For Mobile Banking, It Pays to Know Consumers

Consumer adoption of the internet and mass adoption of screens and mobile devices of all kinds has been a catalyst for change, and we are now seeing incredible innovation when it comes to mobile money.

Consider PayPal, Google and Apple Pay as examples. PayPal is arguably the most widely known not-so-new-kid on the block. It's simple, easy to use and has been widely adopted. In the world of insurance, Google Compare has just rolled out. This is an auto insurance price comparison site competing in the realm of the insurance agents in the U.S. And then there is Alibaba. In 2013, Alibaba launched a smartphone app called Yuebao and with it, people can in seconds swipe money from, say, their state bank checking account into a money market fund paying a much higher level of interest. As of July 2014, it had 149 million users and U.S. $92 billion in assets making it the fourth largest money-market fund in the world.

Clearly there has been a huge amount of innovation in the market in the last few years. New entrants are competing successfully with the traditional players, and there is a great deal of clutter that consumers have to make sense of.

In the world of mobile payments the industry has been launching new ways to pay and new apps to make it simpler - from contactless or NFC, mobile wallets and peer-to-peer payments and SMS/text messaging. But has there been too much emphasis on the technology and not on the benefit or need? Why do consumers need yet another way of making a payment when credit cards, cash or checks work just as well?

Let's take a look at a few examples that may point to the future.

Paym in the UK enables consumers to pay friends and family using only their cell phone number linked to their existing bank account. Users do not need to ask for bank account details as long as the recipient is registered with Paym. Many of the UK's banks and building societies are registered to accept Paym payments.

Owned by eBay, Venmo is, according to one industry commentator "like Facebook and PayPal combined--only a better version of both of those things." It allows you to exchange payments with people in your social circles via your smartphone. It's free to download and use, as long as you link your Venmo account to your banking account or a debit card. It's socialized payments.

Fitness devices or "wearables". The insurance and health industries are looking into how these might be used to set and adjust premiums. And earlier this year, American Express and Jawbone announced a partnership enabling eligible members to tap and pay with the new Jawbone device.

And of course, Apple Pay was launched at the end of last year with much fanfare.

While there has been a lot of development in the mobile payments space, this has largely been supplier led rather than consumer need driven. Over the last few years, Ipsos has conducted research to look at it from the consumers' perspective. In 2012 we conducted a detailed study in five countries which resulted in a segmentation based on consumer attitudes. In June last year we updated this segmentation among consumers who are mobile device users in 24 countries. Our aim was to understand what consumers think and feel about mobile payments and what they need from providers. Ultimately, as with the success with any payment mechanism, the aim is to get consumers to use it, and to use it more often and for a wider variety of purchase occasions.

Dimensions for Consumers

So, what are the dimensions in the consumers' minds? We found five factors which influence consumer attitudes:

The degree of scepticism: To what degree do mobile payments need to be established in the market for consumers to adopt and how much do consumers doubt the security of mobile payments?

The level of understanding & awareness: Do consumers know what payments are available (whether it's person-to-person, m-commerce or NFC)? To what extent are consumers aware who provides these services and where they can actually use the payments? And what are the benefits?

The need for technical support: How much support do consumers need - not just in terms of technology, but also in how they actually make the payments?

Willingness & intentions: To what extent are consumers willing to use mobile payments and to provide geo-location to receive benefits in return, for example rewards or discounts? Will they upgrade their phones to be able to pay?

Payment security: We know security is high on the priority list for consumers, so how important is the perception of security before people will use mobile payments?

When we looked at these five dimensions, we saw four discernible segments of consumers:

Let's take a look at the typical consumer in each segment.

The Confident are people who are already at the point of wanting to use, if not already using, mobile payments. They are already engaged, so the key is to understand how to keep them engaged. They know what they are doing when it comes to new technology and are confident with their knowledge about mobile payments. They feel that mobile payments could help them better manage their money, and they are willing to upgrade to be able to use contactless mobile payments.

There is a large Open segment in many markets, and this is truly the segment of opportunity. There are nascent users here and the more we tap into them the broader the adoption of mobile payments will be. They would like to use mobile phones for payments to help manage money better and help keep track of loyalty schemes. They aren't as informed on where they can make mobile payments or who provides these services. Security isn't the biggest issue and they don't think setting up mobile will take much effort.

It's going to be some time before Cautious consumers adopt mobile payments. They don't know who will provide them with mobile payments, where they can use them and how these payments work. They are not convinced about the benefits of using mobile payments. They think that setting up mobile payments on their phone will be too much of an effort. They would really need technical support and the assurance that such payments are secure. Mobile payments ultimately need to be more established before they'll use them.

The Disengaged feel reasonably informed, but they are consumers who actively choose not to be involved. They are not particularly interested in using their mobile phone for payments. They think they know who offers such services or where they can pay in this way, but they don't expect to use them. They are less concerned about technical support, security and the effort involved in setting up mobile payments. It's not the case that they are waiting for everyone else to use mobile payments.

Broadly then, that's what consumers in each of these segments look like. Let's now turn to how the segments map out by country.

Generally, there is a higher proportion of Confident consumers in markets that have a less developed payments infrastructure, a higher mobile and smartphone penetration and a younger population - such as India and China.

Then if we look at the Open segment, we see that Japan, Korea and China have the largest percentage of Open consumers. The good news is that most countries, including those in North America, have about a third of the mobile device owning population who are Open. Indeed, this presents a major opportunity.

The markets with the largest Cautious segments are Canada, Britain and Australia, followed by the other markets with more established financial systems. For this group, it really is about showing people why they should change their behaviour from something that works well right now.

Finally, France and Germany are the most disengaged, countries where we know there is an entrenched conservatism towards financial services. And Japan, where we see a polarised population between being Open at one end and Disengaged at the other, which may well reflect the country's demography. Overall though, the good news is that for many of the less Confident countries, the Disengaged segment is small. This means there is the opportunity to bring mobile payments to the vast majority of the population.

Reaching your Consumers

Knowing how the population segments in a market is useful, but it's also useful to understand how to reach them to encourage adoption. Using the data we had we conducted an analysis to understand what each of these segments most likely to do and what they are most likely to be. It's important to note that what we're saying here does not exclude consumers of other characteristics.

A typical Confident consumer is likely to have a higher income, be aged less than 55 and have been university-educated. More importantly, Confidents are more likely to Tweet every day.

An Open consumer is most likely to be younger relative to other segments and be university educated. They are also engaged in social media and Tweeting weekly.

The Cautious and Disengaged consumer is older. To reach the Cautious consumer, we need to think about using the Radio - with almost daily radio listening. This is one way to educate, inform and spread the word about mobile payments to get the Cautious on board.

Encourage Usage

What does our analysis tell us is needed to encourage usage of mobile payments?

It is important to prioritise what you as providers want to do for each segment. For the Confident, who may well be using mobile payments already, this means how you get these consumers to use mobile payments for different occasions and more often. It may well be about keeping them interested through new products and services that keep them engaged. For the Open and Cautious, it's about encouraging trial, ensuring that the experience is easy and pain-free, and then increasing the frequency of usage. The Disengaged will not likely change in the short to medium term. Sure, the segments will be dynamic over time but it's likely that the Disengaged will change the least.

When priorities have been established, create appropriate communications. Communication is fundamental in our view through usage scenarios.

1. There's a knowledge gap for many and even the Confident need to know more. For example, to know how to manage their money better; they may be knowledgeable about technology but maybe not always in money matters.
2. Show people the benefits, how easy it is, how other people are using it. The Cautious need to see others using mobile payments to make it relevant to them and communications can be great in demonstrating this.

This leads to the third point about Socialising payments. When we look at behavioural economics or behavioural change theory, we see that people will do things when they think that `people like them' are doing it. And this is of vital importance for the Cautious group, prevalent in markets with a longstanding, well developed payments infrastructure. When we talk about socialising mobile payments, it's not just about using Twitter or other social media. It's about how we create the conditions for mobile payments to be seen as "more established" in consumer psyche. It's about making mobile payments day to day, habit forming and mainstream. So demonstrating usage as the norm is important.

Support - We saw from our segmentation that even the Confident need support. It's the "How" that matters; and the "How" needs to be easy. There needs to be the feeling that the whole industry supports the consumer.

And finally, Understand - as researchers and marketers, we know how important it is to listen to consumers and retailers in order to better understand needs, motivations and barriers to adoption to really know how to create messaging and positioning.

By following these tactics, companies will be well on their way to engaging and delivering on the needs of consumers across the globe.

To hear more outcomes from this study, please view my recent webinar.