Six months ago, mobile payments were on the ropes. Consumers weren’t interested or, worse, didn’t understand the value proposition. Business adoption was at a novel, if less-than-promising, growth stage.
What a difference a few months makes.
Mobile payments, which allow consumers to use their smartphones to make in-store purchases, received a major shot in the arm recently, courtesy of Starbucks’ $25 million investment in Square. The funky start-up, founded by Jack Dorsey of Twitter fame, has created a payment system that allows local merchants to accept credit card purchases with a mobile device.
The mobile wallet is growing up. But is the hype outweighing the consumer value?
The use of mobile wallets and Near Field Communications (NFC) — the technology behind mobile payments — are on the rise. Analysts peg the global transaction value of mobile payments at nearly $1 trillion by 2014, up from $162 billion in 2010, and 24% of all global e-commerce by 2017. By 2015, Forrester forecasts that NFC-enabled handsets will comprise 15% to 25% of all mobile phones in the U.S.
Mobile payments’ future is bolstered by reports that Google now supports all credit and debit cards on its Google Wallet app for Android devices.
With two key factors — ease-of-use and rate of adoption — moving in the right direction, mobile payments may finally reach their lofty potential. But there is still a long way toward mainstream adoption.
Hype Doesn’t Always Match Reality
Mobile wallets have long been touted as the next big thing in marketing. Brands get instant access to a customer’s in-store purchase data and can serve up targeted deals based on those purchases.
The benefit to consumers is equally appealing. Gone will be the days of an endless wait at the convenience store counter while your fellow patron digs through her wallet looking for loose change. Simply hold your smartphone up to the scanner and voila!, your payment is accepted.
If only it worked that way in reality.
Mobile payments may be the perfect mix of targeted e-commerce with bricks-and-mortar shopping. But it’s a strange, confusing world for the average consumer. They are stuck with no industry standard and dozens of competing services. Further hampering growth: Verizon Wireless, one of the nation’s largest mobile carriers, bans the use of Google Wallet on smartphones using its network.
Roadblocks to Mainstream Adoption
There are two significant roadblocks standing in the way of widespread consumer use of mobile wallets:
Ease-of-use issues. To get people to turn their smartphones into powerful e-commerce-meets-direct-marketing tools, companies need to think of the point-of-sale value proposition. That requires an intuitive payment process that delivers instant, targeted coupons and deals based on purchase patterns, location and advocacy opportunities built around social media.
What’s the value to consumers? It’s not enough for brands to believe in the buying power of the mobile wallet. They need to clearly communicate that value proposition to consumers. Why should people trust that a purchase they make via their smartphone at a convenience store won’t be susceptible to fraud? Why should they skip earning points on their credit cards in lieu of making a simpler and faster purchase via their mobile phone?
As retailers embrace mobile commerce, they should offer deals, coupons and one-time offers to entice consumers. Think instant coupons, in-store discounts or other offers that help trigger last-minute purchases. To help propel consumer adoption, merchants should take a page from credit the marketing playbook of credit card companies: offer shoppers a special one-time discount for making a purchase with a mobile-wallet platform.
The era of the mobile wallet is upon us. It’s time for marketers to cut the hype and deliver mobile-purchasing incentives to in-store shoppers.