As m-commerce takes the world contactless, should agencies follow suit?

The Drum 24 Jun 2021 03:00
By Samuel Scott-June 24, 2021

The Promotion Fix is a​n ​exclusive biweekly column for The Drum from Samuel Scott, a global keynote marketing speaker who is a former journalist, newspaper editor, and director of marketing and communications in the high-tech industry. Follow him @samueljscott.

Contactless and other mobile-based digital fintech payment methods surged in popularity during the pandemic and will remain in use afterwards. But are there risks to businesses and consumers? For our deep dive into all things Mobile, columnist Samuel Scott looks into the issue.

My stepfather still writes checks rather than use debit cards, even though he holds up store lines and annoys everyone. Why? He says it prevents careless overspending. And he represents both an opportunity and a problem for mobile payment apps today.

The rise of mobile and other fintech payment apps

According to information compiled by Statista, weekly usage of finance-related mobile apps increased 20% in the US, 20% in China and 5% in the UK after the coronavirus pandemic had begun (see the left-hand graphic). Total business-related spending on mobile apps rose by 116% in Europe during all of 2020 (see the right-hand image).

“The pandemic was like a fault line that caused a seismic shift in digital payment behaviors,” Lily Varon, a senior analyst at Forrester, tells me. “US consumers historically are very stubborn in our payment habits, but the desire to avoid touching cash and payment terminals were incentive enough to combat our collective inertia.”

“Early indicators [today] point to some of these new payment behaviors sticking around: about half of those US shoppers using their credit cards in stores have recently used them to make a contactless payment – as in during early 2021.”

The history

Bank of America issued the first credit card with revolving credit lines and finance charges in 1958. That year, the financial institution introduced the product with the famous ‘Fresno Drop’ and mailed 60,000 new credit cards with limits of up to $500 to people in the California city – along with running accompanying local ad campaigns.

Every financial evolution leads to societal change – for better and worse. Credit cards eventually did become commonplace and have allowed people to purchase and possess expensive household amenities immediately instead of waiting until they had saved enough money to pay in lump sums.

The same is true for the mobile-based fintech and other alternative payment methods that arose just before and during the coronavirus pandemic today.

When I once worked for a marketing agency that focused on B2B high-tech clients, the chief executive told everyone to highlight to them that our work “shortens sales cycles”. His theory was that getting a company to purchase a $1m platform traditionally takes more time than convincing a person to buy a $1 chocolate bar.

In the early 2010s, I had a roommate who became addicted to reality TV cooking shows. For $1.99 per episode, he would push a button, pay the charge and download or watch one after another on some platform all night, every night – and he never thought about how much he was spending (I just hope he never discovered The Great British Bake Off).

A 2000 study by the Massachusetts Institute of Technology found that people spend more when they use credit cards instead of cash. A 2017 one by University of Toronto professor Avni Shah found that paying by smartphone was even worse.

In the UK, there is also controversy over the buy-now-pay-later app Klarna. The company says it is better than credit cards because it does not charge interest or late fees. But the consumer organisation Citizens Advice has warned that the platform can be a ”slippery slope into debt”.

“The money leaves your account almost instantly and transactions are generally not reversible. It’s easy to send money to the wrong person by mistake. It’s easy for scammers to trick you into sending money to them.”

“In April 2021, there were 970 digital wallet complaints – almost double the previous complaint peak in July 2020,” the report states. The three most common complaints were problems managing, opening or closing accounts; fraud or scams; and issues with unauthorized and other transactions.

“Even then, before sending money, ask your friend to send you a request for the money to make sure you have the right username. Consumers should link their app to either a credit card or a separate small checking account, not to their primary account or one with a sizable balance. Immediately file complaints about fraud with your app, your bank and the CFPB.”

A related Forrester report found that merchants have the same top two concerns for both online payments and in-store digital payments: combating fraud and reducing processing fees.

In the UK, card payments on the Monzo app in the country and abroad are free. Revolut, in a different example, is more of a full banking app rather than just a simple payment app and charges £6.99 a month.

“Further, consumer protections that apply to consumer transactions generally do not protect business accounts. Businesses should also read the terms of service carefully as some payment services cannot be used for business purposes. Some payment services may have separate business accounts.”

“Contactless payments acceptance will be a permanent fixture in the vast majority of retail stores soon, but we can also expect to see some of the retail leaders – those who were ahead of the game in terms of curbside pick-up and other omnichannel commerce initiatives – begin to expand their digital and mobile payments acceptance across more channels and scenarios,” she says.

During the worst of the coronavirus pandemic, I hired The Hive Studio, a creative agency here in Tel Aviv, to create a 60-second highlight reel cut from footage from some of my prior speaking engagements. After they finished their excellent work, I sent the payment through Bit – the major local fintech payment app – with 10 taps of my finger on my phone.

And the benefit to The Hive Studio? They get the funds on Bit immediately and can pay others with that money or withdraw the amount to a bank account. Most importantly, the commonly used Israeli business accounting platforms approved by the finance ministry and tax authority all recognize and incorporate the use of such payment apps.

While it is impossible to know how many ad agencies or martech platforms are now processing payments through mobile fintech apps, another told me that they are using alternative platforms.

“All international creators we work with on campaigns are paid via Veem – an alternative to traditional bank payments. We recently introduced Pleo cards for staff expenses, where everyone can also automate expense reports digitally. Bi-weekly we treat everyone to a company paid lunch, and we use Deliveroo’s app rather than having employees expense meals back.

The future of mobile payment apps

In Israel, transfers through Bit accounts are limited to NIS 3,600 ($1,100) per day. I would not be surprised if there will be more rules here and in the US and UK as well – for the benefit of both consumers and businesses.

“This is an existing duty not being enforced,” he says. In the meantime, I do not expect my stepfather to use mobile payment apps any time soon.

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