How Payments Evolve - Notes From Croatia
Even when travelling we notice payments everywhere
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Recently I took a short trip to Croatia.
Upon leaving the airport in Split, I had to make a decision. Do I check if Uber is available, or go straight to the taxi rank and hail a taxi?
This time, I decided to go to the taxi rank at the airport. I asked the taxi waiting if I could pay with card, "cash only" the driver said.
I checked if this was definitely the case, "yes" he confirmed. So I headed back closer to the airport terminal, to connect to the Wifi and then call a taxi via Uber.
But the driver came after me and said "Show me your card?". I was confused. I showed him my payment card within the Apple wallet on my iPhone. "OK that's fine" and then he walked with me back to the taxi.
SoftPOS in Action
Soon, it made sense. Before I got into the taxi, he showed me an app on his phone - it was a SoftPOS, Tap to Phone app. He could accept card payments, but only if I could pay via contactless - which I could with Apple Pay.
He did have a standard Point of Sale reader, but he explained that this was not working. He offered to try his SoftPOS app for the first time.
The SoftPOS app was from PBZ Card. This was interesting, as in a previous role, I had worked on this particular solution for PBZ Card alongside a local partner. This was my first time in Croatia, so I was pleasantly surprised to have the chance to use the app. One nice thing about working in the world of payments is that you can end up using solutions you've worked on in some way.
When my journey ended, and it was time to pay the taxi driver, things didn't go as planned. A series of messages popped up on his phone screen, and the payment process didn't work. The driver didn't know what to select to get past these screens - and as they were in Croatian, I couldn't help.
SoftPOS allows payments to be accepted on a normal smartphone via NFC. But to enable the payment, various security measures need to be present. These include turning off the camera and microphone of the device when the app is in use. As explained in a Payment Card Industry (PCI) security guide:
A camera can be used by a malicious background process or application to capture account data read by the NFC interface.
For companies offering SoftPOS purely as a backup or alternative device, this brings a risk. Merchants may need to be aware of the need to accept the various security settings before using SoftPOS.
This may lead to a painful customer experience if customers have to wait for the merchant to figure out how to navigate the security settings. Training and information sharing are essential so businesses know these requirements.
In my case, the driver was helped, after some time, by a friend who coincidentally was at the hotel I was staying in. The friend helped him navigate the security settings, and I was able to pay with Apple Pay, utilising the driver’s phone as a card terminal.
Instalment Payments as Standard
An interesting facet of payments in Crotia is the use of instalment payments. These have been available in Croatia for a long time way before Buy Now Pay Later (BNPL) became popular more generally. The below can be seen in a supermarket near the cashier.
To incentivise the population to use less cash and more cards, banks in Croatia offer the ability for cardholders to split a transaction into instalments.
When the card issuer and the card acquirer are from the same bank - known as an on-us transaction - then instalments are offered on the merchant’s POS screen. The cardholder gets to spread the purchase over 6 or 12 monthly payments interest-free. The options differ depending on the merchant and the particular type of card used.
The instalments are partly funded by the merchant. The merchant will pay the banks for offering the instalment service, on the basis that offering instalments will increase the average transaction size.
Instalment payments have proven popular in Croatia. almost 30,000 Point of Sale (POS) locations in Croatia support instalment payments in a country of less than four million people. Instalment payments tend to be mostly supported by larger merchants.
Whilst some other European markets have long had instalment payment options - such as Greece - this particular model is specific to the former Yugoslavia countries. And card-based instalments and BNPL more widely are now standard payment options globally, regardless of whether a transaction is on-us or not.
Diners Club International - Still Going Strong
One last observation. Croatia is one of the few places where I’ve recently seen Diners Club cards at the point of sale, as a payment option.
Diners hit the market in Croatia before Visa and Mastercard. Its popularity has fallen behind Visa and Mastercard in recent years, but many local business still request the ability to offers Diners Club card acceptance. So offering Diners is a payment acceptance option is key for card processors looking to grow in Croatia.
While Croatia may be a small payments market, some broader trends can be seen which are impacting payments globally.
SoftPOS is out in the market and growing across various geographies. There are clear use cases, such as for taxis and as a backup solution. But make sure businesses know the various security settings they need to accept!
Instalment payments in Croatia shows how on-us transactions can deliver interesting benefits to consumers. Previously, we saw how on-us transactions provide rewards to consumers in Indonesia.
The growth of instalment payments into a broader BNPL phenomenon is a case of payments moving from hardware to software, a key trend in payments.
The instalments that may have sat in a merchant-facing POS solution will eventually more likely sit within an app (Klarna, PayPal, Affirm).
But in some markets, which still provide instalments at a physical POS level, it will take longer for the software based competition to gain a firm foothold.
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