Value-added services

Enhancing payment processes for customers

From the customer's point of view, payment is purely a necessity with no benefits of its own. The question therefore arises as to how payment processes can be made more attractive to consumers. The answer is obvious: linking payment with certain additional services can generate added value for customers. Chantal Stäuble, Co-Head Business Development Digital Enterprise, and Kurt Schmid, Marketing & Innovation Director Secure Digital Payments, provide an overview of such value-added services and the associated challenges and opportunities.

The business case for processing payments has come under severe pressure. As a result, providers face the challenge of processing as many transactions as possible to increase their revenues and achieve economies of scale on the cost side. One of the keys to differentiating one's payment offering from the competition lies in value-added services (VAS). Such services play a central role in the customer's decision as to which payment instrument they prefer to use for their purchases.

Only relevant services are used

But not every value-added service is equally well received by consumers. A look at loyalty programs in various countries shows that between 30 and 60 percent of consumers actively use such programs. The fact that these programs do not always produce the desired result can be seen particularly clearly in the example of the USA: There, each household participates in an average of 29 loyalty programs, but 58 percent of members do not actively use the programs. Says Kurt Schmid, "Loyalty programs are like apps: you only use the ones that are really relevant."

If you want to take a closer look at the challenges and opportunities, it makes sense to first get an overview of the different types of VAS. Services range from cashback and automatic discounts to coupons, financing offers, digital receipts, and earning and redeeming reward points. With each service offering, it's important to keep in mind the pros and cons.

Each service has advantages and disadvantages

For example, a cashback service, such as those offered by Bank Austria or N26, among others, is easy to implement and it is also easy for consumers to understand. The challenge here lies primarily in financing such a service.

Personalized offers and coupons are well suited for reactivating inactive customers. However, this requires a CRM (customer relationship management) system that allows customers to be presented with only those offers that are really of interest to them. For example, a study showed that although 42 percent of consumers like to receive personalized offers, only 16 percent find these offers attractive. Here, the subjectively perceived added value is the sticking point. You have to understand and anticipate customer needs and what is perceived as added value.

Offering insurance in connection with credit cards is easy for cardholders to use and benefits intensive users in particular. However, such an offer is often forgotten if customers are not regularly made aware of it.

Many consumers see real added value in instalments payment options or instant credit. This makes it attractive for providers – but only if they can meet the regulatory requirements that apply to them.

Consumers also find the offer of personal financial management interesting. The challenge here is that the solutions are usually linked to a payment provider. It would be more interesting to offer the customer a complete analysis, but this would require banking systems, among other things.

Digital receipts can bring real added value for everyone involved – and not least for the environment. In Europe alone, around 10 trillion receipts are printed out every year. The success of such solutions depends, among other things, on industry and country-specific regulatory standards, as Chantal Stäuble points out. "The example of Scandinavia, especially Sweden, which has a pioneering role, shows that the introduction of a "digital receipt" standard together with the legal requirements, creates the conditions for a correspondingly growing ecosystem."

Crucial: error-free implementation and high user-friendliness

For all services, it plays an important role whether they are to function only at the physical point of sale or in e-commerce, or in both worlds. At the point of sale, a decision also has to be made as to whether the service should be integrated into the card terminal or the checkout system. Chantal Stäuble: "The decisive factor for the success of a service offering is whether it can be implemented without errors."

Incidentally, in addition to banks and merchants, Mastercard, Visa and American Express, as well as various acquirers, are also active when it comes to VAS. Value-added services are often offered within wallets. A good example of this is the wallet of Payment Services Austria (PSA), where customers can store their customer cards as well as their bank cards. This alone represents added value for customers.

Finally, any consideration of VAS should take into account the "paradox of personalization". Some consumers very much appreciate the personalized approach that membership in a value-added or bonus program brings. On the other hand, other consumers deliberately do not become members of such programs so that their purchasing behavior cannot be tracked and evaluated.

Kurt Schmid: "Simply implementing a value-added service is not enough. The decisive factor is the quality of the offering. Consumers will only accept services that offer them clearly recognizable benefits and a high level of user-friendliness."

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