2015 u.k. consumer payments study - tsys...set future payments for an account to approve or decline,...

2015 U.K. Consumer Payments Study

“In this age of the consumer, the only competitive advantage is knowledge and engagement with customers” — Forrester

The results of our frst annual U.K. consumer payment choice study are enclosed. This year’s

report includes information on key consumer payment preferences and new insights on a range

of popular industry topics. We continue to strive to provide relevant information to help our

clients and others with payment strategies and initiatives while also creating a useful tool for

discussion of current and future trends in the industry. We’re increasingly asked by the industry

to share insight on where the market is headed and how we can help our clients turn challenges

into opportunities.

A part of our response is to conduct more market-specifc primary research — relating not just to our clients — but to the consumer, our clients’ customers and the driving force behind our collective livelihood.

The payments industry continues to evolve with the explosion in data access points, the growing infuence of mobile and social media, the emergence of tokenisation and HCE, and the increase in infuence that merchants have on consumer payment methods both in-store and online. With the persistent climate of regulatory oversight, challenges such as MIF reduction will garner signifcant attention. Of course, it will continue to be the consumers who ultimately decide how they will pay and interact with stakeholders throughout the payments value chain.

As most demographics have equal access to mobile, social and wearables, consumer interest in using mobile to receive in-store offers, view activity and manage fraud is relatively high across the survey respondents. Our respondents — similar to those in a U.S.-specifc survey conducted last year and a German one whose results will soon be published — rank options that give them control over digital engagement with their card issuer high. We

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expect that interest in and use of mobile payment options will continue to grow — particularly as Apple Pay’s sphere of infuence grows and the use of mobile in consumers’ day-to-day activities becomes ubiquitous.

These fndings and many others were obtained from the quantitative research we recently completed with more than 500 consumer respondents. The respondents covered a diverse demographic, including gender, age and income. We required that respondents be over 17, reside in the U.K., have at least one debit card and one credit card, and have a mobile phone. The survey is designed to facilitate observation of trends in respondents’ answers year over year, and it will be repeated on a regular basis.

Whether you are a client or an industry participant, we hope you will fnd what follows to be meaningful as you contemplate key issues for your business and our industry.

Online Survey Results

For the online survey, consumers were asked both general and specifc questions. We asked payment-specifc questions to understand not only consumers’ attitudes and preferences but also behaviours, i.e., actions they have taken in the past year. We then focused on specifc topics like mobile, social media and alternative payments. As demographics are no longer suffcient to differentiate in an era when all have equal access to digital tools, we looked at six different personas segmented by their digital capability/comfort using digital tools on one plane, and trust/ willingness to share data on the other. Together these formed the personas used for response segmentation and additional insight.

The report provides the findings from our research, and is organized as follows:

TABLE OF CONTENTS

I. SUMMARY OF STUDY’S KEY FINDINGS .....................................................................................................3

II. DETAILED FINDINGS

A. Self direction and preference management.......................................................................................................5

B. Frictionless payments...........................................................................................................................................8

C. Empowering people with options beyond cards ...............................................................................................8

D. Mobile and online ................................................................................................................................................10

III. IMPLICATIONS FOR ISSUERS ........................................................................................................ 13

IV. ABOUT THE ONLINE SURVEY RESPONDENTS ........................................................................... 15

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I. SUMMARY OF STUDY’S KEY FINDINGS • In the recent past classical segmentation through

socio-demographics was a reliable predictor of people’s behaviours. Now, with all demographics having equal access to social, mobile and wearables (people may miss their rent payments, but never their smartphone bill), these models are suddenly antiquated. When we compared the total sample of the survey respondents to those segmented as early digital adopters, there was little, if any, statistically signifcant difference among age, education and income levels. In the past we would have been correct in predicting early digital adopters being over-represented by the younger demographics and perhaps the better educated. This is no longer the case. While those in the over 55 year-old bracket were slightly less likely to be in the vanguard of digital adoption than the rest of the age segments, there was no meaningful distinction by age, education or income levels when it comes to digital affnity.

Following the approach laid out by Wharton School’s Scott Snyder, we have segmented the respondents into six personas. Each of the six segments is defined by Snyder as follows:

Analogs: They are unwilling to and/or incapable of using digital technologies. They may have been capable digital users who decided to “unplug” due to privacy or life-balance concerns. At best, analogs might be willing to dip their toes into the digital waters via easy-to-use touch points like simple kiosks or websites before progressing to more advanced interactions like mobile and social.

Wannabes: Here we have embryonic users of mobile and social who are very eager to learn the basics so they can seem to be experienced. Wannabes are a group that you want to engage via their peers who have more advanced capabilities. Once Wannabes see their friends doing something cool or valuable, they will educate themselves to at least get by — think of seniors talking to their grandkids on Facebook. Once they realized this was the place their grandkids hung out, they put in the effort to become basic Facebook users (not many have progressed to become power users).

Mainstreamers: These are people willing to opt in to most digital solutions offering the strong possibility of a beneft in the near future. Mainstreamers represent the pregnant middle of the market, ready to be nudged toward behaviours and outcomes that are good for them and others. Show them the value of each interaction, and they can quickly become loyal digital patrons. If the value

• What distinguishes cardholder segments in a meaningful way now is two-pronged: their comfort and ability in using digital tools, and their willingness to share data about themselves in return for value.

• Consumers increasingly want control of how they engage with their banks. First, consumers want to exercise more control of their payments. They are much more comfortable and competent setting things up for themselves in their personal digital lives, and this is extending to their banking relationships as well.

• Consumers are interested in doing more with their payments cards. With the advent of apps for everything in a consumer’s daily life, the popular approach to fnancial instruments is forever altered. There is a deep need to empower people with payment options by moving beyond cards to offer more choice and innovation.

equation diminishes (compared to competing offers), you may lose them.

Paranoids: These are cautious users who are very protective of their data and need to be persuaded that there’s a value in sharing their data. Paranoids represent a potentially dangerous group as they will lash out if they believe their personal information is being compromised or misused somehow. Companies that do not respect the privacy needs of this segment risk public scrutiny and bashing.

Chameleons: Here are digital savvy users who will change their digital behaviours and data sharing to suit each situation and personal interests. They are protective of their data when they perceive there is limited beneft or low trustworthiness. Chameleons will educate themselves on the privacy policies of different brands and make sure they share only what they need to. It will take an extremely strong value proposition or clear privacy controls to engage them with highly personalized interactions.

Digital Nomads: People in this segment truly want to port their digital profles anywhere in any setting. They are willing to share data on the promise of a future beneft for them or a broader group. Digital Nomads fully expect that you will not just collect their data, but use it to deliver an exceptional user experience and signifcant beneft for them and other users like them. Achieve this and they will be your greatest champions. Fall short, and they will become your biggest critics.

Source: Knowledge@Wharton

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BRING YOUR OWN PERSONA Digital User Segmentation Matrix

For this study, we segmented respondents along two axes, trust in sharing data and digital capability. As a proxy for trust, we used respondents’ willingness to use partnership marketing. Conversely, we took the usage of the Amazon mobile app as a proxy for digital capability. Details can be explored in the interactive matrix below.

TR

US

T/

OP

EN

NE

SS

TO

SH

AR

ING

DA

TA

D I G I T A L C A P A B I L I T Y

H I G H

L O W

Wannabes Mainstreamers Nomads

Analogs Paranoids Chameleons

18% 18% 10% 46%

28% 20% 6% 54%

46% 38% 16% 100% E M E R G I N G A C C O M P L I S H E D H Y P E R

Matrix concept source: Knowledge@Wharton Data source: TSYS

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II. DETAILED FINDINGS In some instances it made more sense to see things through the prism of the personas, particularly contrasting the opposite ends of the digital engagement spectrum, with the Analogs on the low end and Nomads in the vanguard. In others, a review of the entire response pool was more germane. Here are the details, broken into four themes:

A. Self-direction and Preference Management

Self-Direction: Much like sliding controls on a smart phone, self-direction of card functionality through mobile applications allows cardholders to remotely manage aspects of their payment cards.

Observations: To help analyse the results, we split the responses into two categories:

1. Lowest ratings of the valuable scale (1 & 2); and 2. Highest ratings (6 & 7).

The ability to temporarily disable an account to prevent unauthorised use scored highest among the choices offered at 47.2 percent rating it in the highest and only 10 percent rating it in the lowest. At the other end of the spectrum is the ability to allow for a single use. Overall, however, there is a signifcant portion of respondents who found such self-direction enablers to be quite valuable, with the Nomads naturally very zealous for these types of offerings.

Consumers indicated that they like being provided with tools that enable them to proactively monitor and track their accounts. Some of these controls are currently of particular interest when provided as a mobile option.

Preference Management: A similar mind-set to self-direction, preference management is about allowing cardholders to self-select engagement levels, including frequency and channels.

Question: If you could limit how, when and where purchases were made on your card, how valuable would the following activities be? On a scale of one (1) not valuable to seven (7) very valuable, please rate the following capabilities.

47%

10%

Temporarily disable the account to prevent unauthorised use

46%

13%

Receive alerts for every transaction attempted while an account is in an “off” status

Set future payments for an account to approve or decline, for example a magazine subscription with annual renewal

38%

16%

Limit the use of a card account by location, for example, only allow purchases to be made in the UK

38%

19%

Enable recurring payments despite account status (avoiding interruption of recurring transactions)

31%

19%

Limit the use of a card account to a specifc device, e.g., only from your PC or from a particular smart phone

29%

25%

25% Set an account to approve only the next transaction (allowing for a single use) 25%

Percent responding as most valuable (top two of seven ratings)

Percent responding as least valuable (bottom two of seven ratings)

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Communication Frequency showed a preference for weekly communication (42 percent) to monthly (38 percent). The surprising piece was that

Observations: Unsurprisingly, the greatest response among Analogs prefer to decide for themselves the frequency of all respondents was indication of a preference to receive their issuers’ communications. This was unexpected as much communications once a month, which is typically what of their attitude and behaviour tends to be more passive cardholders are used to in the form of monthly statements. or disinterested. This is certainly a space to watch in next As could be expected, the hyper-engaged Nomads segment year’s survey.

Question: How frequently would you like to receive communications from your bank?

2%

0%

1%

17%

42% Once a week

Once a month

Once a year

I want the ability to decide how frequently my bank communicates with me

Never

12%

49%

38%

49%

4%

4%

3%

29%

15%

35%

All Respondencts Nomads Analogs

Communication Channels

Question: Please select your preferred communication channel when receiving notifcations/offers from your bank.

26%

34%

25%

10%

5%

21%

4% 4% 6%

0.4% 0% 2%

60% 57%

46%

Nomads Analogs All respondents

Mail Email SMS Phone Social Media (text message) (Facebook, twitter, etc.)

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PIN Management PIN codes via SMS, Web, app and IVR delivery. Due to the digital nature of such a service, the continuum with the lowest

Observation: Electronic PIN management addresses the rate of Analogs fnding this valuable/very valuable at one increasing demand of paperless delivery methods and end (23 percent) and Nomads on the other (82 percent) is heightened security concerns, allowing secure issuance of consistent with expectations.

Question: Assume you were applying via your phone (e.g., via a banking app) for a new credit or debit card. If you were given the option to select your PIN electronically and immediately rather than through a paper PIN mailer, how valuable would you consider this service?

Percent respondents selecting "valuable" or "very valuable”

All respondents

Nomads

Mainstreamers

Wannabes

Chameleons

Paranoids

Analogs

Among the 42 percent of respondents who found electronic PIN management to be valuable or very valuable, we asked their preferred channel for PIN Management:

Question: Via which channel would you prefer to receive your PIN electronically?

43%

83%

63%

50%

33%

30%

24%

Observation: SMS and Online banking are universally attractive channels for PIN management across the personas. The mobile app channel is overrepresented by the Nomads, whereas Analogs much prefer online banking (40 percent) and even IVR (11 percent) to Mobile App (3 percent).

All respondents Nomads Analogs 46%

42%

16%

11%

5%

40% 40% 36%

30% 26%

6% 3%

SMS Mobile App IVR Online Banking (text message) (incoming voice response,

incoming phone call)

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Percent respondents selecting "valuable" or "very valuable"

All respondents

Nomads

Mainstreamers

Wannabes

Chameleons

Paranoids

Analogs

76%

96%

80%

90%

59%

61%

68%

Question: In the event that your card was lost or stolen… if you could get your physical plastic credit, debit or prepaid card produced for you immediately with PIN selection from a central location such as a bank branch, retail outlet, or a kiosk, so that you could immediately start using the card, how useful / valuable would you consider this service?

B. Frictionless Payments

Many elements of customer engagement play critical roles in making payments frictionless. One example is the instant, on-site delivery of a new plastic with Instant Issuance.

Observation: What is interesting in this case is that when we compare early adopters to the total respondents, there is no difference. The implication is that there will be no lag time in mass adoption.

We also asked the same question for the issuance of new cards. There was very little difference between the value associated with such a service for the replacement of lost/ stolen cards and the issuance of new cards. Seventy-six percent of all respondents found it valuable or very valuable for the replacement of lost/stolen cards, while 69 percent felt so for newly issued cards.

To explore how to empower people with payment options beyond cards, we asked cardholders what they are interested in. The answer is more choice and innovation.

C. Empowering People with Options Beyond Credit Cards

Dual Cards

Observation: As expected, the Analogs preferred to keep features separated, but there was interest across many personas in holding debit, credit and loyalty functionality on a single card.

Question: Payment cards traditionally have only been good for one type of activity, like paying with a credit line or by direct debiting an account; consumers would need a separate card for distinct activities. The chip in your payment card has increasingly sophisticated technology and there is a capability to combine different functionality onto a single card. Which of the following would you like to see incorporated into a single card? Please mark all that apply.

68%

52% 54%

33%

52%

83%

74%

58%

48% 46%

28%

47%

71%

44%

23%

14% 14%

4%

17%

25%

7%

29%

23% 20%

11% 14%

35%

26%

17%

34% 31%

52%

26%

6%

22%

54% 54%

46%

33%

46%

58%

41%

Analogs Paranoids

Chameleons Wannabes

Mainstreamers Nomads

All Respondents

Debit Credit Instalment Loyalty Points Transit (buses, trains, trams; None, I prefer these to keep e.g. transport for London) features on separate cards

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Instalments

Question: The chip in your payment card can be programmed to allow you to choose to pay for purchases via instalments, for example, purchasing a £500 refrigerator and paying it off in monthly instalments of £100. How valuable would this be to you?

Observations: Different personas found different degrees of value in instalments. The overall average among all responding “valuable” or “very valuable” was 38 percent with

22%

85%

Analogs

Nomads

All respondents 38%

Partnership Marketing aims to bring merchant-sponsored offers that ft the lifestyles of each individual cardholder.

Question: If you could self-determine the level of offers and discounts you receive from merchant partners identifed by your bank, for example, how often you get offers for discounts at particular merchants, and what types of merchants are included, how useful / valuable would you consider this service?

Observations: While a plurality of respondents were neutral regarding this question, only a small percentage, 16 percent, saw little or no value in such an offering.

No Value

Little Value

Neutral

Valuable

Very Valuable

7%

9%

12%

38%

34%

the Analogs clicking in at 21 percent. Their position again starkly contrasts that of the Nomads, 83 percent of which found instalments, as described in the question, to be valuable or very valuable.

Among the 38 percent of all respondents who found instalments valuable or very valuable, here is how they would prefer to choose the option. The large plurality, 43 percent, would opt for choosing at checkout:

Pre-determine by a price threshold

Pre-determine by type of purchase

Determine at a later date

Determine at point of sale / checkout

15%

17%

26%

43%

Among those 46 percent who found the idea of partnership marketing valuable or very valuable, we asked, “For which offer categories would you prefer to receive such offers and discounts from merchant partners identifed by your bank? Please choose all that apply.”

Observation: For issuers looking to offer partnership marketing or permission marketing, they may wish to focus initial efforts on restaurants, clothiers and petrol retailers.

Restaurants

Clothing

Petrol

Electronics

Holiday Travel

Home Furnishings

DIY

63%

58%

53%

52%

50%

30%

28%

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D. Mobile and Online

Observations: With the likes of Apple Pay, Android Pay and Samsung Pay all gaining traction, adoption of mobile payments will continue its high growth trajectory in the near future. While our survey results currently indicate that consumers are more interested in increased non-payment functionality on their mobile device, this is likely to change as mobile payment options become more widely available. In other words, in next year’s survey we expect to see the number increase appreciably from this year’s 26.6 percent of respondents who found the ability to use their smartphone to make a purchase using a specifc credit, debit, or prepaid account valuable or very valuable. We randomly presented

nine optional features and asked consumers to rate them from not valuable to very valuable.

We were able to get a fairly clear picture of what consumers want most by showing the proportion of respondents that fell into valuable or very valuable groups. Among all respondents, the top-rated card feature we asked about was an alert sent to the cardholder’s computer or mobile phone each time a purchase is made (34.4 percent for all respondents, 59.6 percent for Nomads). Also garnering good interest is the ability to self-determine the level of marketing from the bank’s merchant partners (33.9 percent for all respondents, 69.2 percent for Nomads).

Question: Payment card programs (Debit, Credit, Prepaid) can sometimes be made more valuable because of features added by the fnancial institution or merchant. On a scale of one (1) not valuable to seven (7) very valuable, please rate the following capabilities in terms of how useful they would be to you.

Percent responding as most valuable (top two of seven ratings)

Classify purchases for budgeting purposes

Choose particular purchases to be paid off by instalment plan

Request additional cards to an account

Ability to use your smartphone to make a purchase using a specifc credit, debit, or prepaid account

The ability to transfer money to another cardholder using an online or mobile phone app

The ability to converse with customer service representatives via online chat

The ability to make online transactions using a special “one time-use” card number that can be used for only one purchase to help protect your card number from being exposed to hackers

Self-determine level of marketing you receive from your bank’s partner merchants

Alerts sent to your computer or mobile phone each time a purchase is made with the card

All Respondencts Nomads Analogs

65% 22% 10%

69% 23% 12%

71% 24% 12%

54% 27% 17%

60% 30% 10%

60% 30% 8%

69% 33% 17%

69% 34% 8%

60% 34% 7%

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Consumer actions in last year

We surveyed consumers regarding the actions they took last year, and we were able to compare those answers to fgures from last year’s U.S. study, as well as German data from this year’s research. The full set of UK consumer responses is below, while select cross-country comparisons are on the right.

Question: Please select the following statement(s) that describe the actions you took in the last year. Please choose all that apply. (UK only)

I used PayPal to make online or in-store purchases

I made a purchase using a credit card I have on fle with an online retailer (Amazon, Google Play, iTunes, etc.)

I registered my credit card with an online retailer (Amazon, Google Play, iTunes, etc.)

I made a purchase using a debit card I have on fle with an online retailer (Amazon, Google Play, iTunes, etc.)

I sent money to another person utilising a “person to person” money transfer service separate from my online bill pay service

I took advantage of a discount I saw on my online statement

I began using a reloadable prepaid card (Tuxedo Pay Monthly Card, Orange Cash, Virgin Money Prepaid Card, etc. )

I responded to a credit card solicitation I received in the mail

I made a payment at a retail location with my mobile device

I took none of these actions in the last year

I registered my debit card with an online retailer (Amazon, Google Play, iTunes, etc.)

73%

56%

50%

44%

38%

27%

8%

6%

6%

5%

4%

Question: Please select the following statement(s) that describe the actions you took in the last year. Please choose all that apply. (US: DE: UK)

I sent money to another person

38%

27%

38%

31%

44%

29%

39%

49%

47%

38%

56%

72%

73%

21%

utilising a “person to person” money transfer service separate from my online bill pay service

21% I registered my debit card with an online retailer (Amazon, Google Play, 16%

iTunes, etc.)

I made a purchase using a debit card I have on fle with an online retailer 16%

(Amazon, Google Play, iTunes, Etc.)

I registered my credit card with an online retailer (Amazon, Google Play, iTunes, etc.)

I made a purchase using a credit card I have on fle with an online retailer (Amazon, Google Play, iTunes, etc.)

NA

I used PayPal to make online or in-store purchases

United States Germany United Kingdom

Observation: The most popular action taken in the last year among those listed in the survey was using PayPal to make a purchase (73 percent of U.K. respondents and 72 percent of German respondents; U.S. data is not available). The popularity of keeping a credit card on fle with an online retailer to make online purchases is quite important to note, with 56 percent of respondents indicating they had done so in the U.K., 47 percent in the U.S. and, given the popular aversion to credit there, a very high 38 percent in Germany.

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Use daily Use it a few times a week Use it a few times a month Use it less than once a month

Used it once Have the app but never used it Do not have

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ASOS

Amazon

eBay

Etsy

Groupon

RedLaser

Shpock

Supermarket

UNiDAYS

Vouchercloud

VoucherCodes

Wish

Wowcher

Question: Please select the option that best describes your usage of each App (mobile app installed on your smartphone or tablet) listed below:

App usage A simple gauge of a consumer’s digital capability is the use of mobile apps (digital applications installed on smartphones).

Observation: Amazon and eBay, with their longstanding presence in this space, are over-represented in installed base, occasional use and frequent usage. Groupon is the leader of the second tier, with many others playing much more niche roles. There is likely room for market consolidation, particularly given the aggressive market capitalisation of some of these players. We expect this chart to change signifcantly in the coming two years.

Observations: There is no statistical difference for the usage of loyalty apps among the three activities. While a small minority (~ 60 percent) do not have any such apps, there is a passionate minority that frequently use apps to receive, track and redeem points as well as buy before for quick pick-up. This will continue to be an interesting realm to watch, as the proliferation of mobile loyalty apps outpaces the ability of consumers to keep track of them all. As Karen Webster from pymnts.com opines, “Smartphones and apps were supposed to save the loyalty industry, and merchant and brand engagement along with it. But at least so far, all that it seems to have done is expand the supply of loyalty programs and fragment the number of loyal consumers.”

Question: Many leading retailers have launched apps (mobile apps installed on your smartphone or tablet) in the past few years to enhance the online shopping experience for their customers. Please select the option that best describes how often you use retailer’s apps for the following activities:

63% 61%

59%

To receive and redeem coupons

To track and redeem loyalty points

To buy an item before visiting a store so that you could pick it up quickly

21%

16% 14%

12% 12% 10%

7% 6% 5% 5% 4% 4%

Use a few times Use less than Used such app once Have such apps Do not have a month or more once a month but never use them any such app

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https://pymnts.com

13.5% 34.0% 16.0%


Rogers Diffusion of Innovation: Adopter Categories

Critical Mass

2.5% 34.0% Time

Innovators Early Adopters Early Majority Laggards

Please select the option that best describes your usage of the Amazon App (mobile app installed on your smartphone or tablet)

Late Majority

Use it a few Use it a few Use it less than Have the app but Use Daily Used it once Do not have times a week times a month once a month never used it

3.9% 11.8% 15.7% 11.0% 4.5% 6.5% 46.5%

Hyper Accomplished Emerging

Digital Capability

37.8% 46.5% 15.7%

III. IMPLICATIONS FOR ISSUERS Pay attention to early adopters: According to Everett Rogers’ Diffusion of Innovation theory (see above graph), about 16 percent of the population can be expected to fall into the early adopter/innovator category. While Rogers frst posited this maxim in the 1960s, it has weathered the passage of time robustly and remains true today. For this study we took the usage of the Amazon mobile app as a proxy for digital capability and found a bell curve approximating Rogers’ fgures, with 15.7 percent of the survey respondents in the early adopter/innovator stage. One of the takeaways from the bell curve is that special attention needs to be paid to the early adopters, as their behaviour can help us see what’s coming next.

Using this prism of heavy Amazon mobile app users, we analysed their attitudes toward many different payment card features and scenarios in their relationship with the card issuers. This is a great indicator of where the market is headed — delivering features and functionality that delights the early adopters today will put issuers in a better competitive position as the early adopters presage mass adoption. Here’s a look at the recurring themes that the early adopters found most valuable:

User experience (UX): Similar to Maslow’s Hierarchy of Needs, UX has a pyramid structure in which the fundamentals must be addressed before addressing more advanced needs. For proper UX, functionality is table stakes, it simply

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must work or there is no user experience. By delivering on ease of use, we start to make inroads in the user experience. But when we can make the experience pleasurable we create brand advocates and drive net promoter scores.

Part and parcel to UX is to make it frictionless: Human nature is to pursue the path of least resistance unless we are incredibly passionate about a particular challenge. In other words, we don’t like friction. With good reason the payments industry is focusing on seamless transactions, putting payments into the background, where focus is on the purchase, not the act of paying. It’s one of the guiding principles of People-Centred Payments.

Building trust will be key differentiator: As the general population’s digital capabilities continue to grow inexorably, issuers’ abilities to deliver a full digital experience will be a market differentiator only in the short term. The momentum that many issuers are building through TCF (treating customers fairly) initiatives is critical and transparency will be a common commodity in the near future.

Communication is key: By building from the ground up and gradually, issuers will move their consumer base

Open environment for new merchant/issuer partnerships To replace revenue from MIF rate reductions, issuers should pursue a three-pronged approach: drive cardholder base through higher acquisition rates; increase transaction volume; and develop new revenue streams not tied to MIF. For the frst two items, issuers should look to harness the power of their internal data to both develop portfolio management strategies that support cardholder base expansion as well as increase cardholder transaction spend.

For the third item, a signifcant portion of the survey respondents were open to the idea of receiving offers from

UX Hierarchy

Pleasurable

Easy To Use

Functional

along the trust axis by trading true value adds in exchange for consumer’s data. Adding value can be accomplished by enhancing the consumer’s daily life, but should not be intrusive. Issuers should understand the consumers, not just their communication preferences.

merchants identifed by their banks. Partnership Marketing programs would allow issuers to seamlessly and quickly deliver more value to cardholders by sending them merchant-sponsored offers tailored to each cardholder’s unique spending habits or preferences while retaining control over the process of who is included: sectors (e.g., tobacco and alcohol) and particular merchants (conficts with commercial business, etc.). The new revenue streams are not tied to MIF and can be an integral part of an issuer’s MIF exposure mitigation strategy.

Reve

nue

MIF revenue at current rates

MIF revenue at lower rates

1

2

3

Grow cardholder base

Increased transaction rate / cardholder

New revenue streams

2014 2016

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IV. ABOUT THE SURVEY RESPONDENTS We can say with 95 percent confdence that our survey size of 500 represents the approximately 35 million U.K. population that meet the following four criteria:

• Holds a debit card • Holds a credit card • Has a mobile phone • Is at least 18 years of age

The margin of error for the responses is 4.5 percent. Some questions required consumers to rank-order their responses according to their relative value. In these instances, response choices were presented at random to prevent undue infuence on response data.

Income

30.3%

22.2%

1.4%

6.3%

5.3%

20.5%

14.0%

< £20,000 £20,000 — £30,000

£30,000 — £50,000 £50,000 — £75,000 £75,000 — £125,000 > £125,000 Prefer not to answer

Type of Mobile Owned

Do not own a mobile phone of any type

Another type of smartphone

A Microsoft-based smartphone

A BlackBerry smartphone

An Android-based smartphone

An Apple iPhone

A feature phone with a large screen and/or keyboard

A basic voice and text messaging mobile phone 19.7%

32.7%

40.6%

0.0%

2.8%

8.1%

6.7%

5.7%

18-24 25-34 45-54

35-44 65 or older 55-64

Age

20.1%

19.7%

16.9%

11.8%

11.8%

19.7%

Education

6.1%

18.3%

18.9%

15.4%

11.2%

2.0% 0.2%

28.0%

Incomplete secondary education (Below GCSE/O-level) Secondary education completed (A-level or equivalent) Secondary education completed (GCSE/O-level/CSE or equivalent) Some vocational or technical qualifcations Vocational or technical qualifcations completed (e.g. HND, NVQ) University education completed (e.g. BA, BSc) Postgraduate degree or equivalent Prefer not to answer

Gender

Male 51%

Female 49%

www.tsys.com 15


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About TSYS At TSYS® (NYSE: TSS), we believe payments should revolve around people, not the other way aroundSM . We call this belief “People-Centered Payments®.” By putting people at the center of every decision we make, TSYS supports fnancial institutions, businesses and governments in more than 80 countries.

TSYS’ headquarters are located in Columbus, Ga., U.S.A., with local offces spread across the Americas, EMEA and Asia-Pacifc. TSYS is a member of The Civic 50 and was named one of the 2015 World’s Most Ethical Companies by Ethisphere magazine. TSYS routinely posts all important information on its website. For more, please visit us at www.tsys.com.

© 2015 Total System Services, Inc.®. All rights reserved worldwide. Total System Services, Inc., and TSYS® are federally registered service marks of Total System Services, Inc., in the United States. Total System Services, Inc., and its affliates own a number of service marks that are registered in the United States and in other countries. All other products and company names are trademarks of their respective companies. (05/2015)

2015 u.k. consumer payments study - tsys...set future payments for an account to approve or decline,...

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