Mobile payments are complex, with disparate technologies and business models targeting various markets depending on how mobile users choose to transact — e.g., SMS payments, mobile wallets or app stores, just to name a few. This is particularly relevant for credit card issuers, device manufacturers, mobile operators, internet giants, retailers and even startups, who rely on their direct relationships with millions of consumers.
The challenge is enabling a broad and diverse set of businesses to embrace the market without unified technologies and processes. As new mobile payment networks emerge this year, here are three key things brands and retailers must understand to be successful:
1. The mobile wallet is closer to reality. Consumers want convenient, secure and frictionless payment methods. With a mobile wallet, they can leave their cash and credit cards at home and make smaller purchases quickly and conveniently. In theory, a mobile wallet acts like an electronic version of a wallet, replacing everything from credit cards and loyalty cards to coupons and cash.
A mobile wallet is relevant for nearly everyone — over 90 percent of U.S. consumers use a mobile device, according to the CTIA Wireless Association. However, there are several hurdles to overcome before mobile wallets become mainstream. These include integration across multiple processors and compatible merchant and customer hardware. But the outlook for brands and retailers is positive.
For retailers, a mobile wallet is a great opportunity to enhance the customer experience and expedite the checkout process. Mobile wallets have the potential to consistently help merchants increase revenue, reduce costs and decrease fraud, which are all key merchant considerations when choosing payment offerings. Brands and retailers getting on board with a cost-effective payment system is critical to its success.
2. Near Field Communications (NFC) are a key piece to solving the mobile wallet puzzle. For mobile wallets to take off, handsets must be equipped with NFC chips that support purchases. NFC enable the transfer of information in a wireless transaction rather than a physical interaction like exchanging cash or swiping a credit card. NFC can speed up the checkout process by allowing consumers to conveniently wave their phones at NFC readers.
Mobile operators and industry giants from Google to Apple to Visa are creating their own solutions and facing steep competition. For example, the recently announced Google Wallet will use NFC chips embedded in Android phones to enable easy, contactless payments. With Google Wallet, consumers can wave their smartphones in front of NFC readers to make purchases at select retail locations, and even receive coupons or product information. This still requires retailers to install NFC readers at the point of sale, however.
Retailers possess a distinct advantage because they control their own networks and NFC offers. Providing incentives and rewards will help get consumers on board. For example, Starbucks launched a loyalty card program embedded in a mobile app that enables consumers to manage their accounts, find local stores and even make mobile purchases. Whether offering location-specific offers, comparison shopping applications or payment options, retailers can make the shopping experience much more convenient and effective with NFC.
That said, retailers want to be assured that mobile wallets will drive higher revenues and lower costs over time. What the market currently needs is a standard payment instrument, hardware and network to support it.
3. A ‘hub’ eliminates market barriers. While a retail brand might be ready to dive into the mobile revolution, the complexity of establishing relationships in the vast mobile ecosystem often delays or halts progress. In addition, many companies are vying to establish standards for their own payment solutions while tackling consumer concerns over security and privacy. Brands must address these issues with a business model focused on resolving market inefficiencies and fragmentation. A mobile hub solves these problems.
With a hub, brands can reach a broader consumer base encompassing all wireless customers. As mobile operators are the gateway to mobile subscribers, a hub also helps operators relieve commercial, credit and fraud risk by managing thousands of merchants that interact directly with consumers. For example, a hub could help Wal-Mart interact with their customers — regardless of carrier — by easily managing multiple and disparate operator connections. By eliminating cost and inefficiencies, operators can better support subscribers at a lower cost and connect them with their favorite retailers.
Merchants and consumers will drive the adoption of mobile payments systems by adjusting to using these technologies as the primary mode for transactions. Recognize the potential to engage consumers at the point of sale and accelerate the purchasing process with new payment networks. You must carefully assess the best option based on factors including reliability, security and interoperability for driving market growth. In the end, brands will choose the option that reduces costs and delivers the most targeted consumer experience.