche-specific solutions can be developed, we expect many more such offerings to emerge. Already as consumers, we are very familiar with which payment or loyalty card to pull out of our wallets for each transaction context. We will certainly know which app to use and when. Mercator’s own CustomerMonitor Survey Series on mobile usage shows smartphone owners are very willing to download merchant-specific, context-specific apps to their handsets.
So, when ubiquity is held up as a barrier for a new approach, look hard at the transaction context to see if there is a way to add value to that transaction for the merchant, the consumer, and the payment service provider. Convenience, permission-based data acquisition, advertising are all sources for value-add. If value-add is possible then ubiquity may not be such a big deal after all.