8 enormous changes that in 2017 will cause insomnia of top managers in the field of finance, retail and payments

Shifts tectonic plates of the Earth can cause large-scale destruction. The most powerful of them wiped out entire civilizations from the face of the planet. The problem is that we do not know how to predict such changes or their destructiveness until they occur. This metaphor describes the current situation and events in the ecosystems of payments, commerce and retail very well. In an article adapted by us, there are 8 colossal changes that can either destroy or give a serious impetus to the development of your safe haven in one of these ecosystems in 2017. What fate awaits your business?

Today we can talk about eight key shifts that go unnoticed, but aggressively, and transform what we call payments, commerce and retail today.

Bank unbundling

Once banking activity included the banks themselves in the whole diversity of their physical branches and the wide variety of services provided by banks. The main competitors in the struggle for your attention were the banks at home and at your place of work. They differed from each other in offers - requirements for a minimum balance on the account (not always), interest rates on deposits and accumulative programs, commissions (again not always) and smiling (or not) employees of their branches, as well as related products that included in the default offer or offered as additional services.

Today, billions of consumers around the world are literally holding the “bank” in their hands. The motivating factor for this transition was mobile devices. Now the main competitive advantage is the mobile application with the best UX, and it doesn’t matter whose brand is on the icon, how well-designed and good the products are. Bankers are fighting for their "place in the sun" next to purely digital banks that are not burdened with outdated traditional infrastructure. With banks that provide separate packages of services to specific categories of consumers on more favorable terms. The generation of “throwing chains”, which does not want to buy bulky content packages from pay-TV operators, requires a similar approach to the provision of services in the financial sector.
')
And all this is happening at the same time when regulators seem to be doing everything possible to put traditional banks in unfavorable competitive conditions.

Such changes make traditional banks not only strengthen the mobile and digital race, but also rethink the essence of the bank, explore the new needs of their customers: whom customers can entrust with the provision of banking services, what services they want to receive and require from service providers. All this, of course, will include a review of asset and reputation management procedures, which presented them as reliable custodians of client financial assets. At the same time, it will not do without the use of new technologies and cooperation with innovators in this area to make banking part of a new, mobile-digital era.

Commodization of retail

Today, the retail industry, like banking, is changing its new competitor. A small online store selling books, which 20 years later became the largest retailer in the world (judging by market capitalization). Unlike banks and their many digital competitors, for 20 years, Amazon has grown significantly and has rebuilt all retail in the process. Amazon has not just successfully rolled the crest of an online wave; he formed it and inspired a whole generation of online stores to do the same. Amazon and the innovators who appeared after it radically changed the approach to shopping and the use of physical stores.

For example, consumers no longer need to visit stores to find the right product — now the website is their new storefront. Now, one click of the mouse, weekly necessities such as laundry detergent, paper towels, detergents, light bulbs, shampoo and pet food will appear at your door within two days. Products for which consumers went to the store to try and buy them can now be ordered online - and often on Amazon.

This forces retailers of all stripes to find ways to get their customers back to the store, or at least increase the number by clicking “buy” on their sites. Retailers have to constantly rethink the very vision of retail and think about how customers make decisions, where to start and finish their consumer route - and why. When customers, armed with a mobile phone, have access to virtually all information about any necessary product and know where to buy it cheaper, technologies become the driving force of retail, but they cannot be considered as the only and unique lifebuoy. The transition of “physical” retail to digital implies an objective view of what consumers want and expect from their favorite brands, and then an understanding of how technology can translate these expectations into a personalized, profitable and secure reality.

Credit democratization

Transactional loans offered by fintech innovators return us in times of loans from the shopkeeper and take them to a new level, offering credit options for people and retailers - in the format of one transaction at a time. Online lenders provide consumers and small businesses with new lending opportunities and options — in some cases, refinance loans originally provided by banks, while taking commission income from traditional lenders. P2P platforms in developing countries are likely to offer their users access to new ways of financing and wide access to credit for the first time. Contrary to the regulators, trying to squeeze small loans and short-term loan products as much as possible, innovators create new ways to provide loans to the middle class in a convenient and user-friendly manner.

But, as in retail, technology alone is not enough, it is only a driving force for traditional structures and innovators. Transition to new ways of lending while maintaining the level of income will require a rigorous approach to simultaneously simplifying access to credit and managing the associated risks.

Digital payments change payment methods in stores

Long ago, and not too long ago, the main factors for the successful launch of a new payment scheme were the adoption of a new scheme by the audience and the widespread prevalence. Ask Discover, who managed to launch the fourth system thirty years ago. If your plastic card was not accepted wherever the customer would like it, it meant that you are nowhere else. Going on a large scale was very expensive and time consuming.

Electronic payments and devices with Internet connection turn the situation on the head with the acceptance of the audience and prevalence.

Starbucks remains the most successful company that launched its own mobile payment scheme. They managed to transfer to it about 25% of the total volume of payments for five years. Starbucks achieved customer loyalty to the new payment system and made its application available in every store. Mobile applications that work on the principle of “pay at the column” (the principle of payment on the spot, the name comes from the method of payment for gasoline, when the buyer passes the card through the reader installed directly on the column) some independent franchises outperformed paying by credit card. They allow customers to save money on every gallon of fuel and avoid unnecessary actions during refueling. So, Walmart Pay reported on the results for the first year of work, and they exceed all expectations. Independent cashless payments without the help of a cashier became available in each of the 4,000 stores and changed the habits of 22 million consumers using the Walmart.com app in stores every month.

The example of Apple Pay and its contactless payment method showed that in itself the creation of a payment system using a mobile device that reproduces the experience of using plastic cards and payment terminals is not a recipe for victory in the field of digital payments.

The recipe for victory is to add additional useful mechanisms “on top” of the digital payment scheme itself, these mechanisms should eliminate the inconvenience associated with the buying process and add new features. Buying online and getting in store. Ordering goods via mobile devices and the ability to click the "buy" button, being at any point of the store to place a purchase. Or a special application that knows that the buyer is in the store and offers him relevant promotions and discounts before he has paid. All this is the very additional features that arise "on top" of new payment systems and examples of an approach that offers customers much more valuable than just paying by phone at the payment terminal. This is a demonstration of elementary respect for the personal time of customers and their ability to manage their own shopping process.

Such a transition will obviously require players in the payments market to start thinking about how consumers begin their shopping route, and not just about how they finish it. How to use your assets and infrastructure to create the sought-after purchasing experience, and not just try to build as many physical points of sales as possible. Being “everywhere” in the digital age does not mean participating in a competition about accepting payments using automated terminals directly in stores. This is mostly a story about working online, from where almost all routes of buyers begin. And over time, it will allow online to simplify payment processes in stores.

Instant messengers compete for market positions

WeChat showed the world that the ecosystem of instant messengers involves much more than exchanging emoticons and texts with their friends. WeChat has become a good example of how to convert a critical mass of loyal users (700 million people) into a live and operational platform for commerce.

Messengers around the world have adopted WeChat's experience in building commercial platforms. The process goes on in parallel with the rapid growth and increase in the number of users of instant messengers who are now significantly ahead of the “classical” social networks. More than 2.5 billion people use messengers on their phone, and more than a billion people a month use Messenger and Whatsapp. Whatsapp users spend about 3.5 hours a week in the app.

But WeChat started its way in China a little differently, first of all by hooking users on commercial functions inside the application. Inside this ecosystem appeared applications that are not accessible outside. This increased the value and attractiveness of their use. And buyers, in turn, forgave some starting roughness in UX for such opportunities.

Today, in developed countries, instant messengers are used only for messaging. Consumers have access to a whole range of mobile applications and web platforms for managing their “commercial entities”. Of course, sending delivery notifications and correspondence with sales managers often takes place with text, in chat rooms. But booking trips, finding a suit for a corporate party or reserving a restaurant table with the help of Messenger, WhatsApp or iMessage is still an unusual thing for most users.

Innovators are working hard to change this. Tens of thousands of chatbot-enabled chatbots have been built into messaging platforms. Most of them are in the initial stages of development and use them insanely hard and uncomfortable. In order for the messengers to become a new entry point into the field of commerce in the minds of consumers, applications must become much smarter and the user interface much more flexible and convenient.

Commerce becomes interactive

Voice is the most common tool used in the trading process. Each of us has it, and making purchases and interacting with sellers by voice is a common thing. The voice is also the easiest to use tool - no need to type, click and press the "Buy" button.

That is why the market has been filled with countless new players and platforms offering solutions modeled on voice command centers. And many large companies want to use voice control to their advantage. Alexa, which today has more than 5,000 special skills, offers users new, effective search capabilities on the Internet, makes it more accessible and gives additional context. Want to know how to bake a hummingbird cake for your party next weekend? Just ask Alexa, which will not only help you find the recipe and read it out loud, but also add all the necessary ingredients to your shopping list, place an order and provide delivery, it is likely even on that day.

Alexa and her colleagues - voice activated personal assistants from Google, Apple and Microsoft greatly change the interaction of users with brands. Namely: they make brands "invisible" to the buyer.

If earlier banks and payment providers felt vulnerable when customers' payment details were stored in applications, then voice ecosystems change the situation radically and in a completely surprising way. Applications and websites that are activated by a voice assistant can use accounts registered many months and years ago. The transition to online commerce creates a new challenge - how can payment providers, banks, networks and retailers remain the dominant thinkers? And although the transition itself is intended to provide consumers with new convenient ways to participate in commerce, the emergence of new models with their new advantages will allow the creators of voice assistants to establish certain preferences - managed and monetized, of course, not without the help of new voice "gatekeepers".

Commerce wherever there is an internet connection

A couple of years ago, the conversation that trade could extend to any area was limited to discussing the provision of a micro-seller of an Internet “whistle” connected to the telephone. And the consumer’s intention to purchase goods turned into a completed operation only after certain actions were performed directly at the point of sale — in the store — after the card was handed to the seller. Alternatively, online or in the application - after clicking the "Buy" button.

The widespread adoption of wireless technology has changed everything. And although today we are talking mainly about mobile phones and a very small list of wearable devices, analysts estimate that over the next five years the number of devices connected to the Internet will reach 30 billion units. And with the help of each you can make purchases.

Artificial intelligence and machine learning pave the way into the future, providing the possibility of better decision making in real time without human intervention. This also applies to the need for the buyer to initiate a trade transaction. Now information can be stored and processed directly on smart devices, which means that the field of commerce can work on autopilot. The boiler will call the plumbing before the cooler fails, the cooler will order water when its reserves start coming to an end, the smart refrigerator makes a shopping list as the shelves are empty, the washing machine gets powder and air conditioning before they run out, and the car becomes an independent smart a mobile device that can find and pay for parking without stopping its movement in the city, and that's not all.

The introduction of electronic payment systems has become a catalyst for the transformation of a variety of devices with Internet access into a sort of trading hubs. Also in this is the role of information, which is accumulated and distributed. The point is not only that trade gains a certain independence from direct initiation of transactions by consumers or businesses, but also that information becomes the basis of new business models and monetization opportunities for manufacturers of such devices and software platforms they use.

Successful transition to a new model is not only in monetizing data and maximizing digital payment opportunities. Protecting transactions made on different devices in an age of sophisticated fraud is also not a trivial task. It is also important to pay attention to issues related to the confidentiality of data that devices exchange with each other, regardless of the direct actions of the consumer.

Digital identity becomes the best means of protection against fraud

Trade begins with the identification of the customer and at the same stage, it can suddenly harden. Creating a digital person is the creation of a kind of universal passport that the consumer will need to ensure the security of any action in the digital world. And unlike physical documents that can be forged, lost or stolen, digital identity can be protected with a variety of modern protocols and technologies.

They can also be adapted to the needs of a particular verifier. Creating a secure digital identification involves not only verifying the identity of the buyer as part of a specific transaction, but also collecting specific data about the buyer, which can be selectively presented as needed. Advanced technologies and protocols provide banks and players in the payment services market with the opportunity to develop not one, but many options of digital identity for their clients. Accordingly, it will be possible to request any of the options and receive only that part of the information that is important at this particular point in time. Agree, applying for a mortgage loan or a new credit card requires a much more thorough verification of identity, rather than logging into your Twitter account or renewing your driver’s license online.

Make it is not as easy as it seems at first glance. Experts agree that to create and verify a digital identity of a user during his commercial route, a whole multi-level system is needed. Today there are heated debates about who will become the developer or custodian of these levels, who will make individuals functionally compatible, how digital personalities will be “released” and who will perform this function. Will the “digital identity” of the user look like the real one? There is a unanimous opinion that passwords will befall the fate of an extinct Dodo bird, and that reliable digital identification is one of the top priorities in the industry. What this new digital identity will look like and how it will be created is yet to be determined.

The dynamic nature of the development of payment systems, commerce and retail guarantees the onset of global changes in these ecosystems over the coming decades. The tremors that we have felt so far have been quite tolerant. They were the result of rather “muffled” eruptions. And unlike the shifts that occur under the earth's surface, we see a number of signs suggesting exactly how the puzzle pieces will come together or separate from each other.