Last week, we were lucky to speak to some product and payment leaders at Cabotte in Bank. Over a three course meal, we talked about payment quality, and how product and payment professionals could leverage competitive advantage.
Attending were Product Directors and VPs from businesses including PSPs, card networks, and money transfer companies. Here is a flavour of what we talked about and some of my favourite points our guests made over the course of the discussion.
Sometimes, friction is good for your product
The old idea that front-end software products generally exist to remove friction was challenged widely during the discussion.
Can friction be good?
One view is that yes, it can. The more money a user is about to spend, the more friction they would like to feel secure in their payment. Entering your address to make a £1.00 payment is irritating. Paying £10,000 with a single tap is terrifying. Most products which involve transactions sit somewhere on the spectrum (often, at several points), and it is the duty of the product manager to identify the suitable level of friction to match buyer preferences.
(Here’s my question: if friction is perceived by consumers to be in service of extra security, and we achieve low-friction high-security experiences, would it be appropriate to add friction anyway? Are there apps with skeumorphic UX “security theatre”? Is this a relevant risk?)
Do alternative payment methods really confer competitive advantage? That would depend where you are
“We offer any alternative payment method your buyer could ever want.”
This is a very common position among PSPs, probably because it’s an obvious way to establish superiority in like-for-like comparisons between competitors. (After all, payment solutions can look very similar to merchants).
But are they worth the effort? One view is that often, they’re not. Some APMs are poorly managed, and include chargeback clauses and security risks which deter merchants who read the small print. Besides, it’s not clear that it’s even really true that Generation Zs, Generation Alphas, or another future category of younger people will get to the end of their checkouts and decide that if they can’t pay later, they won’t buy at all.
Instead, the most common view at our roundtable was that an APM strategy which is localized is best. Between nations, there are genuinely diverging consumer preferences around APMs: in the UK, card is king. Germany leads on some non-card payment methods. Crypto is generally more popular where inflation is an issue, and the downsides of holding the local currency is higher.
Besides, the specific product use case is likely to affect what APMs are worthwhile, and in a market as commoditised as payments, use case difference provides valuable product surface area with which to compete. What’s the right way to pay for Pintxos in a busy bar environment in Spain? How can you offer the consumer minimal friction and allow the merchant to track who’s eaten what? Is that likely to be the same payment product as somebody purchasing apparel online in the UK, and intending to send 60% of the clothes back to the merchant?
(Pinxtos are small tapa-like bites popular in the Basque region of Spain. But how should you pay?)
Emerging markets are likely to be the playground for the next big thing in payments
Despite enormous winner-take-all effects in the payment market, it remains a case study in just how dynamic and competitive the product space can be. I was so impressed with the dynamism and innovation of the companies in front of me.
It left me with a lot of questions. Will the current “winners” hold on forever? Will they innovate the future? Or perhaps acquire their way to continued dominance? And for how long? How will mobile phone operators, new entrants with the power and resources to rival or surpass banks, change the market?
The general consensus was that factors which reinforce success for incumbents are much much weaker in emerging markets. Higher operating costs, higher rates of inflation, a different risk landscape, a wider variety of approaches to keeping money, large groups of “unbanked” people not plugged into existing payment infrastructure – all create the conditions for some amazing companies to find a niche in the crowded (but affluent) payment product market.
We can help you develop and maintain your global payments experience
Global App Testing works with companies in payments to help deliver differentiated product experiences internationally. By testing with real freelancers cards, we can deliver clean, compliant, and scalable testing in line with your rollout plan in an emerging market or elsewhere. If it's something you struggle with, click the link below to get in touch.