Domestic payment schemes are growing in number and popularity. In an effort to reduce costs, increase market competition and better meet local needs, the market is increasingly looking to domestic networks to offer an alternative to the dominant international players.
The opportunities are huge, but for schemes to fully capitalize on these and remain competitive, they need to enrich their offering by launching new services. The time to innovate is now.
But to maximize the return on investment in new services, it is vital that players fully understand the specific demands of their market before selecting and committing to new technologies.
We can broadly understand the evolution of the digital payment ecosystem in five stages. Each domestic scheme may be at a different point along this development scale. Let’s take a look at what these are, when they should be implemented and how they can add value to domestic scheme service offerings globally.
Identifying your stage of digital transformation
1. EMV® contact
Just starting off on the journey to EMV? This can either be the first step in a market’s launch of a card payment acceptance infrastructure, or made as an upgrade from magnetic stripe cards - as in the ongoing migrations in the U.S. and Japan. Often, this implementation is actioned as a result of governmental and bank mandates.
2. EMV contactless
How about markets with more established EMV use? Where EMV contact is already implemented, domestic payment schemes may look at delivering better services to end users by implementing acceptance of EMV contactless card and mobile payments. This has seen success in markets such as the UK, where contactless payments accounted for a third of all card transactions in 2016.
3. Mobile payments
Consumer demand is rising for mobile payments and these can be launched a number of ways. Before making the move to mobile, schemes should consider some big market questions: how enthusiastically have new technologies been adopted previously in the market? Is the current payment infrastructure able to support these technologies? How many smartphone users are there?
Selecting the right technology to use is a key consideration for mobile payments. In developed markets, such as Australia or Canada for example, schemes may consider an NFC-based solution, given the high NFC-enabled smartphone penetration. In markets such as China and India however, where QR code based solutions have seen rapid adoption and a number of handsets do not include NFC functionality, QR codes may offer a more appropriate, cost-effective solution.
4. Specification migration
Domestic payment schemes may also develop new or customize certain specifications - such as those on NFC contactless. This can help differentiate a payment scheme’s offer to member banks and removes dependence on specifications managed by international schemes or solution providers, which are often closely tied to specific business models.
5. Open Payments for Transport (OPT)
It’s also worth considering the opportunities in transport, working with local transport networks and banks to incorporate the acceptance of contactless and mobile payments into transport systems. Not only are costs shared locally between operators, banks and payment schemes, but consumers benefit from the added convenience of being able to use their card or smartphone to access transport networks.