"The added benefit of mobile payment lies in embedding the payment process into the overall shopping experience"

Many payment solutions on the market take credit for integrating all of the different channels. So why haven’t any of these solutions become widely accepted yet? In this interview, Rakuten CSO Erik Meierhoff talks about the factors that are still standing in the way of cross-channel payment success and about the mobile shopping experience.

Mr. Meierhoff, today customers use the different channels as a matter of course depending on what is most convenient for them. Why aren’t any of the cross-channel payment solutions truly widely accepted yet?

At least in these parts, “true“ multichannel commerce hasn’t arrived yet. Many large retailers are just beginning to look into this subject and aggressively inform their customers about the new services that are possible through linking the channels. This resembles what’s happening with the cross-channel payment systems. The big players in the market, particularly in the banking sector, simply haven’t seen the need yet to launch innovations in this area. What’s more, new services often have problems becoming accepted due to technical and regulatory factors, especially in Europe. I believe these special obstacles are the reason why no cross-channel payment system has so far truly arrived on the mass market.

Another fact is that Germany in particular offers a wide range of payment methods that work very well and give customers what they need. As long as payment systems are reliable and safe, the German customer doesn’t necessarily see the need of changing to a new system. This German reluctance is not a new phenomenon. Back in the day, it took significantly longer in Germany than it did in other countries for credit cards to become truly accepted in retail on a nationwide scale.

It is therefore quite difficult to persuade the German consumer to switch payment methods. That’s why a new, cross-channel payment system needs to provide a clear added benefit and not just replace the PIN transaction at the terminal by scanning a QR code.

Of course, there are still other general conditions that make things difficult for these types of payment systems, such as the network coverage of cell phone providers for instance. Simply put, as long as I only have powerful LTE networks in large German urban areas, I cannot expect that suddenly all customers extensively use mobile shopping services.

So the added benefit for the customer is crucial for the success of cross-channel payments. What types of benefits could those be for example?

I believe the added benefit mobile payment can provide lies in embedding the payment process into the overall shopping experience, which is something the “traditional” payment methods are not able to provide. Rakuten is currently testing this at the so-called “Rakuten Cafe“ in Tokyo. Here, the customer can utilize a variety of services. He can drink his coffee, read the daily papers free on his eReader, even take out an insurance policy, and manage his bank account. If the customer visits this Cafe to meet friends or perhaps read a book or the paper in peace, the payment aspect is already seamlessly embedded in this overall experience.

If the customer wants to read a specific newspaper for example, he can buy it directly without first getting out his wallet and paying at the sales counter. This additional step would once again disrupt the overall experience.
This new cross-channel payment solution provides the opportunity for a seamless user experience. This is already very well accepted in Japan and I believe that eventually we will experience the same situation here in Europe. In these parts, the customer simply needs to be made aware more of which solutions exist and what advantages their use provides. One example for this is PayPal, which has strongly positioned itself as a payment service provider with end customers, instead of just being present as a payment method in retail online shops and at the POS.

To reach mobile customers, it is also important to maintain the same level of shopping experience and convenience with mobile devices. What options do retailers have available to create a memorable mobile shopping experience and set themselves apart from the competition?

I believe that location-based services primarily have the potential to offer the customer an added benefit and thus a special shopping experience. By locating the customer in the store for instance, the retailer is also able to lead him or her directly to the respective product after a search with the Smartphone. Today, this service definitely still sets a retailer apart from the competition.

Rakuten has discovered that even though German customers search for products and compare prices with their mobile devices, they still make the actual purchase at their home PC more than 90% of the time. What’s the reason for this “traditional“ separation of channels in the different phases of the customer journey?

There can be many reasons for this. Even though the customer makes the first contact with the product on his or her mobile device, he or she might currently be on the go and not able to sufficiently focus on the information. The customer makes the actual purchase decision at night on the couch, after he has taken the time to really research the product. Of course, all this also depends on the type of product.

The focus of the Rakuten marketplace for instance is on products from the areas of “Home&Living“ and ”Garden/DIY“. Of course, these products are not the classic trigger for impulse buying as it happens in the fashion area for example. These products are purchased after due consideration and often only after consulting with the partner. A new technology is not able to instantly change this natural buying behavior. Retailers should not fool themselves in terms of how quickly this change might happen. Currently “only” 43 percent of sales are attributed to smart devices even at Rakuten in Japan for example. However, the trend is clearly moving in this direction.

When we talk about cross-channel shopping, the mobile touchpoint is already essential today, because it is becoming less and less important for customers, whether they purchase a product online or at the store. The opportunity with mobile systems lies clearly in the information and in triggering the impulse to purchase. Where the customer makes the actual purchase in the end depends on several other factors, but should only play a secondary role in a true cross-channel shopping experience.