8 colossal shifts that in 2017 will cause insomnia for top managers in finance, retail and payments

    imageShifts of the tectonic plates of the Earth can cause large-scale destruction. The most powerful of them wiped entire civilizations off the face of the planet. The problem is that we do not know how to predict such shifts or their destructiveness until they occur. This metaphor describes very well the current situation and events in the ecosystems of payments, commerce and retail. In an adapted article , we present 8 colossal shifts that can either destroy or give a serious impetus to the development of your quiet haven in one of these ecosystems in 2017. What fate awaits your business?

    Today we can talk about eight key shifts that go unnoticed, but persistently, and transform what we call payments, commerce and retail today.

    Bank downsizing


    Once upon a time, banking activities included the banks themselves in the diversity of their physical departments and the wide variety of services provided by banks. The main competitors in the struggle for your attention were banks at home and at your place of work. They differed from each other in proposals - requirements for a minimum account balance (not always), interest rates on deposits and savings programs, commissions (again not always) and smiling (or not so) employees of their branches, as well as related products that included in the offer by default or offered as additional services.

    Today, billions of consumers around the world are literally holding a “bank” in their hand. The stimulating factor in this transition was mobile devices. Now the main competitive advantage is a mobile application with the best UX, and it does not matter whose brand is on the icon, how well designed and well-designed products are. Bankers are fighting for their "place in the sun" next to purely digital banks, not burdened by outdated traditional infrastructure. With banks that provide separate service packages to specific categories of consumers on more favorable terms. A generation of “dropping shackles” who do not want to buy bulky content packages from pay TV operators requires a similar approach to the provision of services in the financial sector.

    And all this happens at the same time that regulators seem to be doing everything possible to put traditional banks at a competitive disadvantage.

    Such changes force traditional banks not only to strengthen the mobile and digital race, but also to rethink the essence of the bank, to study the new needs of their customers: to whom consumers will be able to entrust the provision of banking services, what services they want and require from service providers. All this will undoubtedly include a review of asset and reputation management procedures, which presented them as reliable custodians of client financial assets. At the same time, it will not do without the use of new technologies and cooperation with innovators in this field to make banking a part of the new, mobile-digital era.

    Commodization of retail


    Today, the retail sector, like banking, is changing a new competitor. A small online bookstore, which, 20 years later, became the largest retailer in the world (judging by market capitalization). Unlike banks and their many digital competitors, over the past 20 years, Amazon has grown significantly and in the process rebuilt the entire retail. Amazon has not just successfully rode the crest of an online wave; he shaped it and inspired a whole generation of online stores to do the same. Amazon and the innovators that came after it fundamentally changed the way they shop and use physical stores.

    For example, consumers no longer need to visit stores to find the right product - now the website is their new storefront. Now, at the click of a mouse, weekly necessities such as laundry detergent, paper towels, detergents, light bulbs, shampoo and pet food will appear at your door within two days. Products for which consumers went to the store to try them out and buy, can now be ordered online - and often on Amazon.

    This forces retailers of all stripes to look for ways to get their customers back to the store, or at least increase the number of people who clicked “buy” on their sites. Retailers have to constantly rethink the vision of retail and think about how customers make decisions, where to start and end their consumer route - and why. When customers, armed with a mobile phone, have access to almost all information about any product they need and know where to buy it cheaper, technology becomes the driving force of retail, but you cannot consider them as the only and unique lifeline. The transition of “physical” retail to digital implies an objective look at what consumers want and expect from their favorite brands, and then understanding,

    Democratization of loans


    Transactional loans offered by fintech innovators bring us back to the time of loans from the shopkeeper and take them to a new level, offering credit options for people and retailers - in the format of one transaction at a time. Online lenders provide consumers and small businesses with new credit opportunities and options - in some cases, they refinance loans originally provided by banks, while taking away fee income from traditional lenders. P2P platforms in developing countries are probably the first to offer their users access to new financing methods and wide access to loans. Contrary to regulators who are trying to squeeze small loans and short-term loan products as much as possible, innovators are creating new ways to provide loans to the middle class in a convenient and user-friendly manner.

    But, as in retail, technology alone is not enough, it is only a driving force for traditional structures and innovators. The transition to new methods of providing loans while maintaining the level of income will require a scrupulous approach to simultaneously simplifying access to credit and managing the risks associated with it.

    Digital payments change payment methods in stores


    Once upon a time, and not so long ago too, the main factors for the successful launch of the new payment scheme were the adoption of the new scheme by the audience and widespread prevalence. Ask Discover, who managed to launch the fourth system thirty years ago. If your plastic card was not accepted wherever the customer would like, it meant that you were not anywhere else. Reaching a large scale was very expensive and time consuming.

    Electronic payments and devices with an Internet connection turn upside down the situation with acceptance by the audience and prevalence.

    Starbucks remains the most successful company to launch its own payment scheme from a mobile account. They managed to transfer to it about 25% of the total settlement for five years. Starbucks achieved customer loyalty to the new payment system and made its application available in every store. Mobile applications operating on the principle of “pay by column” (on-site payment principle, the name comes from the method of paying for gasoline, when the buyer passes the card through a reader installed directly on the column), some independent franchises outstripped the popularity of credit card payments. They allow customers to save money on every gallon of fuel and avoid unnecessary actions during refueling. So, Walmart Pay reported on the results for the first year of work, and they exceed all expectations.

    An example of Apple Pay and its contactless payment method showed that the creation of a payment system using a mobile device that reproduces the experience of using plastic cards and payment terminals is not a recipe for victory in the field of digital payments.

    The recipe for victory is to add additional useful mechanisms “on top” of the digital payment scheme itself, these mechanisms should eliminate the inconvenience associated with the purchase process, and add new features. Buying online and getting in the store. Ordering goods through mobile devices and the ability to click the buy button, being at any point in the store to make a purchase. Or a special application that knows that the buyer is in the store and offers him relevant promotions and discounts before he paid. All these are the very additional opportunities that arise "on top" of new payment systems and examples of an approach that offers customers something much more valuable than just paying by phone on a payment terminal.

    Such a transition, obviously, will require players in the payment market to begin to think about how consumers begin their shopping route, and not just how they end it. About how to use your assets and infrastructure to create a demanding customer experience, and not just try to build as many physical points of sale as possible. Being “everywhere” in the digital age does not mean participating in a competition about accepting payments using automated terminals directly in stores. This is more of a story about working online, where almost all customer routes begin. And over time, it is online that will simplify payment processes in stores even more.

    Messenger apps fight for market position


    WeChat has shown the world that the messenger ecosystem includes much more than sharing emoticons and texts with your friends. WeChat has become a prime example of how to convert a critical mass of loyal users (700 million people) into a live and existing platform for commerce.

    Messengers around the world have adopted WeChat's experience in creating commercial platforms. The process goes in parallel with the rapid growth and increase in the number of messenger users, who are now significantly ahead of the "classic" social networks. More than 2.5 billion people use instant messengers on their phone, and more than a billion people per month use Messenger and Whatsapp. Whatsapp users spend about 3.5 hours per week on the app.

    But WeChat began its journey in China a little differently, primarily by hooking users with commercial functions within the application. Inside this ecosystem there are applications that are not accessible outside. Thus, the value and attractiveness of their use increased. And buyers, in turn, forgave some starting roughness in UX for such opportunities.

    To date, in developed countries, messengers are used only for messaging. Consumers have access to a wide range of mobile applications and web platforms for managing their “commercial entities”. Of course, sending delivery notifications and correspondence with sales managers often occurs precisely in text, in chat rooms. But booking tickets, finding a suit for an office party or reserving a table in a restaurant using Messenger, WhatsApp or iMessage is still an unusual thing for most users.

    Innovators are working hard to change that. Tens of thousands of chatbots with payment support have been built into messaging platforms. Most of them are in the initial stages of development and it is insanely difficult and inconvenient to use them. In order for messengers to become a new entry point in the field of commerce in the minds of consumers, applications must become much smarter, and the user interface much more flexible and convenient.

    Commerce Becomes Interactive


    Voice is the most common tool used in the trading process. Each of us has it, and making purchases and interacting with sellers by voice is a common thing. Voice is also the easiest tool to use - no need to type, click and press the Buy button.

    That is why the market is filled with countless new players and platforms offering solutions modeled on voice command centers. And many large companies want to use voice control to their advantage. The Alexa service, which today has over 5,000 special skills, offers users new effective search capabilities on the Internet, makes it more accessible and gives an additional context. Want to know how to bake a Hummingbird cake for your party this weekend? Just ask Alexa, who will help you not only find the recipe and read it out loud, but also add all the necessary ingredients to your shopping list, place an order and ensure delivery, it is likely even on the same day.

    Alexa and her colleagues - voice-activated personal assistants from Google, Apple and Microsoft are changing the way users interact with brands. Namely: they make brands “invisible” to the buyer.

    If earlier banks and payment providers felt vulnerable when the customer's payment details were stored in applications, then voice ecosystems change the situation radically and in a completely surprising way. Applications and websites that are activated by voice assistant can use accounts registered many months and years ago. The transition to interactive commerce poses a new challenge - how do payment providers, banks, networks and retailers remain masters of doom? Although the transition itself is designed to provide consumers with new convenient ways to participate in commerce, the emergence of new models with their new advantages will allow the creators of voice assistants to set certain preferences - managed and monetized, of course, not without the help of new voice “gatekeepers”.

    Commerce wherever there is an internet connection


    A couple of years ago, the conversation that trade could spread to any area came down to the discussion of providing micro-sellers with an Internet “whistle” connected to the phone. And the consumer’s intention to purchase the goods turned into a completed operation only after certain actions were taken directly at the point of sale - in the store - after the card was handed to the seller. Alternatively, online or in the application - after clicking the Buy button.

    The widespread adoption of wireless technology has changed everything. And although today we are talking mainly about mobile phones and a very small list of wearable devices, analysts estimate that over the next five years the number of devices connected to the Internet will reach 30 billion units. And with the help of everyone it will be possible to shop.

    Artificial intelligence and machine learning pave the way for the future, providing the opportunity for better decisions in real time without human intervention. This also applies to the need for the buyer to directly initiate a trade transaction. Now information can be stored and processed directly on smart devices, which means that the field of commerce can work on autopilot. The boiler will call the plumber before it fails, the cooler will order water, when its supplies begin to end, the smart refrigerator will make a shopping list as the shelves are empty, the washing machine will acquire powder and air conditioning before they run out, and the car will become independent smart a mobile device that can find and pay for parking without stopping its movement in the city, and that's not all.

    The introduction of electronic payment systems has become a catalyst for turning many devices with Internet access into a sort of trading hubs. Also, the role of information, which is accumulated and distributed, is great. The point is not only that trade receives a certain independence from direct initiation of transactions by consumers or business, but also that information becomes the basis of new business models and monetization opportunities for manufacturers of such devices and software platforms that they use.

    Successful transition to a new model is not only about data monetization and maximization of digital payment capabilities. Protecting transactions made on various devices in an age of sophisticated fraud is also a non-trivial task. It is important to pay attention to issues regarding the confidentiality of data that devices exchange with each other, regardless of the direct actions of the consumer.

    Digital Identity Becomes Better Fraud Protection


    Trading begins with the identification of the buyer and at the same stage, it can sharply become stale. The creation of a person’s digital identity is the creation of a kind of universal passport that the consumer will need to ensure the safety of any action in the digital world. And unlike physical documents that can be tampered with, lost or stolen, a digital identity can be protected using a variety of modern protocols and technologies.

    They can also be adapted to the needs of a particular relying party. Creating a secure digital identification involves not only verifying the identity of the buyer in a particular transaction, but also collecting special data about the buyer, which can be selectively presented as necessary. Advanced technologies and protocols provide banks and players in the payment services market with the opportunity to develop not just one, but many options for a digital identity for their customers. Accordingly, it will be possible to request any of the options and receive only that part of the information that is important at a given particular moment in time. You must admit that applying for a mortgage or a new credit card requires a much more thorough verification of your identity than logging into your Twitter account or renewing your driver’s license online.

    To do this is not as simple as it seems at first glance. Experts agree that in order to create and verify a user's digital identity during his commercial route, a whole multi-level system is needed. Today there is heated debate about who will become the developer or custodian of these levels, who will make personalities interoperable, how digital personalities will be “released” and who will carry out this function. Will the user's “digital identity” look like real? There is a unanimous opinion that passwords will befall the fate of the extinct Dodo bird, and that reliable digital identification is one of the top priorities in the industry. What this new digital identity will look like and how it will be created remains to be determined.

    The dynamic nature of the development of payment systems, commerce and retail guarantees the onset of global changes in these ecosystems over the coming decades. The shocks that we felt so far were quite bearable. They were the result of rather "muffled" eruptions. And unlike the shifts that occur beneath the earth's surface, we see a number of signs suggesting exactly how the pieces of the puzzle will come together or separate from each other.

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