In many mobile services, the most unpleasant part of the user experience is connected to the mobile payment. This doesn’t have to be the case, since with tokenisation card payments can be made easy.

This text is based on a talk I gave at a recent IxDA Helsinki meetup. You can find the slides below.

Online bank payments, so revolutionary in their day, lead to an agonizing mobile user experience. Mobile credit card payments have traditionally been slightly more convenient, but the increasingly common 3-D Secure authentication has made card payments tricky as well. This is compounded by the fact that, in Finland, 3-D Secure has traditionally been implemented with mobile-unfriendly online bank codes. The combination creates a transaction that can involve dozens of buttons to tap.

Credit card information can be stored, however, which makes payment easier and practically invisible. Uber is a famous example and in Finland, Wolt is often mentioned. The technology used by these services is called tokenization. In it, a third-party service assumes responsibility for the strictly regulated storage of credit card information. There are numerous such service providers currently on the market. When choosing the service best suited for your needs, you should look for certain other things in addition to the commission: a user interface optimized for mobile devices, possibility for recurring invoicing and the ability to adjust the required security level on the fly according to the purchase amount and customer profile, location, etc. (dynamic scoring).

PSD2 could revolutionise everything

While tokenization is a mature and finished solution, the next big leap is hidden in the abbreviation PSD2 (Payment Services Directive 2). It is an EU-instituted amendment to banking regulations that will force banks to open their APIs. Some details have still not been finalized, even though the new regulations will enter into force at the beginning of 2018. A particularly intriguing part of the package is X2A, i.e. access to account. It means that banks will be required to provide merchants with direct access to their customers’ accounts.

This could revolutionize payment methods by cutting credit card companies out of the equation, lowering costs. In addition, X2A will enable new types of services that can visualize the account data of users in a meaningful way – potentially combining data from different banks. Soon, it will finally be possible to realize the idea behind the Balancion service that aroused such interest a decade ago, without any questionable prying into the information of users.

In PSD2 jargon, these new roles are abbreviated as PISP (payment initiation service provider) and AISP (account information service provider).

The mobile wallet race is on

At the end of my presentation, I highlighted a few services worth keeping an eye on. Danske Bank’s MobilePay is an extremely successful example of a service whose polished user experience has attracted a wide user base outside Danske’s own customers. At the same time, it represents an interesting strategic coup: for years, Danske has been sponsoring every transfer of funds between the customers of other banks by an amount equal to the credit card commission, just to build itself a customer base. The time to reap the rewards will come when PSD2 will enable providing the service without credit cards.

The Siirto service of Finnish banks is entering the same race, but has given MobilePay a generous head start. Siirto is being developed by Automatia, an ATM company jointly owned by Nordea, OP and Danske. The service is not yet as polished as MobilePay and does not work with all banks. However, it enables quicker transfers, which improves the user experience. Since it’s not based on credit cards, it is also cheaper for the service provider, but as long as Danske continues sponsoring MobilePay, users will not notice.

Both Siirto and MobilePay are also interesting from the perspective of mobile wallets. Mobile wallets offer a more convenient way of paying for online purchases than traditional bank transfers or credit card payments. The contest has been joined by MasterPass, launched this year in Finland by MasterCard in cooperation with banks, and OP’s Pivo – although I have not been able to determine the extent to which Pivo wants to serve customers outside OP. (Edit 7.7. on the updated Pivo homepage, it’s now clearly highlighted that Pivo wants to be the most convenient mobile payment platform and open for the customers of all banks.)

All such services operate similarly from the perspective of the user: the user chooses the payment method in the online shop, enters authentication details such as their telephone number, and receives a payment confirmation push message on their mobile.

The Swedish Klarna is worth mentioning, too. It not only enables extremely effortless payments without registration, but also offers financing for paying the invoice. People buy more when they do not have to think about money: on the basis of certain empirical data, it looks like the average purchase amount of a Klarna customer could be up to double that of customers using traditional payment methods. Klarna has been making the news lately: first, Klarna’s banking license was announced, followed by reports on an investment by Visa.

It will be interesting to see how quickly mobile wallets will spread in Finland and whether any single service will achieve a dominant position. The difficulty with MasterPass and Siirto is that they lack an existing user base. However, the banks are launching the services smartly by integrating them into existing applications, so users can adopt them without really noticing. Siirto has reported that it already reaches 250,000 users, even though everyone I know still settles their debts with MobilePay. MasterPass has the advantages of working in foreign online shops and providing the merchant with address details in addition to payment data if desiredt.

At the European level, the competition between mobile wallets currently looks like this:

Then there’s Apple Pay. For iOS users, it’s the most convenient way of making purchases both online and in the real world. The service is easy to adopt, especially when supported by credit card information already stored by Apple. In addition, the user experience is super smooth, since Apple controls both the hardware and the OS – and effectively blocks third parties from accessing the NFC chip.

There is no official information on Apple Pay’s launch date in Finland as of yet. Google’s equivalent service, Android Pay, is plagued by similar vagueness.

In any case, things are looking up for the consumer. Things are finally happening in a long-dormant sector and obstacles to trade are being removed. The latest exciting announcement concerned Kotipizza’s Messenger bot that uses Pivo as its payment method.

Designers should keep their heads up as well. If you find yourself designing a service that includes online payments, the first question to ask should be “Have I done everything possible to make payment easier?” You should move on to other things only when you are absolutely certain that the answer is “yes”.