Innovations in Retail Payments

Drivers for innovation and
emergence of New Retail Payments


Innovation in the retail payments space generally involves two key aspects:

The first is the adaptation of existing technologies or adoption of new technologies to improve the efficiencies in the way payments are made in terms of the transaction channel used or device used.

The second is the development of new business models and mechanisms for handling the underlying payment processes and activities.

This results in innovation in the following space:

  • a new payment product (e.g., e-money products),

  • a new channel for using an existing payment product (e.g., using a mobile phone to initiate a credit transfer or using a business correspondent for cash deposit)

  • changes in how the product is used (e.g., biometric authentication)

  • an improvement in internal processes that often are not perceived by the final user (e.g. cheque truncation).

Most recent technology developments are leading to the emergence of new retail payments. While emerging payments are highly dynamic, the most prevalent and widely adopted are in the area of:

Key aspects to Innovations in Retail Payments

  • Adaptation of existing or new technologies to improve the efficiencies in the way payments are made (channels or devices used)

  • Development of new business models and mechanisms for handling the payment processes and activities.

Innovations in Retail Payments - The Current Drivers
  • Technology enablement (High speed internet, Mobility)

  • Economic crisis (Move towards pre-paid and debit products as opposed to loans and credit based products; Need to reach-out to new markets (unbanked))

  • Social shift (Self service; Social media)

  • Technology savy new market entrants (Paypal, Google, Telecoms, etc.)

This results is innovation in the following areas:
  • New payment products

  • New channels for using an existing payment product

  • Changes in how the product is used

  • An improvement in internal processes that often are not perceived by the final user


The aim of this article on innovations in retail payments was to improve the general understanding of retail payment economics and to help identify possible developments and dynamics that will shape the future retail payments landscape.

We hope this will led to valuable findings which will further stimulate efforts to foster the economic underpinnings of innovation and integration in retail banking and payments.

Areas of Innovation


Emerging retail payments

  • E-Money / Digital cash

  • Person to person transfers and payments

  • Electronic Bill Payment Presentment (EBPP) and electronic bill payments


Emerging payments mechanisms

  • Contactless and proximity payments
  • Use of barcodes
  • Biometrics
  • New transaction messaging formats

Emerging payment channels

  • Mobile channel, and integration of other channels with the mobile channel

Emerging retail payments
  • E-Money / Digital cash
  • Person to person transfers and payments
  • Electronic Bill Payment Presentment (EBPP) and electronic bill payments

Emerging payments mechanisms
  • Contactless and proximity payments
  • Use of barcodes
  • Biometrics
  • New transaction messaging formats

Emerging payment channels
  • Mobile channel, and integration of other channels with the mobile channel


Payment Cards and
Bank Accounts Still Most Important


Which do you think is the current relative importance of these payment products in a country?
  • Credit / charge cards
  • Direct debit/ credit/ giro/ ACH
  • International scheme debit cards
  • Electronic bill payment
  • Cash
  • Domestic debit cards
  • Internet based payments
  • Remittances
  • Prepaid cards
  • Mobile payments (remote)
  • Contactless cards
  • Cheques
  • Mobile transfer
  • Mobile NFC payments

You will find that most survey shows for Europe debit and credit cards are currently the dominant payment method for retail payments with direct debits etc dominating wholesale payments.


Mobile, Online & Contactless are the Future


What ar ethe 3 payment products which will experience the greatest growth in importance in a country over the next 5 years?

Mobile technology is very "cool and sexy" but its only the on ramp - The data is the winning play.
  • Mobile proximity payments
  • Contactless cards
  • Mobile transfers (P2P, remittances)
  • Internet based payment products(including P2P/ excluding Bill payments)
  • Prepaid/ stored value cards
  • Electronic bill payments
  • International scheme (VISA and MasterCard) debit cards
  • Domestic debit cards (e.g. PIN debit)
  • Credit / charge cards
  • Direct debit / direct credit / Giro / ACH
  • Remittances (excluding Mobile)
  • Cash
  • Cheques

Most of the survey done predicts that over the next 5 years mobile and contactless will take an increasing share of payments in Europe replacing cash and cheques.

Visa EU predict 50% of their transaction volume will be from mobile by 2020.

Electronic money or E-money / Digital Cash


E-Money or Digital cash is one of the fastest growing segment.
  • Electronic Money or Digital cash is a record of funds or value available to a consumer and stored on a card (chip or magnetic prepaid cards), a mobile device, a computer system

    • (Social) Network money
    • M Money
    • Electronic Purse, Electronic Wallet

  • Largest growing segment

  • Offered by both non-financial and financial institutions

  • Some examples

    • Account to account services using E-Money: Paypal, Google Cash
      • Auction sites, retailer sites and mobile applications
    • Closed loops social network payments: Facebook Credits

    • Mobile Money: 100s of M-Money products around the world, with 90% in developing countries

Facebook Credits: Micro-payments to be used within the Facebook environment only (purchase of games and applications within Facebook).

Mobile Money - Experiences with mobile banking, combined with the experiences with e-money products motivated various entities to experiment with e-money products with transaction initiation through mobile phones as a key design aspect.

Uptake of the Mobile Channel


  • Mercator, NFC ubiquity could happen within 3-4 years.

  • In-Stat report says... mobile-payment users 120m to 400 million in 2015.

  • Juniper Mobile Payments Value in 2015 ($700B)

  • PayPal estimate that they will process $5B in 2015

It is estimated that some banks had 250,000 New customers attributed to new mobile app simply because they had the application as an option.

Banks and Mobile

Benefits for Banks

  • Attract new younger customers
  • Drive more transactions over existing infrastructure
  • Migrate costs from Call Centers
  • Leverage fraud mitigation and compliance processes
  • Build customer loyalty and stickiness

Threats for Banks


  • Customer base being approached for financial services by a multitude of players
  • New, more agile players looking to take share - e.g. Google, Paypal, ISIS
  • Social Media
  • Customer behaviour is changing
  • Credit crunch means consumers perceptions of banks changing

  • Enroll mobile customers - fine, just expand current application process, may need an Mobile Web Server to interface to phones

  • Manage mobile accounts and virtual cards - mobile accounts are just accounts so that easy, managing virtual cards is more difficult and may require new processes to be added

  • Process transactions - Easy, but need to handle new data and authorisation processes

  • Provide additional services - How can we easily add new financial applications?

  • Form new relationships - With the smallest number of new institutions possible

  • Make some money from it - Never lose sight of this

Mobile Products and Services


  • Mobile Banking - Gives you the ability to connect a financial institution and its account holders using a mobile device to provide action-enabled access to functions and services.

  • Technology
    • SMS
    • Browser based
    • Rich UX (e.g. Mobile App)

  • Examples
    • Account inquiry
    • Transaction summary
    • Funds transfer
    • Bill Payment
    • ATM/branch locator
    • Password generator

Mobile as the replacement of a traditional payment device

  • Mobile as the replacement of a POS terminal
  • Mobile to stage ATM transactions
  • Mobile to receive e-receipts for transactions that were initiated at other channels

Mobile as an authentication device and fraud prevention enabler

  • One use password via SMS
  • SMS Fraud Alerts

Retail Payments - Customer Loyalty


Retail Payments customer loyalty scores should exceed a company average in all four major metrics.

Retail Payments customers score should be much higher than a company average on being "Truly Loyal", 57% vs 48%

Retail Payment customers in the high risk measure should be significantly under the company average 18% vs 28%

A company customers should feel slightly less trapped than average 12% vs 13%

Retail Payments is slightly more accessible that average 13% vs 11%. The Year-on-Year (YoY) customer loyalty trends should all be moving in the right direct.

In some cases, for instance, takeover mergers and acquisition, the company customer base will be very nervous as post acquisition is stabilized and are now beginning to see the advantages of being part of a larger organization.

We believe that the company customers will begin to see the strategic nature of the upgrade to newer product and expect that to continue with new releases upgrade and the continued trend of differentiated capabilities from earlier products.

High Level Suggested Actions for Innovations in Retail Payments

  • Truly loyal should be cultivated for cross-sell opportunities

  • Accessible and truly loyal should be targeted for innovation jams

  • High Risk – Should be reviewed and targeted for management outreach


Innovations in Retail Business Models


The innovations in retail business payments software should underpins electronic payments throughout retail and wholesale banking, and commerce, all the time, without fail.





































































































































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