The Green Sheet Online Edition
July 24, 2016 • Issue 16:07:02
The state of mobile today - Part 1
Innovation in the mobile payments realm has been high for a number of years. Many contenders have developed products and brought them to market or intend to do so soon. Some, such as Apple Pay and Samsung Pay, appear to have had a relatively smooth ride. Starbucks has also enjoyed success with its mobile app. Others ‒ for example, the mobile carrier-backed Softcard (formerly Isis), which closed shop, and the recent termination of MCX's CurrentC beta test have not fared as well. However, observers have tended to agree that no winners have emerged yet.
With this backdrop in mind, we asked members of The Green Sheet Advisory Board
to weigh in on the following:
- What is your opinion of the various mobile payment options available today?
- What technologies do you feel make for the best merchant and consumer experience?
- Do you see clear mobile payment winners emerging? Why or why not?
- Have you adapted your business model to incorporate mobile payments? If so, what have you done, and why? If not, why not?
Following is the first portion of responses we received. The remaining perspectives will be shared in The Green Sheet, Aug. 8 and Aug. 22, issues 16:08:01 and 16:08:02. Many thanks to the busy payments experts who took time to answer these questions.
Matt Bruno, Payment Logistics Ltd.
1. I've used Google Wallet and Samsung Pay. Google Wallet was first for me, but then moved to Samsung Pay (primarily because it was easier with my phone). I use the app regularly wherever possible, and even abandon some purchases where NFC payments were not available because I wasn't carrying my wallet. From what I've seen, Apple Pay is a pretty sleek app, as well.
Based on my usage, I think the process is better than a physical card. It provides the flexibility of carrying multiple cards without the need to actually carry them. As a consumer, I feel a little safer knowing the card number actually used on the merchant's system is a placeholder/token for my actual card number (in Samsung Pay, my AmEx card uses a MasterCard as the placeholder). I feel the solutions will progressively take over the physical card, as they are cheaper for issuers, faster for merchants and easier for consumers. Wearable technology will help to expedite this takeover, IMO.
2. The best technologies overall for both groups are the ones that are easiest and fastest for the consumer to use.
For the customer, this would include the technologies that are easiest to start using (that is, download or obtain), are ubiquitously accepted and can be used without barriers (that is, using biometrics or wearable technology pairing instead of typing passcodes etc.).
For the merchants specifically, NFC payments that come through as contactless EMV are going to be the best for them. In addition, ensuring they have the technology required to accept mobile payments in their business – including pay-at-the-counter and pay-at-the-table options.
While pay-at-the-counter is relatively easy to implement since most EMV payment devices (like the Pax S80) have NFC built in, ensuring the customers and employees are aware of it can be a challenge. I was recently at a taco shop where I saw the merchant had an NFC device. I reached to pay with my phone – the cashier asked me what I was doing. I had to explain to her what NFC was.
Pay-at the-table is proving much more difficult for most businesses to implement since the systems most businesses use do not have a viable pay-at-the-table device available – especially those with legacy POS systems. At Payment Logistics, pay-at-the-table has been a prime focus, in part, for this reason.
3. Apple Pay and Samsung Pay are the two with the most potential. In part, because users of those devices are often early adopters of new technologies (that is, waiting in line for the latest phones) and the applications are pretty simple to use. Apple's two-factor authentication is a nice added security feature. Wearable technology (that is, smart watches) will help propel mobile NFC payments forward – so the big winner may end up being the company with the nicest and most functional wearable technology.
4. Yes definitely. Our in-house developed Paygistix integration for POS systems allows our ISV partners to add both NFC pay-at-the-counter and pay-at-the-table processing to their legacy POS system. We've found a good number of merchants appreciate the relative reduction in processing time compared to standard EMV transactions, which definitely makes NFC a selling point.
It's my personal opinion that if a POS system fails to adopt NFC processing capabilities for their counter sales or pay-at-the-table solutions, they will be at a substantial disadvantage in the near future.
NFC payments are only part of the capabilities involved in mobile payments. There are some new methods of using this technology on the horizon today which will further change the landscape of mobile payments. It's an exciting time to be involved in payment technology for sure!
Brandes Elitch,CrossCheck Inc.
1. Options available today. There are the three main ones: Apple Pay, Samsung Pay (Android), and Google. Then there are all those in-app payments. As for Apple, if you look at the number of Americans who have the right Apple phone and the merchants that have a working NFC terminal, you will find that the number of potential users is small. Surveys have shown that only 20 percent or so of that number have even tried it, and of those people, most use it only once a week. This is what is called a "failure to launch."
Similar statistics are available for Android, although it has a big advantage now, in that it doesn't require an NFC terminal. It appears that the only mobile payment platform that is actually getting any usage is Starbucks, and this is really because it is a perfect storm: millions of addicted customers, some of whom come in three times a day, stores everywhere, low price per item, good loyalty program, and ease of use (you can skip the line).
Other than that, I see no meaningful usage yet. Of course, EMV will change things because new terminals will be NFC enabled. But there are issues: onboarding, ease of use, security. Bottom line: there is no compelling value proposition for the consumer, unless you are in Starbucks (or Dunkin' Donuts).
2. Best Technology. The big issue here is security. Apple Pay and Android have encryption and tokenization, and Apple has biometrics. You want to authenticate both the device and the cardholder when both are present. This makes the device impossible to use for payments, even if it is stolen. Consumers will always put more importance in safety and security, even before ease of use.
3. As much as I dislike saying it, it looks like Walmart Pay, now available nationwide, is becoming the most successful player in terms of transaction volume. In states where it has been tried, Wal-Mart says that 80 percent of the people using it have been repeat customers. The trick is what is called "omnichannel." A person can order something online, pick it up in a store, and pay using the app ‒ all very seamless.
In the store, the consumer can open the app and activate the camera, then scan the displayed code and get an e-receipt on the app, and you can upload receipts for price checking. There are 20 million active users. You can refill a pharmacy prescription, locate the nearest store and pick it up there. This generates its own momentum based on the sheer number of consumers that shop at Wal-Mart every week; perhaps only Costco generates this kind of loyalty among the shopping-crazed American consumers engaged in "retail therapy."
4. No clear winners yet, but every industry expert is predicting explosive growth in volume here. Since it is easier to just swipe a card (or put it in the terminal), consumers won't use it regularly until a few things happen. One is that the store has to have employees on the sales floor, not just behind the counter, to facilitate the transaction. The associate can now stay with the customer (just like Nordstrom), kind of like a personal shopper, and this will generate more sales, especially when linked to beacons with CRM, which can make instant offers to the consumer while they are in the right aisle.
Americans, unlike the Brits, hate waiting in line, and if they can bypass the checkout this will be a big incentive, kind of like finally giving in to buy a FasTrak pass for your car rather than get in line at the toll booth or signing up for TSA pre-check after waiting an hour in line during your last trip. Once you are really aggravated, you will try something new. Right now, consumers are not aggravated making card-based payments.
At CrossCheck, we have had many requests for a mobile payment option, although in our case it is about paying with a check from the mobile phone, not with a credit card (for example, for yard maintenance, home services like Roto-Rooter, etc.).
We are currently evaluating a number of technologies. We know that there is a need for this, because merchants don't want to go to the branch to deposit a check, and they cannot use our typical remote deposit capture with scanner solution in the field. There is also the question of people who do not carry their checkbooks with them. We expect to have a working solution in the near future.
Curt Hensley, IMPACT Recruiting Group
1. The landscape is littered with various mobile payment options. The difference among them is often times negligible. The key is convenience, and second to that is security. The general public is only concerned about security after something happens to them, rarely before.
2. Those that provide a complete experience. For instance, American Express, as part of Apple Pay or Samsung Pay, provides updates confirming your purchase. Few others provide that level of information for both the merchant and the consumer. Ease of use, transparency and access to information are key elements that are often overlooked in the process.
3. No. There are still key battles to be won or lost on the merchant's counter, and that battle will have a great deal of impact on the eventual winner of mobile payments. Whatever is done to secure online transactions will not impact the viability of mobile e-commerce. The battlefront is at the store and other real world environments that will weigh heavily on determining the winner.
4. We are not in the mobile sales environment. However, everyone must be "Mobile Aware." Do you ever pull up a website on your phone and realize it's not optimized for mobile? When that happens, what do you do? I know what I do (unless tied to that provider). I go to someone else's website, and they get my business. That appears to be the trend. Make it easy to navigate via phone, or get left behind.
Rod Katzfey, Credorax
1. Contrary to popular belief, I believe we have not reached wide-scale, global mass consumer adoption for all of the various mobile options on the market today. On the surface, it may seem as if 2016 should be deemed as the year that mobile payments have finally reached global mass adoption.
Why wouldn't one think that? Between the technological advancements developed over the past few years both on the card-not-present and card-present side, such as mPOS, in-app payments, NFC/contactless, combined with the 800-pound gorillas ‒ Apple Pay & Samsung Pay ‒ snatching up partnership deals with retailers and banks across the globe, it comes across as if mobile has reached a pivotal turning point.
However, honestly I truly believe we are still in the hype versus reality stage and not quite there yet in terms full embracement by consumers. There are several key factors attributing to this slow uptake, but the ones that I continue to witness first-hand are the following:
- Consumer confusion: Particularly in the U.S. market, there are too many choices, especially on the mobile wallet side, from financial institutions to singular and multi-merchant m-wallet offerings, consumers are in the position to select from way too many options, and that puts them in a state of confusion. In addition, most consumers, even millennials, do not quite yet "get" the benefits of using a mobile wallet and, as such, are even more confused and therefore are resistant to adoption.
- Multichannel is still King: Let's face it, on a global scale, consumers are not fully committed to one singular "channel" of choice; they continue to want the freedom to shop wherever and whenever, sometimes in-store leveraging good old traditional POS systems, and then there are times they want to sit at home and shop via their PC and, of course, on the go with their mobile devices.
In fact, lately consumers are demanding the option of split payments, where they can pay, say, half in store via POS solutions and then half online via a mobile or PC device. So for the time being, mobile is not the clear dominant leader, and I believe we will continue for at least the next decade to live in a multi-channel commerce environment.
In addition, objectively most analysts agree that we are still in the early stages of mobile payment adoption. I believe a recent report developed by Edgar, Dunn & Co. and Wirecard sums up the current and potential market penetration quite well. They conducted an industry survey in developed markets and reported that currently, in 2016, there is still slow adoption or declining usage rates of mobile payments among consumers.
The industry is divided in its evaluation of this data. Some observers say that the low usage rates are indicative of a weak consumer value proposition and are very skeptical for the future of mobile wallets. Others, however, are more optimistic and believe the glass is half full, not half empty.
2. I believe the answer is different for a consumer versus a merchant. For example, while a merchant cares very much about the consumer's shopping experience, as that ultimately will lead to sales, right now, many are very focused on security issues surrounding both card-present and card-not-present transactions, and mobile payment is obviously part of that concern. The primary security concerns can include theft of consumer payment credentials, theft of consumer account/transaction history and identity theft.
As such, I think many, especially SMBs, are embracing mPOS solutions, as this allows them to integrate EMV security measures and provides them with some sense of control against card-present fraud. Does the technology have a long way to go domestically? Yes, absolutely, and no one is denying that. Nevertheless, the adoption will continue to grow due to regulations, as well as one of the casualties: the U.S. national necessity to adopt EMV that has led to an increase of fraud on the card-not-present side.
Consumers, on the other hand, tend to care mainly about fast and convenient payments. Is security a concern for them? Yes, absolutely, as many fall victim to fraud, especially here in the United States. However, typically, they tend to focus on convenience and as such, I believe the advancements made on the in-app payment side, allowing them to conduct transactions with their mobile devices and not rely too heavily on walking around with cash or credit cards, is ground-breaking and beginning to turn a corner. Is it widely adopted yet? Nope, but it's getting there – just think about how many consumers today are using Uber.
I also would like to add that the Internet of Things (IoT) will also soon heavily impact consumers' "best choice of mobile commerce experiences." The rapidly growing wearables market is projected to reach $53 billion in sales by 2019 (reports Juniper Research) and there are tremendous breakthroughs in IoT consumer commerce solutions being developed for this market.
For example, as part of their IoT banking platform initial rollout, Intelligent Environments integrated the Pavlok wristband, a wearable interconnected device that "delivers an electric shock" to users' wrists when they exceed predetermined spending. So a user who sets a limit of $1,000, for example, will receive shock (they can control the level of physical interaction, from vibration to shock) if they spend more than this amount.
While this may seem extreme, this is to give you an idea of where the IoT is heading in the mobile space, and consumers will have plenty of exciting ways to explore this coming technology attraction.
3. Circling back to my answer to your first question, I think, again, it is too early to tell who the clear winners are. As with every industry, there will be a shake out; only the strongest will survive. And, of course, there will be consolidation, but we need to wait at least five more years to determine the victorious winners.
4. I believe it is not possible to be a merchant acquiring bank and not adopt mobile payments. Consumers are demanding it from merchants, and as such, merchants are demanding it from their payment providers, which ultimately leads to acquirers who need to inevitably adapt their business and technological solutions to meet this demand.
In Q2 2015, Credorax launched ePower, a singular acquiring and payment platform, and one of the key integrations we included in the platform is a robust solution for managing mobile payments. We are able to adapt the technology to meet both mobile POS and m-commerce solutions, and several of our PSP partners are leveraging this technology.
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