Where’s the money? Manufacturers and payments

Where’s the money? Manufacturers and payments

As LG becomes the latest manufacturer to reveal ambitions in the mobile payments space we look at some of the challenges that these companies face when they enter the market


Thin margins, big hassle

The world of payments is complex, to join it there are many deals which need to be done and regulation that needs to be passed. The high volumes and tight margins that many of the biggest players work with can make negotiations and agreements complex and difficult. This can be challenging especially for a business used to earning revenue through the sale of hardware. You only have to look at Apple who have taken a while to strike agreements with all the major banks, but are yet to complete a deal for one of the UK’s biggest banks, Barclays to carry the service.

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Owning the customer

In every consumer facing businesses there is a constant battle to get close to the customer. The payments and banking space is no different. Everyone is fiercely defensive about their relationship with the customer. You only have to look at a company like Visa which spending a fortune maintaining strong brand awareness amongst consumers, despite its function being largely back-end. The marketing of Apple Pay has also provided insight into this relationship, with the majority of the awareness being driven by the banks themselves rather than the manufacturer.

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Service expectations

What customers expect from companies managing their finance is very different to what they expect from the manufacturer of their equipment. There is a greater patience if a handset goes wrong, but a payments problem can be terminal. If things don’t work well for even a short period the damage to a new player in the financial space can be severe. There is also the issue of security, you adopt a whole new set of responsibilities and risks when you enter the payments space.

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