The development of digital payment advisor (DPA) applications residing on customer smartphones and mobile devices has the potential to significantly disrupt the payment value chain states analyst group Gartner
"By encouraging the use of alternate currencies - loyalty points and social currencies - for purchases of day-to-day products and services, DPAs may start to alter the very subtle psychological balance in place when customers make purchases using cash and payment cards," says Alistair Newton, research vice president at Gartner. "Spending hard-earned money can feel very different to consumers, compared with spending loyalty points that may have been allocated freely by retailers or airlines. Such shifts will bring significant changes to the entire retail purchase experience and the associated payment value chain."
The advent of DPAs will likely herald a shift in power from banks and payment card issuers to their customers, says Newton, and offer a viable market entry point for alternative currencies.
By offering the user a clear indicator of the most cost-effective - or profitable, when aspects such as potential loyalty rewards or 'cash back' options are factored in - payment application to use for a particular transaction, digital payment advisors will cut through many of the marketing and pricing issues that plague today's payment market.
Banks may be able to carve out a role for themselves as honest brokers in the management, exchange and disbursement of loyalty points and social currencies for their customers, says Newton, but with one caveat.
"In such cases, financial services institutions that wish to offer the DPAs may need to establish an independently branded solution - such as some of the insurance price comparison sites, which are in fact owned by insurance companies - to ensure that customers regard any advice offered as being independent and accurate."