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Money in motion: how mobile payments technology is changing the face of retail

18 Jul

Danielle Dalkie is a Co-founder and Director of Social Commerce & PR at Waspit, the groundbreaking mobile payments service. In this series of blog posts for NetworkMilan she will be writing about  mobile payments technology, social commerce and trends in the tech startup sector with a focus on the Italian/European market. To kick off the series she Danielle starts by looking at the big picture of what the mobile payments environment looks like from her uniquely well-informed perspective!

Danielle Dalkie

Payments and mobile technology in Europe have always been ahead of the American market. I am not sure when the idea started that the US is better known for adopting technologies at an early stage: stateside mobile networks are about 10 years behind those of Europe – and their payment methods also lag those of the “Old World” by a decade, too.

US society still seems to be largely cash-based. Compare that with Europe, where today 6 out of 7 transactions are made using a card. But the difference goes even deeper. The technocrat government of Italy, in particular, has declared a war on cash: Prime Minister Mario Monti wants the country’s vast army of self-employed entrepreneurs, including landlords, plumbers, electricians and small businesses to stop making large transactions in cash, which critics say simply facilitates tax evasion. On 4 December 2011, the Italian government reduced the maximum limit for cash payment from 2,500 euros to 1,000 euros. The rationale for this reduced limit on movements of cash is that Italy desperately needs to increase its tax revenues and views its anti-cash measures as a means of cracking down on tax evasion, which “costs” the government an estimated €150 billion annually. However, with an eye-watering €1.9 trillion of public debt to its name, some commentators have described this kind of punitive measure as “too little too late”.

Against the backdrop of a general tendency towards the “cashless society”, the recent announcement by American Express that they have just released their roadmap for Europay MasterCard Visa (EMV) got me thinking about the state of the payments environment and how this technology could develop in the coming months and years.

Now, let me stick my neck out and say that I for one didn’t actually think the US should have made the switch over to EMV, since it has been used in Europe for the past six years and the technology itself – at over 10 years old – is well past its sell-by date. It would have made much more sense for the US to bypass EMV altogether and move straight to near field communication (NFC), which allows consumers to make electronic payments by simply waving their NFC-enabled phone near a payments terminal . Yes, EMV has security benefits, and it has helped to substantially decrease fraudulent transactions throughout Europe, but this should have been apparent to the US retailers and federal authorities 6 years ago. Why wait until now when more flexible and innovative technologies have superseded it?

One saving grace is that at least this switchover will force merchants to upgrade their terminals. Each of these upgraded system devices will also accept NFC and mobile transactions, which is a fantastic opportunity for companies operating in this space, especially startups and smaller, independent companies who (unlike the credit card giants) do not have the funds or capacity to influence terminal and Point of Sale (POS) technology or upgrades.

Waspit: social banking for students

The innovative startup company I have been involved with over the last 18 months, Waspit, uses MasterCard PayPass technology and will be accepted by card-capable merchants in the US by 2017, by which time the proposed switch-over will be completed. This is clearly great news not only for consumers but for mobile payment startups, such as Waspit, generally. With merchants on board, socially-oriented financial services like ours will be able to focus on winning new customers and offering a wider range of related services and benefits

However, not all mobile / NFC payments technology are problem-free. PayPass, for example, and other card networks for mobile and micro payments, charge merchants 0.15% plus 0.025 Euro in the interchange every time a transaction is made. This means that if you’re buying a relatively low-value item , such as a 2 Euro ice-cream, the merchant is not actually making a profit. These increased costs may force small businesses to raise prices, or face margins being squeezed as they are unable to compete with larger retailers who enjoy greater economies of scale. (The European situation could also be affected by the recent $7.25 billion settlement by Visa and MasterCard of a class action brought by retailers in the US over interchange fees.)

From the merchant’s point of view it makes sense to bypass the credit card networks completely and go with the closed loop solution. The market has woken up to this fact with every tech company and startup offering some sort of mobile wallet, or mobile payment solution. You can now buy a latte with your Starbucks app , and even use your PayPal account in selected stores. But here’s the irony: all of this cashless technology is supposed to be making life simpler – except it’s not!

Behind the scenes, the situation is even more complicated, with the reliance on technologies such as those of the Trusted Service Manager (TSM) and over-the-air personalisation. When NFC handsets go mainstream and there is no longer a need for plastic at all, that is the moment when we will truly be in the era of mobile payments. But at present TSM is also in a state of flux. The mobile networks themselves are going to be the main players, but will Vodafone, Three, Orange (3 of the main UK operators) and the others be more flexible than the credit card companies, who currently control the scene? And the system will still rely on the infrastructure of the credit card companies, so interchange is still a factor. It is going to take a lot of hard bargaining, regulation and hammering out standards the key players in the industry can all agree on. No-one can say for sure how the situation will pan out – or how smaller players are going to get access to the chips that are vital for mobile payments to become the norm.

Mobile payments

Consumers want to use electronic and mobile payments – and when the technology is fully rolled out I don’t think it will be hard getting them on board. However, in the industry we have been talking about this for a while. The flip side is that this is not good for merchants , especially small ones. Either the credit card companies need to come to the party or something needs to shake up the whole space. There needs to be more unity and maybe regulation, but this should not be dictated by the giants who dominate this space.

Consumers are clearly voting with their smart-phones: there is increasing demand and enthusiasm for making mobile payments more widespread and easier. Retailers – especially smaller, independent ones – could stand to benefit; and even government revenue-collecting agencies governments would welcome the introduction and greater use of this type of technology (with concerns over privacy being taken seriously, of course). There is also an urgent need for business itself, trade and consumer bodies, as well as national governments and the EU to co-ordinate their efforts to ensure that the consumer has a choice of easily accessible, safe and efficient payment methods to choose from. And, of course, there needs to be a level playing-field for innovative creative startups such as Waspit to develop services that give consumers the flexibility and freedom that this revolutionary technology could bring to people’s lives.

Read Danielle Dalkie’s next blog post on NetworkMilan – coming soon!

UPDATE (AUGUST 2012): Danielle has recently founded Network Roma, a sister group of the Milan Business English Network. You can become part of Network Roma by joining their group on LinkedIn.

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NetworkMilan welcomes Danielle Dalkie, mobile entrepreneur and PR /Social Media expert

12 Jul

We are delighted to introduce our first guest blogger, Danielle Dalkie, who has a fascinating background as a mobile payments entrepreneur and is currently planning a strategic move to Rome. In this article she talks about her experience in setting up Waspit, a social banking service, and how she plans to use her PR and social media skills in her new life in Italy.

Danielle on the Digital Mission Stand at ad:tech NYC Conference and Expo 2010

Ciao! I am really pleased to be writing for NetworkMilan.com – and I am looking forward to sharing some of my ideas and business experiences with you. I’m also really excited about coming to Italy! I am an Australian who grew up in New Zealand and for the past two years I have been living between London and New York. And now I am moving to Rome!

I am Co-Founder of a startup called Waspit, a social banking platform for students. More specifically, it combines traditional banking features with social platforms to create a more intuitive and enriched experience for users. In essence, Waspit is “Banking 2.0”, and I have been involved in product development (right from the conception of the company) and more recently realigning the product to suit the target market: I have also been doing some business development and I aided the company in raising its first round of venture funding in New York.Waspit is designed not only to provide all the latest banking capabilities including mobile payments, but to enable for the first time a dynamic communication between users, their friends and the merchant on how and where they choose to spend their money.

Waspit lets you plug in all your social media platforms into one place so that you no longer have to manually check-in on Facebook and foursquare or post separate reviews to Yelp, Twitter and your other networks.

Social banking for students

For the more traditional ‘bank-like’ transactions Waspit is accepted in-store and online anywhere MasterCard is accepted; cash can be withdrawn from most ATMs; and students can pay their bills using ACH (Automated Clearing House) or Billpay. The FDIC* insured account also has a traditional routing and account number so students can receive their wages and allowances.

In the social world, students can easily, securely and instantly send and receive money between friends via Facebook, Twitter or mobile phone. Making quick payments in store is as simple as tapping your mobile phone over any MasterCard PayPass terminal. Students can even use the iOS, Android or Facebook apps to split restaurant bills or request money from their parents.

My own background is in public relations and social media, however. I have been involved in developing and implementing customer acquisition strategies in the tech, digital and social sectors. My skills include traditional PR such as managing press releases, publicity, social media, online content, corporate events, conferences and creating brand awareness.

I also specialise in social marketing and developing viral strategies (including guerrilla marketing efforts), as well as many successful viral and online campaigns in the both the US and UK. In addition, I develop comprehensive campaigns which rely heavily on social media and social marketing.

Rome calling (Image: Trevi Fountain by Fod via Wikimedia Commons)

But the big news is… I am relocating to Rome this year and I am currently looking for a suitable position and some cool social media projects to work on (so please get in touch with me if you have something I might be interested in!)

I am also involved in setting up the Rome Business English Network – the first sister group of the Milan Business English Network to be based in another Italian city. (Visit Network Roma for all the latest news about events and networking for people speaking, learning and doing business in English in the eternal city.)

NetworkMilan.com have invited me to write a series of blog posts on how mobile commerce is changing the way we interact with companies and its wider implications for the digital economy. I hope you enjoy these articles and find them useful, too!Read Danielle Dalkie’s next guest post, coming soon on NetworkMilan.com:
Money in motion: how mobile payments technology is changing the face of retailClick here to find out more about Waspit and social banking.

*Federal Deposit Insurance Corporation: A US federal agency that insures deposits in member banks.

UPDATE (AUGUST 2012): Danielle has recently founded Network Roma, a sister group of the Milan Business English Network. You can become part of Network Roma by joining their group on LinkedIn.

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