The following guest post is by Carin van Vuuren, Chief Marketing Officer, Usablenet, which develops mobile sites and apps, as well as infrastructure. (The company is platform agnostic when it comes to mobile payments.)
Google Wallet, PayPal, Square, MasterCard, Visa’s V.me, LevelUp. The mobile payments space is becoming more competitive by the day, with both established leaders and savvy upstarts staking their claim for market dominance and consumer mindshare. Already the range of choice seems overwhelmng, yet we are only at the start of the mobile payment revolution. What will fuel this industry moving forward is growing recognition among businesses of the importance of delivering quick and seamless payment capabilities to both improve mobile commerce and enhance the overall customer experience on mobile.
Research firm IDC reports that by 2017, 1.5 billion smartphones will be in use globally. As smartphones gain ubiquity, consumers are doing more than ever on mobile. Mobile users are task oriented and expect simple, intuitive experiences. Nowhere is this more important than with mobile payments, where consumers demand the ability to transact when, where, and how they choose.
For merchants and business owners, mobile payments present a unique opportunity to connect with customers and deliver value in a more personal way. They should consider accepting mobile payments not just because it’s the hot tech trend du jour, but because it can enhance and deepen their relationships with existing customers — as well be a prime reason to attract new customers.
The Future of Payments is Already Here
It is important to recognize that mobile payments are not just another shiny new object attracting temporary fascination, only to be discarded like yesterday’s augmented reality experiment.
By the end of 2017, Forrester Research predicts that U.S. mobile users will spend $90B via mobile payments, a 48% increase over the $12.8B spent in 2012. Mobile payments are revolutionizing how consumers spend online, and 50% of current smartphone users say they will use their mobile wallet for daily transactions as early as 2016. Emarketer reports that mobile payments volume in the U.S. tripled from 2011 to 2012.
At the most basic level, mobile payments are generally delivered either by swiping through an NFC reader, a tap-and-go system like Starbucks has introduced, or using stored credit card information to speed the checkout process via a virtual wallet.
Mobile payments technology represents the future of online commerce because it meets a fundamental consumer need to transact simply, safely and quickly. And not only are today’s digital consumers seeking easier, more secure payment options on their mobile devices, they have proven willing to seek out and favor brands that provide seamless payment experiences. Amazon’s recent online success and the positive impact of one-click payment, as well as the success of Starbucks’ partnership with Square are evidence of this trend.
As barriers to consumer adoption are rapidly decreasing, the digital wallet has significant potential to revolutionize the customer journey. Solutions like PayPal, MasterCard’s MasterPass, and Visa’s PayWave enable consumers to easily make in-store mobile purchases virtually, via NFC or tap-and-go. And with more customers using their mobile devices to look up product information and find competitive prices in the store, digital wallets will emerge as a key channel for retailers to deliver value added services and loyalty experiences to the consumer.
Battle Lines are Being Drawn
This past holiday shopping season marked a watershed moment for retailers as mobile commerce came of age. Yet, while consumer confidence is growing in the U.S., there is the stark reality that the overall universe of shoppers is growing slowly. Forrester predicts that there will be only 4 million new online shoppers in 2013, meaning that in order to remain competitive retailers must focus on driving repeat business and deepening engagement with existing customers.
Mobile payments provide clear business and brand differentiation benefits by improving the overall customer experience. In order to achieve successful e-commerce results in today’s digital age, retailers need to excel at the fundamentals of mobile, which include: optimized user journeys, more efficient checkout and payment options, fast and convenient experiences, and the ability to plan and execute integrated campaigns and promotions on mobile. And with retail e-commerce sales resulting from mobile devices poised to reach 15% of all online transactions, the pressure is on brands to create quick, seamless payment options for these devices.
For consumers, making a payment on a mobile device has traditionally been cumbersome. More than 23% of cart abandonment on mobile is attributable to clunky and un-optimized checkout and payment paths. Basic UX best practices like guest checkout, streamlined forms and payment progress indicators are often overlooked, resulting in frustrated users who leave the site. In fact, the top reasons online shoppers abandon shopping carts include concerns about security, the lengthy process of filling out web forms, and merchants that force them to create an account before purchasing.
Mobile payments can be part of the solution and contribute to building shopper confidence and increased conversions. Many mobile payment providers such as PayPal and MasterCard are investing heavily in building market awareness and demonstrating the scalability and security of their solutions. The 2013 holiday shopping season will be a crucial period for businesses to identify consumer behaviors and sentiment towards mobile payments.
Mobile Payments Change the Game
In contrast with using technologies such as QR codes or SMS, brands offering mobile payment options are generally viewed as innovative by consumers. The potential to leverage mobile payments as a way to create competitive advantage comes as the boundaries between online and offline commerce begin to blur, and the playing field between online and brick-and-mortar retailers starts to level. According to industry analyst Denee Carrington, who has written extensively about mobile payment adoption, digital wallets will cause merchants to differentiate the customer experience through contextual features.
Contextually relevant digital wallets will “embed capabilities that can create a more convenient commerce experience for consumers and give merchants a growing set of potential benefits.” These types of contextually relevant experiences – which, in addition to payments, include special offers and discounts as well as loyalty program rewards – have the potential to provide a distinct competitive advantage and deliver significant value to the business at lower total costs than traditional payment platforms. In addition, wallet pricing models are still evolving and could potentially disrupt the traditional interchange fee system.
Despite the mobile payment solutions that are already available to merchants and consumers, it is still too early to predict which platform will deliver the greatest value and convenience to consumers. Over time, those platforms that best combine usability, security and scalability will have the greatest market opportunity.