Skip to main content

Who Benefits From Frictionless Payments?


Contactless payments are just the latest in a line of innovations introduced by the payments industry in order to make the process of paying for things simpler, quicker and more convenient. The goal? To move us away from a cash based society to one where payments are a source of income for the industry which enables them.

The cost of managing cash is one of the reasons why the payment industry came into being. For the customer in a cash based society having sufficient cash on hand to cover any of the purchases which might become necessary over the course of a day is inconvenient. For the vendor that cash is effectively worthless until the point that it is deposited into a bank account.

Cheques were the first alternative solution - and although they allowed a customer to effectively carry all of their wealth, without actually having to carry all of their wealth, they also slowed down the buying process. Writing a cheque, signing and cross-checking slowed the business of business. Irritating for one customer, painful and costly across a whole business day for the vendor. Who also had to deal with an even bigger delay before receiving the actually money.

The transition to payment  cards removed most of the delay and irritation whilst also allowing vendors quicker access to funds. Contactless cards and smartphone payments only add to the convenience for both parties to the transaction.

However the Payment Card industry is providing a service which has to be paid for. It validates and guarantees payments, it ensures smooth transit of funds from account to account and it provides a common ground for vendor and customer to perform business. That has to be paid for. But by whom?

From next year the UK will ban surcharges on card payments. That means that the cost of using payment cards will need to be picked up by all consumers as a hidden cost in the retail price of goods. Whilst both vendor and customer benefit equally from the intermediary service provided by the payment card industry ultimately the cost of providing that service is borne by the customer.

With that cost equating to 2-4% of the purchase price of the product or service fee, it's a significant tax on all consumers whether they use cards or not.

Whether consumers ultimately decide that this is a price worth paying or not will determine how quickly retail and financial industries are disrupted. Would you consider a different payment method if it meant that every single thing you purchased was 4% cheaper? Just how much value do you put in the convenience card payments bring to your life?

These are the sorts of questions which open the door for the new and rethought services like Alipay and WeChatPay.

Comments

Popular posts from this blog

F1: Robert Kubica Impresses In Renault Test Run

The car may be old but its the performance of the driver that's the story here. Robert Kubica returned to F1, after a fashion, earlier this week with an extensive test run in a 2012 Lotus Renault F1 car at Valencia.
The age of the car and the circuit were likely determined by F1's current rules which ban testing, but the reason for Kubica being in the car is far more interesting. Considered by many to be a potential World Champion and certainly one of the fastest drivers of his generation, Kubica's F1 career seemed to be over after a 2011 crash whilst driving in the Rally of Andora. His Skoda Fabia was penetrated by a guardrail in the high speed accident partially severing his right arm.
Up until last year Kubica has been competing in rallying, with the expectation that the limited movement in his repaired arm would prohibit a return to single seater racing.
So this week's test is both interesting and confusing. Interesting because Kubica completed 115 laps of the ret…

Panos Panay's Defence Of Microsoft Surface Hardware Sounds Eerily Familiar

This weekend I went out with my ten year old daughter to select a laptop for her school year beginning in January. The schools requirements are quite specific, requiring a Windows 10 device, with a preference for a touchscreen and a stylus. She chose a Surface Pro, after trying a large number of different options. Having seen the way I use my own Surface Pro - and tried it herself there was only ever going to be two options - and the other was a Surface Laptop.
I tell you this so that you understand I am a buyer of Microsoft's products through choice, not compulsion. I'm on my third Surface device now. 
So when Panos Panay dismissed reports of the death of the Surface hardware line, I was very interested to see exactly how strong these denials were. Especially how they reflect what has gone before. To whit: Windows 10 Mobile.
Panay claimed that Microsoft is in hardware for the long haul. Almost exactly mirroring the words of Terry Myerson, when he claimed Windows Mobile was g…

WhartonBrooks Indiegogo Windows 10 Mobile Even More Doomed To Failure Than Usual

WhartonBrooks is currently crowd-funding its latest Windows Mobile smartphone on Indiegogo. If crowdfunding isn't already a bad enough idea, a company trying to crowdfund a Windows Mobile device should be warning enough for you.
Not that anyone seems to be taking the project too seriously. With a few weeks left to run the campaign has managed to ensnare just 2% of its $1.1m target.
If you want a better indication of how few Window Mobile loyalists remain I doubt there is one. Of 3,900 Windows Phone enthusiasts Wharton Brooks was seeking for its new phone, it has managed to entice just 50.
Windows for Phones is dead, even if the corpse hasn't stopped twitching yet.