While various mobile payment providers scramble for prominence in these seemingly early days of using the mobile phone as a credit card, an infrastructure to support this payment system is coming sooner than we think. According to a new report from Javelin Strategy, 60% of U.S. credit card terminals will be EMV (Europay, MasterCard and Visa) capable by October 2015, and these newest versions of POS terminals for proximity payment with credit cards are almost all being built with NFC capabilities as well. Javelin says the rest of the terminals will be capable of handling proximity payments by the end of 2017.
This sets the stage for the volume of proximity payments from mobile devices at retail point-of-sale to accelerate quickly from $.7 billion this year to $5.4 billion by 2018. According to the report, “the greatest driver behind the evolution of the POS retail environment is not the economy; rather, it is slowly gaining popularity of the e-commerce and mobile payments market.” Although 93% of all retail sales in the U.S. are coming from brick-and-mortar point of sale, the use of e-commerce and mobile payment systems at the checkout is poised to radically change POS.
While proximity payments will still represent only a small fraction of the total point-of-sale purchase volume -- only .13% by 2018 -- a number of things are happening at retail that are normalizing mobile payments from companies like Square, PayPal and Intuit. Javelin says that new practices such as mobilizing the POS terminals are helping consumers make the connection between mobile devices and checkout. The fact that Apple employees at their stores can pull out their own iPhone and complete your purchase for you on the spot communicates to the consumer that their own mobile phone is now somehow in the point-of-sale chain.
But as just about everyone in the mobile payments space has come to recognize, the difference between pulling out a debit card and pulling out your phone to pay for something is negligible to the consumer without some clear new value-add. Javelin believes the market can be propelled forward by mobile hybrid solutions that not only make payments, but also encourage the consumer to use their phones to engage with other functionality within a location such as unlocking hotel doors and getting direct access to one’s loyalty or rewards programs.
Perhaps more important, these mobile payment systems need to be part of an enhanced shopping experience in order for them to make better sense to the consumer to use at checkout. Mobile payment may not add to users’ convenience, but geo-located marketing that pushes offers to them before they even get into the store helps make the association between the mobile device and shopping experience that can be fulfilled at checkout.
And there is the rub. So much of the mobile payment fetish among credit card companies and startups has been aimed at that final piece of enacting the transaction, because that is where these companies make their money. But that is not the place where consumers feel the most value. It seems to me that what most shoppers want is a richer shopping experience itself, and it is within that context that mobile payments really make sense.
How about if the mobile phone user in the store can scan the items that they expect to bring to the cart, which then allows them to seek out available manufacturer coupons elsewhere and apply them to this purchase? They then could come to the checkout and present the clerk with the prefabricated checkout list and authorized coupons that pull onto a single device and moment the way that most people actually go about researching bargains, gathering coupons, and deciding on a purchase.
Until these companies can really use these systems to put power in the hands of the consumer, much of this technology in the end is really just asking us to jump through a new hoop to support somebody else’s startup.