Jun 06 2019

Payment systems: mobile payments take off

Paying with smartphones and smartwatches is picking up speed in Europe. But public authorities, banks and retailers still have reservations – and customer expectations don’t make it any easier for them.

Around four years after the major launch of Apple Pay in the US, new payment systems are being launched rapid-fire in Europe, too. Almost every week, there are new reports on live roll-outs in online retail or new test runs, and this is having an impact on the furniture industry:

  • German health and beauty chain Müller is testing Amazon Pay in its stores, including in Munich. The e-commerce retailer’s payment service is in fact mainly used for online purchases, such as in online pharmacies. But Amazon Pay is an option that furniture showrooms might also consider.
     
  • The prospect of US giants Apple, Amazon and Google dominating payment services is viewed with mixed feelings in Europe. European solutions are designed to avert this scenario. Among them is Bluecode, developed by the company with the same name. It enables payments to be made with Android and Apple smartphones via an app. No data is stored on the phone or transferred to it. Solutions like this are an answer to the European Central Bank’s desire to maintain Europe’s independence from US providers. In Germany, a number of institutes of the Sparkasse Group are collaborating with Bluecode.
     
  • eBay has announced that German customers will have the option of paying with Google Pay and Apple Pay as well as by credit card or direct debit.
     
  • Swedish company Klarna has already won some fans of its e-commerce payment services among German furniture retailers – including the discounters Roller and Wayfair. Klarna allows consumers to pay for online purchases in different ways, such as by invoice or credit card.
     
  • Google Pay is making inroads in Europe, along with Apple PayHome furnishings retailer Dänisches Bettenlager has switched to electronic price labels in its stores, investing more than Euro 50 million in the process. This may not initially seem to have anything to do with payments, but it provides the integrated solution that the company was seeking. This includes being able to respond rapidly to prices and special offers, something that is becoming increasingly important in furniture retail. Prices in stores and online can also be adjusted immediately.
     
  • Apple Pay is finally available in Austria after a lengthy delay: Erste Bank and direct bank N26 have recently launched the service for their customers. Payments can be made with an iPhone or Apple Watch. Austria is now the tenth European country with Apple Pay.

In some countries like the US and the UK, smartphone and smartwatch payments and integrating diverse finance apps and new payment services are already on their way to becoming established. By contrast, there has been relatively little movement in continental Europe, including in Germany. T

his is due to the ecosystem operated by the banks, who are reluctant to allow new providers to make inroads into this market, to stricter requirements imposed by regulators and supervisory authorities, and greater scepticism among consumers towards paying without cash or a debit or credit card. Contactless payments using NFC technology also had to face some resistance in the beginning.

But now things are moving in that direction because queues at the checkout cost furniture retailers and other businesses lots of sales. Smartphone payments and mobile point of sale (mPOS) systems could avoid this. Self-checkout is also picking up speed: in a REWE supermarket in Cologne, customers can scan barcodes while they’re shopping and save themselves the hassle of having to get their purchases out again at the checkout.

There should be around a thousand stores in Germany that offer this service by the end of the year. In the furniture industry, IKEA already uses this method, but up until now, customers have still had to unpack their purchases at the checkout – and the launch hasn’t been met with great enthusiasm.

One finding that’s relevant to furniture retailers that have their own online channel or sell their products exclusively online: payment by invoice is still the most popular payment method in German households. Around 28 per cent of e-commerce purchases were made this way last year, with PayPal following in second place.

Interest in mobile payments

Overall, interest in mobile payments is growing. In practice this means paying with an app and a smartphone. One in four Germans would already like to use this method in stores. But a sizeable 89 per cent don’t want to move away from traditional checkouts, as a study by market research company YouGov revealed. Here’s another statistic that the furniture industry should note: 26 per cent can see themselves using mobile payments in furniture stores. This figure is not far away from the percentages for supermarkets (35 per cent) and electrical retailers (30 per cent).

The differences between sectors are generally not significant; as things stand, industry-specific solutions shouldn’t be necessary. What’s more important is finding simple and secure payment services that offer real added value. For retailers, integrating these services into various digital solutions and linking them appears to be especially important: personalised offers, price campaigns, in-store availability checks and payment need to be combined to create a complete experience.

It is US providers that are leading the way here: Google Pay will soon be able to import concert tickets and the latest price offers from Google’s e-mail service Gmail. This will save customers the laborious process of moving data back and forth – delivering a complete experience. 

The payment market in e-commerce is extremely dynamic, as the example of online retailer Otto demonstrates: it launched instant payments for purchases of furnishings and other items at the start of this year – receipt of the transfer can be verified within seconds. The problem: there are still banks that don’t provide these faster payments.

Differences between customers

One of the greatest challenges facing payment system providers and retailers, including in the furniture and interior design sector, is the different expectations of different target groups – and not just between generations. A study by payment platform Adyen identified two categories of potential customers that couldn’t be more different: at one extreme, there are the trendsetters.

For this group, using new technologies is completely natural, and they expect to retailers to offer these solutions. To attract this target group, it’s important to have integrated systems from the online store to the physical outlet. At the other end of the spectrum are the refuseniks.

They approach new payment technologies with reluctance, perhaps due to concerns about the security of mobile payments. Any company that masters the difficult balancing act of offering the right payment system for both technology enthusiasts and sceptics will have a considerable advantage.

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