This is the third article of a series in which members of The Green Sheet Advisory Board share perspectives on the state of mobile payments. The first two sets of insights they shared were included in The Green Sheet, July 25, 2016, issue 16:07:02, and Aug. 8, 2016, issue 16:08:01, respectively.
The mobile payments realm is bursting with innovation. A number of companies have brought products to market or intend to do so. Some solutions, 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 MCX's CurrentC, which was terminated during beta testing – hit terrain too rocky to navigate. With this in mind, we asked members of our advisory board to weigh in on the following:
Thank you to all of the industry experts who took the time to participate in this series.
1. There are a number of promising mobile payment solutions currently available, but we are still in the early stages of this industry shift. I believe that Apple Pay and Android Pay are the two leaders at this point and have created the most well thought-out payment experience, bridging in-store and in-app/online purchases.
2. Although Samsung Pay has an interesting approach to their solution, it is leveraging older technology and is also limited by its exclusivity to Samsung phones. There are also various store-specific mobile payment options that have gained traction, most notably Starbucks, and these will continue to attract brand loyal customers but will not gain widespread adoption due to their limited scope.
Any solution that is going to be successful needs to be convenient for the customer and seamless for the merchant. If a mobile payment method requires extra steps or creates friction in the checkout process, it is not going to succeed. Apple Pay, Android Pay and Samsung Pay have all bet heavily on NFC being the primary in-store mobile payment method, and I think that this is likely to become the standard as we move forward.
This trend is only going to continue as an increasing number of merchants upgrade to NFC-enabled equipment and consumers become more familiar with NFC payments. QR codes have been successful in some cases, but as NFC-capable terminals become more ubiquitous, there will be less need for additional equipment to support QR codes. Bluetooth and beacon technology also show some promise, but we have yet to see a really successful mobile payments model utilizing these technologies.
3. I believe that Apple Pay and Android Pay are the two mobile wallets best positioned for long-term success on a broad scale. Store-specific mobile payment options also have the potential for success, especially for businesses that have high customer loyalty and frequent return visits such as Starbucks.
Although Samsung Pay has an interesting approach to their solution, it is leveraging older technology and is also limited by its exclusivity to Samsung phones. We have already seen some of the early players fail, most notably Softcard and CurrentC, and we will likely see the field shrink further before a small number of leaders emerge as the standard-bearers.
4. We have been deploying an NFC-capable terminal as our primary terminal offering for years, and now all of our standalone terminals support NFC payments. Since NFC is emerging as the standard mobile payment method among the primary mobile wallets, we felt that this was the most logical option to offer our merchants.
We are also integrating NFC into our POS systems for both retail and counter-service restaurant environments. Additionally, we are developing deeper integrations with Apple Pay and Android Pay that go beyond simple NFC payments in order to harness the tremendous potential that mobile payments have to offer.
1. Mobile payment acceptance is both geographic as well as generational. As with EMV, we differentiate between EMV ready versus EMV operational, hence mobile ready versus mobile operational. While many people have mobile payment capable smartphones, how many have the mobile payment feature turned on, then use it, are the answers.
I equate mobile payment acceptance today to mobile coverage a decade ago. Mobile payment capability today, hence acceptance, is centered in major metropolitan areas similar to mobile coverage a decade ago. Next, X, Y and Me generations are concentrated in metropolitan areas, along with locales with large populations in higher education. Mobile payments have yet to reach tier II and III population communities, plus baby boomers are slow in adopting mobile payments due to security concerns.
Personally, I like Samsung Pay because it is the least disruptive and easiest to use. The predominant mobile acceptance system in our area is Square.
Mobile payment is still a crap shoot with no clear leader coming to the forefront.
2. That's the million-dollar question, literally. "It's all about the consumer experience," said Steve Jobs. Some players in the mobile payment space lose sight of that. The technology delivering the best merchant and consumer experience is the least obtrusive, the least disruptive and is the technology delivering real value – not least cost, not card association mandated nor subsidized, and not penalty driven. Again, why I prefer Samsung Pay.
3. I don't foresee a clear winner in the mobile space due to the number of highly invested, major stakeholders such as Mastercard and Visa, Apple, Google and Amazon, plus a few others. Depending on perspective, the real winners may be the small companies those prominent stakeholders acquire or invest.
Additionally, mobile payments remains an evolving environment with a lot of money chasing new technology. Great rewards are anticipated, yet at what cost? Just numbers, $50 billion in revenue after $5 trillion invested over 10 years.
4. What do you adopt, which technology, which direction? It's difficult and expensive to be all things to all merchants. So you pick one or two mobile payment options to offer to your merchants, keeping a third and possibly fourth in the background should one of your first choices fail. That which is easiest for the merchant to implement is what you sell.
I don't have answers because I don't believe there are any answers yet.
There are many mobile payment options in existence today, as well as failed trends and emerging alternatives. Mobile payments are popular because of the customer expectation of convenience. That being said, the multitudes of options that exist for consumers are becoming the norm in the purchasing experience, but that norm may be contributing to confusion in the marketplace.
The main types of mobile payments – app, wallet, and NFC – are being integrated by the various industry players with the intention of streamlining the customer experience. The basic app payment option is extremely popular with retailers. The consumer opens the app, adds items to the cart and checks out with traditional payment information.
Mobile wallets that store payment information are making it easier and more convenient for the one-touch transactions that so many consumers enjoy. And the contactless NFC payments that many stores now accept are trending as well, but market penetration and acceptance is still lagging.
Interactive experiences are crucial for consumer-facing products and services. Mobile apps released by companies such as Starbucks, Dunkin' Donuts, and more, allow ease of use and the functionality that is resonating among consumers. They enjoy the ability to save profiles of their favorite purchases within apps, and the one-touch purchase option that companies like Amazon offer create brand loyalty and a virtually instantaneous checkout process.
Consumers also like a custom shopping experience, and mobile apps are catering to that demand. Mobile apps solve a lot of past pain points for consumers who wanted ease of usability, accessibility, custom experience. Mobile apps benefit merchants as well, because they improve the customer experience and drive down the cost of transactions. This is good news. Forrester Research predicts that mobile commerce will reach $142 billion by the end of 2016.
Consumer convenience is what drives all mobile payments, which is why mobile P2P services like Venmo are so popular. However, there are so many options in mobile payments, and everyone has their favorite – but none of them are the same. This is a good news, bad news situation.
A good part of the public prefers social media and messaging apps for payments, some enjoy Bitcoin and digital currency for micro payments, and others are staunch supporters of the originals – Apple Pay, Samsung Pay, and Android Pay. No approach has yet to become a defacto standard, and may never, due to consumers seeking a custom and personalized experience. With so many options and trends on the market, it's extremely difficult to pick out the true contenders.
However, leaders in the space are emerging in the form of consolidated customer experience services, like Kohl's. The large retailer is the first to combine Apple Pay with their store branded charge card as well as their loyalty program. Talk about the ultimate in convenience! Companies willing to create an omnichannel shopping experience and blend physical and digital experiences may be the kind of disruptors we need in payments.
There's no universal standard for mobile payments, so if regulators implement policies in the coming years, that may set the stage for the long-term players to reveal themselves. Greater saturation of mobile payment usage in the market will aid in that as well, and when security measures catch up to the trending payment options on the market, more consumers will be apt to use mobile payments more frequently.
When more card-present terminals and POS systems offer NFC solutions, more consumers will use tap-to-pay mobile payments, and when more retailers allow more universal mobile wallets to be used for in-app purchases, we will see which contenders really stand out.
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