Which Firm Poses The Biggest Disruptive Threat To Retail Financial Services?

Benjamin Ensor

Over the past few months, we've been researching a series of reports about the disruptive potential of various clusters of new entrants into financial services, from social lending and crowdfunding to digital investment managers and digital banks.

But many eBusiness executives are more concerned about the potential impact of technology giants like Amazon, Apple or Google with their deep pockets, technological prowess and broad consumer reach.

I originally posted this question on one of Forrester's internal collaboration platforms, but I was so intrigued by the results from my colleagues I thought I would post the same question here to see whether your perspective similarly is thought-provoking.

Please vote in my poll in the column to the right of this post. ->

Have I missed any firms that you think have even greater potential, or plans, to disrupt retail financial services?

Why Visa’s V.me Digital Wallet Matters To eBusiness

Benjamin Ensor

I attended a briefing from Visa Europe yesterday, about its V.me digital wallet. Here’s what Visa said:V.me by Visa

  • V.me is more than a mobile digital wallet. Customers will be able to use V.me to make online payments too. It lets users check out at online stores using a one-click solution that remembers card details from multiple providers (including MasterCard and American Express cards) as well as billing details and postal addresses.
  • V.me is not just about mobile contactless payments. V.me will support a variety of ways to initiate payments including bar codes and QR codes, as well as NFC.
  • Visa intends to distribute V.me through its member banks, much as Visa cards are distributed today. BBVA will be the first issuer in Spain.
  • V.me is already in extended pilots in the UK and Spain to test the system and will launch formally in both countries soon. France will be next. V.me will start rolling out into stores in the UK next spring. Officially V.me will be available in France, Spain and the UK by next summer. (Visa Inc has already launched V.me in the US).
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Why Contactless Cards Aren’t Taking Off In The UK

Benjamin Ensor

The other day, Smile*, one of the banks I have an account with, sent me a new contactless card.

The contactless symbolThe striking thing about this otherwise ordinary event was that the bank didn’t mention that it was a contactless card. I know it’s a contactless card because it has the contactless symbol on it. But nothing in the letter the bank sent with the card so much as mentioned the new contactless functionality. Logically, one of the following must be true:

  • Uncharitably, it could just be that the left hand doesn’t know what the right hand is doing, and the product team forgot to tell the marketing team it was doing anything new.**
  • Possibly, some slip meant that my envelope didn’t contain any marketing. But there’s no mention of contactless cards on the bank’s website either.
  • Alternatively, the bank simply reckons that the benefits of promoting the contactless functionality are so marginal that it’s not even worth the effort of changing its standard letter (which promotes card protection insurance in extensive detail).
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The Digital Wallets Wars Are the Next Phase of the Payments Industry Transformation

Denée Carrington

In my coverage as Forrester’s new payments analyst, I'll serve consumer product strategists who accept or facilitate payments as they create, navigate, and capitalize on digital disruption within payments.

We are in the early stages of unprecedented innovation and transformation of the consumer payments industry, and emergence of a digital wallet marketplace is the next act. The definition of a digital wallet continues to evolve as innovations come to market, and the term is sometimes used synonymously with “mobile payment.” However, there are significant differences. Forrester defines a digital wallet as:

A digital service — accessed via the web or a mobile application — that authorizes payment transactions from one or more payment sources and facilitates other commerce-related features, such as offers, coupons, loyalty rewards, electronic receipts, and product information.

As new wallets are introduced into the market, we will see consumers and merchants accelerate their trial and adoption. Yesterday, Google announced a new cloud-based version of their digital wallet that intends to address many of impediments associated with their first version.  In my new report out today, titled “Why The Digital Wallet Wars Matter," I frame the emerging digital wallet landscape, provide a profile of early adopters and how to capture their attention, and outline which wallets will ultimately win in the marketplace. Here are the key takeaways:

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Forrester's CPS Practice Welcomes Our Newest Analyst - Denée Carrington!

Carlton Doty

Over the summer, I asked you all whether we are finally headed toward a cashless society. Since then the battle for the digital wallet has certainly heated up. Well today, I am thrilled to announce the newest addition to Forrester's Consumer Product Strategy practice. Her name is Denée Carrington, and she will be joining us as a Senior Analyst, covering consumer payments, starting January 3, 2012. 

To provide more specifics, here's a sneak peek at some of the coverage areas where Denée will be able to help Forrester clients with consumer payment strategy in the new year:

  • Defining the future of consumer payments
  • Managing a portfolio of payment products (e.g. credit, debit, prepaid, contactless, mobile, person-to-person (P2P), etc.)
  • The business models and profitability of these payment systems
  • Understanding the dynamics of customer (consumer and merchant) payment behavior
  • Understanding the payments needs of different markets
  • Sizing the different payments market opportunities
  • Driving customer (consumer and merchant) adoption of payments systems
  • Building and developing new payment systems
  • Optimizing existing payment products to improve security and increase convenience
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The Battle For The Digital Wallet

Benjamin Ensor

Over the past couple of years I have been intrigued by the concept of a 'digital wallet' that will combine mobile payments with a variety of other benefits for customers. The more people I talk to, the more convinced I am that mobile digital wallets will mark a big shift in retail payments. A mobile digital wallet is more than just a mobile payment system because it combines:

  • Mobile payment. Digital wallets are likely combine several different payments systems into a single service, including mobile contactless payments, online (i.e. web) payments, and over-the-network mobile payments, making it easy for customers to make a variety of different types of payment from a mobile device.
  • Barcode scanning. Scanning barcodes or QR codes will let customers get more information about products, and let them pay for items on their phones before showing an on-screen receipt to leave the store.
  • Loyalty rewards. Instead of carrying (and sometimes forgetting) a separate loyalty card, digital wallets will track customers’ spending and offer merchant-funded rewards, either on the phone or at the point of sale.
  • Coupons and offers. Digital wallets are likely to offer customers coupons and location-based offers.
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Is It Time You Accepted PayPal?

Benjamin Ensor

We've just published some new research on online shoppers' payment preferences in Europe. Payment habits across Europe remain diverse, with shoppers in different countries using different, and sometimes entirely different, payment methods to shop online.

One of the findings that struck me most during our research was the growing popularity of PayPal. That PayPal is used by many online shoppers across Europe is well known, and partly explained by the success of eBay. What struck me as new is how many big European online merchants now accept PayPal, among them leading fashion retailers and airlines. Perhaps I didn't spot that sooner because the British merchants have been much slower to adopt than those in Italy, Germany, France and Spain.

The growing acceptance of PayPal raises questions for two groups of eBusiness executives: 

  1. If you work at a retailer or other merchant, is it time you accepted PayPal payments online?
  2. If you work at a bank or card issuer, what does the growing use of PayPal mean for your relationships with your customers?
  3. For both groups, what payment methods are customers likely to want as they start buying from tablets and mobile phones?

What do you think?

If you are a Forrester client, you can read the full report here.

Some Observations From Finovate Europe

Benjamin Ensor

For the past few years I have watched enviously as the Finovate online financial technology show has gone from strength to strength in San Francisco and New York. So I was thrilled to hear that Finovate was coming to Europe and today I was lucky enough to go along to the show in London.

For those of you who aren’t familiar with Finovate, it’s a fast-paced format with seven-minute live demos and pitches from 35 financial technology vendors. It’s produced by Online Financial Innovations, the people behind the excellent NetBanker blog.

The big themes were:

                Money management: Figlo; IND Group;  Linxo; Lodo Software; LoveMoney.com; Meniga; Strands Personal Finance; Yodlee.

                Security: Business Forensics; miicard; SilverTail Systems; SolidPass; Voice Commerce.

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Does The UK Need Another Online Payment System?

Benjamin Ensor

I am intrigued by last week's announcement from UK payment processor VocaLink and Australian financial software vendor eWise that they are collaborating to build an online banking transfer payment system for the UK. Online banking transfer systems make it (fairly) easy for online shoppers to authorize payments through online banking by integrating the payment details into their bank's secure online banking site. The customer is routed directly from the merchant's site to the bank to authorize the payment and back again.

In the Netherlands, the iDEAL online banking transfer system has been highly successful. It's now used by some 10 million Dutch online shoppers for about 5 million transactions a month. But the UK's online shopping market is different to the Dutch one in a couple of important ways. Firstly, debit cards can be used to pay online in the UK. Since almost all adults have a debit card, paying online is not a big problem in the UK, unlike many other European markets. Secondly, UK Net users have always been relatively complacent about online security compared with other Europeans. That means that one of the primary attributes of an online banking transfer system -- more robust security -- may not cut that much ice with British online shoppers.

Forrester has long argued that any new payment system needs to overcome three hurdles to succeed: providing a clear improvement over the existing alternatives, driving consumer and merchant adoption, and developing a viable business model for all parties.

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