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24 JUNE 2019
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Wednesday, 27 March 2019 11:46
Taking position for the new payments tomorrow
Reasons behind Apple’s “vintage” credit card

The new payments landscape is upon us and rather than being a volcanic eruption of change, it is the relentless erosion of how things were yesterday, to be replaced by a new normal.
This new normal has arrived insidiously, because it is just part of the monumental change taking place throughout all aspects of our lives. Consumers have been dictating the pace of this change, so the usually recalcitrant and wooden major financial services firms have been forced to adapt.

Take Citigroup for example. Today the bank outlined its plan to establish a merchant services unit to enable retailers to accept the expanding array of consumer payments now on offer. This is a small move for a bank that has a wide range of financial services already, but it is significant, following as it does on major acquiring deals, such as the merger of Fiserv and First Data.

Earlier this month, Barclaycard announced it was partnering with Alipay to help UK merchants increase sales from booming Chinese tourism. The new agreement will enable UK retailers to accept Alipay payments in-store, and connect with Chinese tourists before they travel to the UK, opening the door to a potential £1 billion of tourist spend.

There is plenty for traditional payments companies to keep up wth. Also this month, processing giant PayPal announced a new partnership with Instagram to help with buyer and seller transaction through Instagram’s new check out experience for shopping.

According to PayPal, Checkout on Instagram will be available within posts and stories with shopping stickers and tags. it will enable Instagram users in the U.S. to buy, track and manage their purchase directly within Instagram and allow businesses to sell directly on Instagram with the buying having to change context.

Financial firms are having to make changes, albeit reluctantly, given the costs involved in making any amendments to the rails of a legacy business, because customers using digital payments are changing their practices very quickly. Take Instagram for example. Who would have thought that this picture based portal would become a major online merchant within which customers expect a seamless and uncomplicated shopping and paying experience?

With legislation, such as PSD2 forcing banks to open their back-office doors to newcomers, there was no stopping the move to this new normal.

All of this adaptation means that those in the pathway, including processors, acquirers and gateway payment platforms are creating change in the value chain with the goal being to attract merchants who want to accept any type of payment that customers wish to make. The Citi announcement is aimed at attracting big merchants by offering them a suite of consumer payment options ranging from traditional credit cards to new digital wallets, and including direct bank to bank transfers. Paypal wants to be everywhere the customer goes, Barclaycard sees the opportunity presented by connecting with Chinese tourists through Alipay.

But not all the progress is forward.

Let’s look at the announcement from Apple that it is to issue a payment card. What?? How last year, last decade. What is wrong with paying by Apple phone? The answer is scale. Some people pay by phone, but even in markets where contactless is ubiquitous, such as the UK, where to find a merchant that doesn’t accept both contactless and ApplePay is the exception, there is still reluctance on the part of customers to move over to phone payments. (Apple Daily Cash Reviewed).

This is especially true in the US, where merchants have been painfully slow in converting their terminals from mag-stripe swipe to chip, and because they have elected for chip and signature, it is even more complicated still. An Apple payments card is the obvious answer in what may be a very long interim, before digital phone payments become the accepted way to pay. Or before we move to something entirely different, such as biometric payments, that don’t need any device at all. It means Apple can continue with developing the all-important customer relationship, without having to wait for banks, merchants and their systems to catch up. It may mean that Apple appreciates that mobile phone payments may not be the chosen method to pay – ever.

CEO Tim Cook says his new announcements, of which the Apple credit card is just one, is about the launch of new services, not new devices. This is significant. The streaming service, gaming portal and credit card are all offerings that round out the Apple offering, and tie customers in even more deeply to the Apple product line.

People don’t buy technology, they buy what technology will do for them. If it is clunky (like phone payments), they won’t use it. As we work out how to use augmented reality, AI, robotics, machine learning and all the other gismos that technologists keep inventing, it is worth bearing this in mind. How is the customer going to respond to this new development? Have we even thought about it from their perspective? Will it keep the customer loyal? Are we watching closely enough at how behaviour is changing?

I’m off now to see what the Apple credit card will do for me. As with all Apple announcements, this is not immediately obvious, but time will tell.

The subject of how customer behaviour is changing and what we should be doing about it will be discussed at the 2019 Loyalty Surgery, October 16&17. Book your tickets at
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