As a person who studies new tech for a living, it’s no secret that I’m an earlier adopter. Most of our mobility team at Accenture not only try new technology, but also look at it through our “consumer” lens as best we can.
Most recently, I was working with our team in New York City this week, and while out to lunch I came across my arch nemeses- a sandwich place that only takes cash. The warning was plastered on menus and at a big sign in the window. Contrast that to another situation. At dinner in Philadelphia, a Boy Scout had a table set up outside the restaurant selling popcorn to raise money for the troop. Once again, I didn't have cash in my pocket.
His response? "That's OK, we have Square."
Guess who closed his sale?
Putting aside the impact that Jack Dorsey's $250M brainchild helped a local Boy Scout troop sell one more bag of popcorn, mobile payments is a shifting beast that many, large and small operations, are not ready to contend with for a variety of reasons.
Mobile Payments are Progressing…Slowly
We're at the cusp of manufacturers like Apple and Samsung wanting to control the payment space. A little over a year old, Apple has expanded its partnerships from the Big 4 banks to 500+ institutions of all sizes. Its launching in the UK, thought it will not see support from some major UK banks until 2016.
But the adoption estimates don't paint a rosy picture for mobile payments. One firm estimates 1% of all retail transactions are attributable to Apple Pay. In the same report, Panera Bread, an early adopter, estimates 20% of app transactions and "low single-digits" for its in-store transactions. Starbucks, in contrast, claims a 16% mobile payment rate.
Hardware might be part of the problem
But not all phones support mobile payments yet. It doesn't help that US consumers are still adjusting to new ways of buying new phones – a 2014 study showed only 31% of users had upgraded to the 6/6s or plus models capable of NFC payments.. As carriers have shifted from subsidy models for devices, there's a good chance more consumers will be waiting longer to upgrade their devices- not good for a model that's dependent on users adopting new hardware.
Plus there's the issue of the merchant terminals. Large and small business alike have been preparing for the rollout of EMV chip technology for several years now. But NFC has been an afterthought for many, although companies like Square are now stepping into the void.
Research firm Javelin [Disclosure: An Accenture owned company] recently released its estimates- nearly 32% of businesses will be prepared to accept EMV contactless payments by 2019. As contactless acceptance trickles down and widens out across enterprise and small business alike, awareness of the option to pay via contactless mobile will most likely gain traction.
In The US, we've got to get past chip cards first
There's a good chance that most businesses are still focusing their efforts on accepting chip cards first, and with good reason- the shift of liability is now on the merchant if they are not accepting transactions using the chip technology. And banks have lagged in getting new cards out to consumers- an estimated 60% of cards haven't been replaced yet.
MXC Still wants to bypass the credit card all together
Despite the intrinsic value the payment card industry provides to consumers, there's still one group that wants to cut it out. Merchant group MXC is still pushing users to adopt it’s current platform- one that leverages a QR code and links via ACH to a checking account, bypassing card interchange fees. But the rollout is yet to be seen, with MXC only recently expanding a beta in Columbus, Ohio. MXC has seen some setbacks though. Best Buy and Rite Aid, both members of the consortium, began accepting contactless payments over the summer.
So what are teams that manage payments to do?
It’s an unclear space if you’re responsible for managing how your customers pay. While the jury is still out and the trial far from over on whether mobile payments will boom or bust, your strategy should include:
Pay attention to your demographic and its tech
If you cater to a higher-income or tech savvy base, chances are you’ll see NFC-capable hardware in your customer’s hands before companies that cater to value-based customers.
Don’t forget about the app play
It’s not just about paying with the device itself- Apple, Samsung and Google also want their wallets integrated into mobile apps. While they tout higher conversion rates and a streamlined process, its up to businesses to decide whether or not its really worth the time and effort to integrate- and more importantly share revenue with another provider/processor.
Leverage loyalty and other elements beyond payment in the process
Banks and stores alike are trying to drive mobile payment traffic. Wells Fargo offered $20 credits for using their cards in Apple Pay, while the Wallet app will support storing loyalty cards and offers. The conversation is not just mobile payment- its truly mobile commerce.