As the margins around credit card processing are eroded through caps on interchange and a commoditized competitive market, payment solution offerings need to include value-added components to the services that they provide. Anyone can take a payment these days at a rock bottom costs, and as any professor of strategy can tell you, you can only make more money by increasing the perceived value of your offering or lowering your own costs. Probably time to increase perceived value…
The trick, of course, is providing a solution that addresses a need both for the merchant and the consumer. Look at what Google Wallet, Square and Braintree’s Venmo Touch are doing today, and you can see how these types of solutions are reducing friction both for the merchant and the consumer.
The merchant’s pain point – Based on Braintree’s own research 70% of mobile searches do not result in a successful conversion, and a lot of it has to do with the difficulty of typing in card/personal data for purchase. How could you improve conversions and make the process simpler?
The consumer’s pain point – Holding your phone or tablet and entering in your card data is a pain. For me, if my card data is not already stored with the merchant, I’ll probably just wait until I am in front of my laptop. Thus the large drop-off…
Sure a consumer can have a tokenized card sit with their favorite merchant, but there are few merchants who have the marketplace power of an Amazon or Apple… or the appeal of Uber or Hotel Tonight. And if the merchant is using a utility like Jumio to help make the process of entering card data, then it’s making the experience better but not exceptional.
The solution – What if as a merchant, you could pull up a tokenized card based on a previous purchase or one that is stored directly on the consumer’s phone or tablet?
Google, Square and Venmo are attempting to do just that for their pool of merchants, and it’s going to have a major impact. If the card that I already have stored with Uber pops up when I’m surfing my tablet and exploring my next vacation on Airbnb, then how much more likely am I to buy at the point of search? A lot more likely than when I would do my research and wait until I was in front of my laptop. In the old scenario, I might stumble onto a place on Hotels.com or TripAdvisor, but now I’m making my purchase on my mobile device and moving on. That’s pretty powerful stuff that improves conversion and drives real revenue to merchants.
The challenge that remains – For this to be truly impactful, only a few companies can own the relationships with these major mobile merchants. Either that or mobile OS companies need to start becoming payments companies, so that they can essentially store card tokens within the mobile device. Both Apple and Google have been spending time building on some of these capabilities, but the reality is that they will probably need to make an acquisition when the time is right. Then any app could pull my tokenized card data from my phone, and I would just use the appropriate card to make my purchases.
And that’s probably a good thing for everyone.