Digital disruption is affecting many industries and payments is certainly not an exception. Merchants and their customers are gaining many benefits from the rise contactless payments, which presents long term opportunities for you as the mobile network operator (MNO) or financial institution. In this blog, we list 5 reasons why mobile network operators (MNOs) should be encouraging merchants to adopt contactless payments.
1. Improves business operations
Contactless payments open a world of opportunity for merchants and their customers. Digital tools create granular data which can help improve business operations, thereby enhancing their offerings. For instance, QR Code payments provide data around operations which can be used to improve basic customer relationship and store credit management, supervision of staff; payment of suppliers and inventory management, amongst others. Jack Dorsey, founder of Square (a US payments company) hits the nail on the head:
“It’s not about killing cash. It’s about being able to account for your entire business.”
Digital payments also offer choice. By adopting one digital solution, retailers could be losing out on business. Small retailers are more likely to adopt combined solutions that help manage and grow their business so it’s important as a mobile network operator or financial institution to offer the right solutions as each business and its market is unique. There is no ‘one size fits all’ solution.
2. Improves credit scoring
The data trail that digital payments create can help with a merchant’s credit scoring for formal working capital to which most small merchants have little to no access. “Big” and “small” data from payments will increasingly be used to offer value-added services, particularly microloans, to small businesses. Merchant acceptance of electronic payments will grow as more business owners adopt a variety of consumer technologies, from today’s smartphones and social media to the future’s wearables and virtual reality.
3. Supplier payments made easy
Paying suppliers with money received electronically from consumers can help build positive network effects. Retailers prefer to receive payments from customers and pay suppliers and employees from the same account because it is convenient.
4. Cheaper and quicker to roll out
Falling smartphone prices are encouraging the rapid adoption of smartphones throughout the world. Exponential growth is already being experienced in sub-Saharan Africa where the region is set to add more than 400 million new connections by 2020, by which time the smartphone installed base will total over half a billion. Many people are already using their phones to shop online so it makes sense that these devices are used to pay retailers in shops. Once again QR Codes, are a good way to encourage digital payments using the phone because it is easy and cheap for suppliers to develop and customers will enjoy its convenience, speed and security.
5. Larger transactions for merchants
Because of the convenience and security of digital payments, consumers tend to spend more—even twice as much as when making cash purchases. It’s also a lot about perception: cash is a tangible thing, something you can hold in your hand. When you spend it, you have less of it in your wallet. On the other end of the spectrum, it’s hard to perceive the card or mobile phone payment as something tangible. Psychologically, it seems like it would be easier for someone to purchase more because the digital payment does not represent actual money-it’s just a code or piece of plastic. Impulse purchases also tend to occur more with digital payments, according to psychologist Dr Ian Zimmerman. Digital payments are resolving many challenges for retailers (and their customers) in a fast and often cost-effective way, helping businesses to grow steadily. For MNO’s, there are many opportunities that arise from merchants’ successes in the retail industry. It’s a matter of time before new market entrants snap up the opportunities so to avoid being left behind in a space that is becoming increasingly competitive, MNOs should consider taking an active role in promoting digital payments.