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.