Business case or a payment solution – what are you offering?

business_case_vs_payment_solutionI’d like to pose a question to the attendees of  mPOS World 2015 event. When speaking to your customers, do you offer an innovative and effective mPOS solution … or a well-crafted business case outlining what gains and for what costs will the customer receive?

While both ways are valid approaches towards a customer, I can only recommend considering the business case approach. In all my years as IT executive, I was approached many times by vendors offering excellent solutions. To stay focused on the mPOS event, let’s narrow down to payment solutions like new digital wallet solution, mPOS tablet device or an NFC based non-brand credit card. Each of the offered solution is innovative even disrupting and offers new ways of attracting tech oriented customers to our stores and generating new revenue.

Each of solution has a price, but that is expected and after a few rounds of negotiations acceptable. But there is an another side to any new payment solution deal … and that is all the hassle on the customers side connected with the implementation. Energy, time, resources and costs that need to be considered, approved by respective owner, spend in accordance with the project plan, tracked for reporting and controlling issues and successfully completed in the POTIFOB (project on time in full on budget) way.

Considering just a simple NFC payment solution, there are a number of questions and points to be answered and solved to make the project a success.

1. Numbers … How many NFC capable devices are in my market(s)? How many NFC capable credit/debit card holders are in my area(s)? Do I sell goods that can be sold via NFC payments (e.g. price under 20 EUR?) What are incentives for customers using NFC?

2. Costs … costs for the NFC solution are just a small part here as we need to include: eventual purchase of new POS terminals including roll out costs, adjustments to POS software, adjustments to in-house payments processing software, testing and certifying the whole HW/SW solution by given authority (acquiring bank, VISA/MC, any government offices), solution testing in-house or externally, training of your IT staff, training of your sell guys, marketing costs (advertisement, printed posters and stickers in your stores, promotions)

3. Funding … do we need to pay for all costs alone? Who else might be benefiting from this project? Is that one willing to share some of the costs? Is our acquiring bank interested in this project? What about VISA/MC/AMEX/DISCOVERER?

4. Perks … what can be used to promote the business case in eyes of one’s superiors? Do we have numbers based projection of revenue increase vs. necessary costs? Can this project be used as a part of a larger marketing or IT initiative? Can we use some numbers based business case from previous successful implementations?

It is well known in IT departments of large retail chains … there is a lot beyond the decision of adopting a new payment method, but that might not be so obvious for solutions providers. Look around during the mPOS World 2015 event, discuss with your peers and see for yourself, what are the companies offering, business cases of sole payment solutions?

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Making a business case for Contactless / NFC payments

ImageSince the time I posted an article regarding NFC payments  back in October 2013, I had a dozen of interesting discussions featuring the future of Contactless / NFC payments. Oddly enough, the most reoccurring question touched the point on when NFC payments will finally take off and do the magic. Well, the good news is – Contactless / NFC payments already took off, bad news is – Contactless / NFC payments are not suitable for every business.

Like every other initiative or project, introducing Contactless / NFC payments need a strong business case. Creating a business case is always a bit tricky and involves some magic, but luckily for NFC, we can use facts and figures to see whether Contactless / NFC payments will work for one’s business or not.

The basic fact is that Contactless / NFC payments do have quantitative limits. Those limits are put in place by card issuers like VISA or MASTERCARD and are quite simple:

Rule one: a single NFC purchase may not exceed 20 EUR

Rule two: a cumulative of all NFC purchases may not exceed 60 EUR

Any purchase failing rule one or rule two will be forced to be processed on-line (connection between the POS and the bank will be established) and will require card holder authorization (PIN or signature).

So back to the business case. Let’s go through simple steps.

ImageStep one: Can you sell your goods for a price under 20 EUR? If you can’t, then you can happily forget about Contactless / NFC as your purchases will violate rule number one. Here you need to determine the average value of purchases in your stores or the value of articles most commonly sold. If, for example, the average purchase from your business is around 15 EUR, you’re safe and can proceed to step two.

ImageStep two: Doing local research. For any Contactless / NFC payments project to be successful, you need your customer to actually have Contactless / NFC payments ready devices. Those include – bank issued cards, Contactless stickers, NFC sim cards or NFC capable smartphones. What is the penetration ratio of Contactless / NFC payments capable devices on those markets you operate? No idea? … you can find out more from local banks, bank associations, government financial authorities or from card issuers like VISA/MC/AMEX/DISCOVERER.

ImageStep three: Doing the math. Here we need to calculate total cost of Contactless / NFC payments implementation. Those may include but are not limited to: eventual purchase of new POS terminals including roll out costs, adjustments to POS software, adjustments to in-house payments processing software, testing and certifying the whole HW/SW solution by given authority (acquiring bank, VISA/MC, any government offices), solution testing in-house or externally, training of your IT staff, training of your sell guys, marketing costs (advertisement, printed posters and stickers in your stores, promotions), eventual incentives to customers using Contactless / NFC payments (even if for a limited time). There you go, now you have your total cost of Contactless / NFC payments implementation bill.

ImageStep four – allocating financial resources. Should you have enough money ready to play for the whole total cost of Contactless / NFC payments implementation bill – then you’re safe and proceed further. Should you be short of funding, you can consider contacting other bodies that will benefit from your Contactless / NFC payments implementation. Those are banks and card issuers. Their profit is clear – more card transactions means more transaction fees for them. Try to negotiate some sort of support from your acquiring bank, try to contact other banks and ask whether they can support your project. Go and ask your local VISA/MC/AMEX/DISCOVERER office for marketing or incentive support. Depending on the quality of your project, the size of your business or actual situation in your market … you might be able to receive significant bonuses.

ImageStep five – blending all information into a business case. Now you know whether you can actually sell your goods for NFC-friendly prices, know the penetration ratio or Contactless / NFC devices in your markets and have completed a basic balance sheet. Now just add your expectations from a successful  Contactless / NFC payments project and ready you go … your business case is ready.

Having a business case for Contactless / NFC payments is just the very first step and there are many more to do before your business will start accepting Contactless / NFC payments and generate extra revenue / profit, but every journey begins with the first step.


How to make success with Contactless and NFC payments.

Successfully implementing Contactless / NFC payments into your existing payments infrastructure can both serve your company well and support your reputation in eyes of your peers and even board members. While it is a project like many others, there are several points that makes is unique.

Strong business case – Introducing new technology is nice, having NFC features in your payment solution is great, but spending resources to roll out Contactless / NFC payments without a valid business reason makes no sense. You need to find the answers to a simple question: “What benefits will Contactless / NFC bring to my business?“. When possible, those benefits should be measurable – so you can quantify your costs and profits and supporting your core business.

Sponsorship from the board – as with many IT driven projects, you will face a lot of resistance from various departments. Let’s face it, there are many that do not trust IT and label IT projects as pure technical and non-business ones. Having a board member as sponsor of your project, you will get an advocate on the top level that can make sure that others will listen and cooperate. Furthermore, your sponsor can bring the project to the attention of other board members and with little luck it will attract their attention as well. As many of us know – a project with board’s attraction can receive additional resources (and respect across the company) far more easy then a one without this privilege.

Get the most of the project – knowing your business environment, what portfolio of solutions will you include in your project. Contactless cards? NFC smart phones?  Contactless stickers / watches / wristbands? What is the penetration of each of those payment devices in your area? Evaluating the potential and answering those questions will help you to get most of the project while still retaining financial sustainability.

Agile implementation partner – finding an implementation partner that has a strong interest in the success of your project is half-way to victory. Such a partner will react quickly to your requirements and agile to all the adjustments that will come as the project will advance. Reasons why your implementation partner will show strong interest can be various, ranging from desirable reference (when you are the first implementing Contactless / NFC in your industry or country) to a good prepared contract with a considerable success fee.

Dedicated team – here is where you can do your own homework as leader and manager. A smaller team with the right attitude and enthusiasm is better suited than a large group of specialists that have only mediocre interest in the project. Once again, motivation facts will vary – from the possibility to work with the latest technology, through becoming an expert in a “sexy” area, to earning respect from taking part on a board level supported project.

Engage external stakeholders – there are others outside your company that could have interest in your project and its success. Maybe your acquiring bank or credit card issuer might want to join forces with you and use your project for own marketing. They can offer expertise, counselling and even financial resources to support you and your team.

Enthusiasm from sales – while this point looks like not much important, it is in fact crucial. It will not be IT that will work with the new payment solution, it will be sales that will have to work with it day by day. Too many project fail on the point that the (internal) customer does not find any attraction in the provided solution and will use it only partially or none at all. Creating enthusiasm from sales is not easy by far, but there are ways and tool to do it. Communication on all levels and through various channels is needed, presentation and training are important but the key is to find the benefit for the sales guys and “sell” it to them.

Marketing where it matters – like many projects, budget is tight and IT driven projects tend to spend their resources on hard facts like hardware and software. Therefore there is always a lack of money to be spend for marketing. But be smart – use the resources where it makes most sense – at the point of sale. Be it local store or your online shop.

Selling the results – thinking that the project is over when the solution is working and handed over to the customer is a common mistake (especially with IT projects). From a certain perspective it is never over, but when the technical solution is working, your true work as leader has begun. You need to present achieved results on different levels of management. Not once, but two or three times, each time with more and detailed facts. You need to show your business case and if you have reached your expectations. Maybe you will need to prepare  a press statement or give an interview or two. In the end, you need to sell your project to all your stakeholders.