There is no way around it: the mobile story will just get bigger and bigger. As mobile wallet adoption continues to rise globally, the message for merchants is a simple one: get your mobile strategy right or get left behind. In many Asian and Latin American countries, mobile wallets are now the dominant payment platform. In China consumers, have adopted mobile almost exclusively as their payment channel of choice. Consumers want to buy products and services when they want and wherever they are. Mobile is central to a new consumer behaviour emerging around the globe. Offering the right payments experience and a seamless mobile checkout solution will be crucial to commercial success in 2018.
The Alipay and WeChat phenomenon
Consumers do not only want to pay wherever they are, they also want to use the payment methods they know and like. Nothing underlines that fact better than the Alipay and WeChat ‘invasion’ of Europe. In just a little over five years, these two digital platforms have changed the nature of Chinese retail payments, and helped hundreds of millions of Chinese consumers move from cash to electronic payments.
In the last few years we have seen a flurry of European retailers adopting Alipay and WeChatPay, from Selfridges and Harrods in the UK, French retailer Galleries Lafayette to market traders in Camden town. The logic is quite simple: over five million tourists travelled to Europe in 2017. Figures show that Chinese travellers spend more than any other nation when travelling abroad. Retailers in Europe are missing a big trick and a huge opportunity if they don’t develop strategies to integrate new forms of alternative payments and cater to this huge consumer group. We expect this trend to continue and at ACI, we are helping our clients to accept more and more payments from Chinese consumers.
The Telco Opportunity
With many consumers now spending more time and money on their mobile devices than on their desktops and in stores, telcos – the facilitators of this movement – are at the moment on average only billing 3 percent of consumer spend! Add to this the increasing number of new market entrants, in particular OTT (“over the top”) players, who are threatening the traditional bread and butter revenue streams of telco companies, and it is clear that MNOs and MVNOs need to consider how to carve out a profitable, sustainable path in a digitally-connected future.
According to an analysis by ACI Worldwide and Red Dawn Consulting , the mobile payments market is set to double over the next five years, and telcos have a towering opportunity to increase their mobile payments revenue at least fourfold by 2022.
However, this €13 billion opportunity can only be realized by those telcos who are willing to think ‘outside the box’ – or rather ‘inside the handset’ – by examining how they can deliver against consumer demand for speed, convenience and security. And by those that make their businesses a mobile-enabled hub for the digital marketplace.
Although this is only number four on my list of things to watch out for, it goes without saying that fraud needs to be on top of the agenda for retailers and merchants wherever they are. As the industry continues to add more channels – opening and expanding the capabilities with the target of real-time, borderless, any-to-any payments – fraudsters will attempt to attack the ‘weakest links.’ ACI’s most recent analysis for this shows that fraud attempts are expected to rise 30 percent during this year’s holiday season. Identity theft (via data breaches), account takeover (including phishing attacks) and friendly fraud (chargebacks) continue to be the biggest challenges for consumers and merchants and it goes without saying that sophisticated fraud monitoring and prevention capabilities will be more crucial than ever before.
PSD2 and authentication
A few weeks ago, the European Commission announced the final regulatory technical standards (RTS) for the revised Payments Service Directive (PSD2) which will take effect in 2018. One of the most contentious recommendations is a new requirement for PSPs to increase the strength of customer authentication needed to complete a transaction.
In the new PSD2 world, regulators want us to authenticate every transaction via at least two steps. It looks like ‘friction free’ will remain a fantasy in the PSD2 world. PSPs may be exempted if they have developed ways of assessing the risks of certain transactions and can identify fraudulent ones. Exemptions also exist for contactless payments and transactions for smaller amounts.
Expect a big debate in 2018 and beyond, about the need for strong authentication and whether these measures are too ‘heavyweight.’
By Andy McDonald, Vice President Merchant Payments, ACI Worldwide