TURN THE CUSTOMER JOURNEY INTO A JOYRIDE. The Mobile Payments Opportunity for Telcos

Transcription

1 TURN THE CUSTOMER JOURNEY INTO A JOYRIDE The Mobile Payments Opportunity for Telcos

2 OPTIMIZING THE MOBILE PAYMENTS EXPERIENCE INCREASES CUSTOMER LIFETIME VALUE. Customer lifetime value (CLV) the revenue that an average telco consumer will generate over the course of their relationship with the operator is at significant risk, due to decreasing ARPU and high churn. In this paper, we explore and seek to quantify how optimizing the consumer s mobile payments experience can increase CLV. Convenience and time-saving are cited as the primary drivers by consumers who have paid on mobile 1, which challenges telcos to make the checkout page as frictionless as possible. Equally, telcos must address the reasons for shopping cart abandonment. Concerns about security and time consumption have been cited by consumers who abandon their shopping before paying. SUCCESSFUL MOBILE PAYMENT 18% via mobile wallet 1 19% via carrier bill 1 25% via app 1 40% via credit card 1 UNSUCCESSFUL MOBILE PAYMENT 58% of consumers abandon shopping carts 2. Of these... 21% are disengaged by the long checkout process 2 26% believe their personal data is not protected in online payments 3 42% identify trust as a barrier to purchasing 2 Between filling a shopping basket and clicking the Pay button, 58% of consumers change their minds 2. The main causes include the time it takes to enter personal and payment details, being redirected to pay on another page or concerns about data security raised by the design of the payments page. In summary, this means lack of convenience and lack of trust. By implementing solutions to ensure payments convenience and trust, both ARPU and churn rates can be improved. 2

3 MANAGING PAYMENTS CONVENIENCE AND TRUST To become an efficient digital marketplace, telcos must optimize customer convenience and trust by implementing a personalized interface, seamless checkout, advanced security and loyalty schemes. When these four initiatives work together, the revenue-generating potential from customers improves and greater stickiness is created, which in turn reduces churn. Focusing on data insight and personalization has strategic benefits for the telco, for example enabling the company to match merchants and customer segments via social media integration and purchase pattern analysis, to offer a personalized experience that can have a direct influence on customer lifetime value. A SUCCESSFUL MOBILE PAYMENTS EXPERIENCE Benefits PAYMENTS CONVENIENCE MAXIMIZE DATA INSIGHT MINIMIZE TIME SPENT MAXIMIZE PERCEIVED SECURITY RISK PAYMENTS TRUST MAXIMIZE LOYALTY Initiatives PERSONALIZED INTERFACE SEAMLESS CHECKOUT ADVANCED SECURITY LOYALTY SCHEME Adapts to the consumer s interests supports consumer to finalize payment removes consumer doubts about payments safety rewards consumer trust in payments process Example features Register with one click with social media account (e.g., Google, Facebook) Opt in to data analytics Receive purchase suggestions based on data insights Consistent omnichannel checkout Connect all devices through mobile phone (e.g., pay with wearable) Save personal details Authenticate payment with biometrics (e.g., Apple s Face ID 4 ) Tokenization Security reminder at checkout Merchant brand commitment Receive benefits via rewards system (e.g., accrued points, volume of payments, tenure) Use merchantspecific vouchers in the marketplace Consumers are now more risk- and fraud-savvy than ever before. This, alongside the upcoming GDPR 5 regulation, means it is important to signpost all data analytics opt-ins and security measures to gain consumer trust and stimulate mobile payments. 3

4 CONVENIENCE AND TRUST HAVE A COMPOUND EFFECT ON CLV. Consumers want a fast, seamless and convenient mobile payments experience. The digital marketplace facilitates this by enabling them to make one payment for multiple merchants products. Here we offer an approach to calculating the impact on CLV from initiatives to increase consumer mobile spend and reduce churn. Based on prudent assumptions, the addition of 10% to the telco s share of wallet and a 20% improvement in churn, the impact is almost a 50% increase in CLV. INCREASED CLV INCREASED ARPU through payments convenience DECREASED CHURN through payments trust CLV calculation assumptions SHARE OF WALLET By expanding the product offer via the digital marketplace, telcos can capture an additional 10% of an average household s monthly spend, equivalent to 305/month 6. MARKETPLACE MARGIN Of the telco facilitated spend, we assume telcos will capture a basic level of 1.5% merchant commission, i.e., an extra 4.6/month. Below we illustrate how this commission can be increased. PERSONALIZATION By offering digital products tailored to consumers interests, as well as payment options that integrate third-party data, the stickiness of the service grows and churn decreases. LOYALTY Once the marketplace has matured, telcos can differentiate through data-driven, personalized loyalty schemes. We assume this will decrease churn by 20%. COMMISSIONS INCREASE AS TELCOS ADD MORE VALUE TO THE MARKETPLACE Increasing value adds by marketplace providers Commission level 7 15%+ 6-15% 1-5%.5% MARKETPLACE TAKES HIGHER-VALUE COMMISSIONS for higher-value products (e.g., ebay, Amazon) MARKETPLACE MANAGES THE PLATFORM for merchants to promote and sell products (e.g., DaWanda, Yatego) MARKETPLACE PROVIDES URLs to merchants marketplace and may promote special offers (e.g., TopCashback) NO DIGITAL MARKETPLACE, aggregator pays low commissions as cashback to consumers (e.g., Santander) 4

5 DELIVERING A 49% INCREASE IN CLV CLV increases with the reduction in subscriber churn and increase in ARPU. We have assumed three impacts: a 10% increase in share of wallet, a commission share of 1.5% and a 20% reduction in churn. This leads to an increase in CLV of 49% as shown below. Before initiatives After initiatives +49% +19% 3% 13% Additional 10% 20% reduction 2 1, ,200 TELCO SHARE OF WALLET (%) MOBILE CHURN, PER MONTH (%) 8 ARPU, PER MONTH (EUR) 8 CLV (EUR) METHODOLOGY CLV IS CALCULATED AS ARPU Chum THE ARPU AFTER INITIATIVES 9 IS CALCULATED AS ARPU before initiatives + (Commission % x share of wallet increase x average household spend) WE ARE A TRUSTED PARTNER TO RETAILERS, BANKS AND TELCOS AROUND THE WORLD YEARS INNOVATING PAYMENTS YEARS SUPPORTING TELCOS This paper is one in a series designed to help telcos understand and evaluate the mobile payments opportunity. Visit mobilepaymentsopportunity and sign up to receive your copy as each insight paper is published. 5

6 58% OF CONSUMERS ABANDON THEIR SHOPPING CARTS. WE UNDERSTAND TELCOS CHALLENGES IN SECURING CUSTOMER LOYALTY. COMPETITION drives need for service innovation CHURN increased by low switching costs TALK TO US ABOUT HOW YOU CAN INCREASE CONVENIENCE AND TRUST WITH YOUR CUSTOMERS. SECURITY concerns after high-profile breaches...and WE HAVE THE SOLUTIONS TO ADDRESS THEM. FOR MORE INFORMATION: Chris Curd, Head of Telco Sales - Europe chris.curd@aciworldwide.com +44 (0) ACI PAY.ON PAYMENTS GATEWAY PAYMENT PROCESSING Out-of-the-box checkout solution Managed recurring billing One-click omni-channel payment INTEGRAL RISK CHECKS Blacklisting and whitelisting Copyright ACI Worldwide, Inc ACI, ACI Worldwide, ACI Payment Systems, the ACI logo, ACI Universal Payments, UP, the UP logo, ReD, PAY.ON and all ACI product names are trademarks or registered trademarks of ACI Worldwide, Inc., or one of its subsidiaries, in the United States, other countries or both. Other parties trademarks referenced are the property of their respective owners. This report has been prepared in partnership with Red Dawn Consulting. Plausibility checks 3D secure MOBILE SOLUTIONS ios and Android in-app payments Mobile software development kit Device optimized security features 1 Mobile users in Europe, A Global Perspective on Mobile Commerce, IAB and On Device Research, September Users can use multiple methods to make a payment. Percentages do not add up to 75%. 2 Mobile Money Report, MEF, January Mobile users in Europe, Global Consumer Survey: Consumer Trust and Security Perceptions, February 2017, Aite Group, ACI Worldwide 4 Face ID available on Apple X mobile phone, announced on September 12, General Data Protection Regulation (GDPR) will enforce more secure and authorized use of customer data in the EU starting May Eurostat, Commissions based on ebay, Amazon, Dawanda, Yatego, TopCashback and Santander data. 8 Typical churn and ARPU based on post-paid subscribers in the U.K. 9 Assume that ARPU from telco services and household spend remains constant 2017 to 2020; 10% increase in share of spend = EUR305; 1.5% commission received by telco from selling products in the digital marketplace; 1.5%*EUR305 = EUR4.58, which is the additional ARPU received by a telco. 6