MasterCard and Visa have released
surveys on the consumer view on payments technologies. Both surveys
indicate new and growing markets for alternative payments, writes
Duygu Tavan.
Go deeper with GlobalData
MasterCard
and Visa have released ‘barometers’ measuring the benefits and
demand for alternative payments. MasterCard’s Prepaid Holiday
Barometer found that prepaid cards are an efficient product to
market to consumers who underestimate their budgets on short or
last-minute holidays. Visa Europe’s Contactless Barometer found
that the vast majority of contactless users would advocate its
use.
The research focused on the
UK mainly (Visa also considered Poland and Turkey), but both survey
findings can draw comparisons to other mature markets.
The survey findings put into
perspective the benefits prepaid and contactless cards can have for
consumers. MasterCard’s findings indicate the increased potential
for prepaid products marketed at affluent consumers. Similarly,
Visa’s findings indicate the increasing consumer demand for
contactless payments and the persisting lack of
contactless-compliant payment devices at retailers.
Thus, these two surveys set a
benchmark to measure future product and service propositions as
well as insight into business cases for the networks’
partners.
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MasterCard’s case for
prepaid
Sun, sea, sand – but no security. That
is what MasterCard argues in its research. With the summer in the
UK now officially over, the card network found that when consumers
make last minute decisions or simply go on long-weekend or
short-term trips, they tend to underestimate their
expenses.
More than half of the 2,000
respondents surveyed said a last minute holiday over a long bank
holiday weekend cost them just as much as their regular, ‘proper’
holiday. For more than two-thirds, these mini-breaks came with
unexpected – or not considered – costs.
While prepaid cards were
traditionally marketed to the underbanked or unbanked, MasterCard
now sees huge uptake among Europe’s mass market, says Matt Lanford,
head of prepaid at MasterCard Europe.
“Consumers may not check the
exchange rates or just underestimate the expenses they will incur
when they are abroad, such as getting to and from the airport,
making a purchase in the duty free shop. You’re on holiday, so you
may not think of your budget,” he says.
And this is were prepaid
cards come into the picture.
Surveys support
business cases
“These
two surveys are of course designed to get across [Visa’s and
MasterCard’s] message. That said, there is a lot of value in
prepaid and contactless cards. Especially as travel money. You know
how much you commit to your budget,” says Paul Lucraft, a
consultant for the payments and card industry.
“This is very beneficial for
a lot of younger people. When they run out, their parents can
upload more credit,” he says.
Lanford, too, argues that a
prepaid card has more benefits than traditional cards, especially
on holiday, because it can be pre-loaded before the holiday and in
the case of theft of loss, can be replaced.
“When you are on holiday and
you use cash and you lose your wallet – that’s it. It’s gone.
Prepaid cards can be replaced. This is the same with credit cards,
but prepaid cards will have a budget set by the consumer. And
consumers are more likely to take one card with them to the beach
instead of their whole wallet.”
Lucraft agrees.
“It’s a lot safer than taking
cash or travellers’ cheques,” he says. Cards are also more
flexible. If there is money left over, you get it back. If it’s
lost, you get it replaced.”
Prepaid benefits are
global – MasterCard
For Lanford,
the benefits of prepaid cards are global, as is the attraction of
being able to set your budget on a card. In the US, this attraction
is gathering pace with several banks and card issuers adapting EMV
technology so that travellers can use their cards in
Europe.
“We see the rising popularity
of multi-currency prepaid cards,” says Lanford.
There are of course currency
conversion rates, but, he says, they are not set by the card
networks and “usually, they are lower than rates at the bureau de
change”.
Lanford’s case for the higher
benefit of prepaid versus credit cards, at least on holiday, is
that it is more secure and an alternative and cheaper replacement
for travellers cheques. There are lots of different markets for
prepaid. For travel, there is a very strong business case for
issuers – it is safer and cheaper.
The travel money sector is
mature and very competitive. Other areas of prepaid are still in
the process of being proven, such as employee benefit cards or
insurance company cards using them to pay out claims.
“Something we haven’t seen in
the UK is the use of prepaid cards for concerts or festivals such
as Glastonbury,” Lucraft observes.
It makes him laugh to think
that we live in the 21st century, yet when a few hundred thousand
people go to a pop concert, they still use cash.
“People don’t really want to
carry cash with them. They go to such festivals or concerts and
then have to queue for half an hour to get cash out,” he
says.
Visa’s case for
contactless
Visa’s
Contactless Barometer is the first for the network and will be
published quarterly. The research focused on traditional bank cards
with contactless enabled technology. This, says Mark Austin, head
of contactless at Visa Europe, will provide the network with an
indicative insight into how consumers are likely to adapt to mobile
contactless technology.
The research was also
undertaken in Poland and Turkey “where broadly the same themes are
reflected”, Austin says – and Visa aims to use the quarterly
barometer as a benchmark to measure consumer take-up of new payment
methods and highlight Europe’s changing attitudes towards payment
methods.
“The findings from the
barometer also allow us to gain valuable insight into which
locations this technology is most useful for consumers, which in
turn provides useful insight for our retail partners,” Austin
says.
Visa also surveyed 2,000
consumers in the UK alone and found that there was more demand for
contactless cards technology than currently on offer, with most
people happy to recommend using contactless to others.
The survey found, however,
that the lack of retail acceptance was the biggest barrier to using
contactless.
“We see high levels of
satisfaction and recommendation of contactless technology amongst
users. For example, in Turkey 96% of those who use contactless
would recommend the technology to their friends or family alongside
95% of those in Poland. In addition, 91% of contactless users in
Turkey believe contactless makes life simpler, alongside 94% of
contactless users in Poland,” Austin says.
In the UK, the statistics are
similar: 85% of contactless users surveyed said that they would
recommend contactless to their friends and family, and 90% say it
makes life simpler.
In correspondence to this,
almost a third complained that there were not enough retail stores
offering contactless payments and almost a third had never been
given the option to pay with a contactless cards when making a
purchase. This, said almost two in five people, is the main barrier
preventing them from using the technology.
Changing consumer
attitudes
“We’ve developed the barometer to help
us benchmark changes in consumer attitudes and take-up of
contactless payments,” says Austin. “It’s good to see that users of
contactless are satisfied with the technology – but it’s also clear
that many consumers would like to see it become more widely
available across the country.”
One key finding was that 44%
were concerned about security and theft, prompting Austin to
criticise banks for failing to educate customers properly. This
indicates that perhaps consumers still require more education in
terms of contactless card security.
“Contactless cards are
subject to the same level of consumer protection as all Visa cards,
which means that if you are a victim of fraud you can get your
money back. The cards also have in-built security functionality
which means they can only be used a certain number of times before
a PIN is required,” he says.
Visa’s research supports the
industry-wide argument for contactless roll-out: a third of
consumers surveyed consider the speed of payment the main benefit
of contactless. More drastically, more than half do not like to
hand over their card to a cashier, while slightly more people
simply do not like carrying cash in their wallet and half do not
like having to take cash out of ATMs.
Austin’s conclusion is that
“we are now taking the first steps” on the road to becoming a
‘less-cash’ society.
Retailers need to
keep pace with consumer sentiment – Visa
“The
Barometer offers a snapshot of changing attitudes towards payment
technology and consumer experiences of using it on the high
street,” Austin says.
“The two key takeaways for me
are the need for retailers to keep pace with consumer demand and
also for our industry to take steps to ensure consumers are
reassured about the security measures present in all contactless
cards.”
For Lucraft, the lack of
option for these alternative payment services at merchants is the
failure of the banking community to bring consumers and retailers
together.
“That is a business
opportunity. If you have several thousands of people at an event,
there’s got to be a business opportunity,” he says.
“Would you rather stand in a
queue for half an hour or pay maybe £1 ($1.6) to use a prepaid
card, for instance?
“Contactless is almost there
but the way it has been pushed in the UK has been flawed. For
instance, Barclays launched contactless on their credit cards
instead of debit. But contactless is targeted at low-value
payments, less than £15.
“One of the challenges was that banks could not roll it
out on debit. Now Barclays has several thousand contactless outlets
around London. But until the retailer says that this is something
they really want to push, until they see the value, it will not
take off.”
