Mobile payments opportunities and obstacles for US vendors

03-01-2017 | Industry news

The U.S. is lagging behind the world, particularly emerging markets, in the acceptance and adoption of mobile payments as a way of life. The launch of mobile payment services such as Apple Pay have made headlines stateside, but the promise has yet to be fulfilled on Main Street, and progress is slow. Although predictions that the transaction value of contactless mobile payments is expected to grow about 210 percent in 2016 to more than $27 billion (eMarketer), it remains a drop in the ocean compared to the value of credit card transactions nationwide.

While many large retailers have embraced mobile payments, individual business owners have been slower to adopt the technology. The reasons are varied, but not as complex as you may assume. Vendors in the U.S. are looking to ultimately take advantage of mobile payment technology in the same way that is already much more prevalent in many emerging markets around the world.

Apprehensive consumers holding back U.S. vendors Fintonic’s independent research has found that in emerging markets such as Mexico, more than one in three (36%) consumers believe physical wallets won’t exist in five years time compared to only one in ten (11 percent) Americans. It’s quite a startling finding, considering the preconceived notion that the U.S. is one of the most technologically advanced nations, and at the forefront of many of the world’s tech innovations.

The consumer reticence is an issue for widespread implementation – vendors need to balance the need stay ahead of the curve on consumer trends while not jumping the gun on something their customers may not care about, or worse, be turned off by.

Obstacles for vendor adoption of mobile payments Implementing mobile payment technology is no small investment, both financially and in terms of time, so understanding which is the best mobile payment provider for your particular business is crucial. Once that decision is made, the next step is to determine which NFC contactless payment terminals to use. Depending on the functionality required, these are not cheap to acquire or to train often transient and temporary sales associates and staff to use effectively.

Then there is the assumption that just because everyone currently uses – and prefers – cash and credit/debit cards, it’s not a broken system and therefore doesn’t need fixing. However, that assumption is increasingly being proven false. Americans in particular, do not carry much cash with them and instead rely on other payment methods. Bankrate claims that nearly eight in 10 Americans carry less than $50 cash at any time and nearly one in 10 don’t carry any cash with them at all. The assumption is that everyone’s just using credit, but there are issues there too. Credit card fraud tripled in the United States from 2013 to 2014 according to Javelin Strategy. This is catalyzing a demand for new, more secure payment options. There is a great opportunity here for mobile payment technology, because it is more compatible with biometric technology and can add another layer of security that cannot be achieved with a credit card alone.

The mobile payment opportunities and benefits Contactless transactions are 63 percent faster than cash and 53 percent faster than a credit card, according to American Express. We’ve initially seen this growth increase due to Apple Pay, Android Pay and Samsung Pay, which account for almost 70 percent of all new mobile payment users according Juniper Research. However, much of the continued growth will be driven by millennials – eMarketer predicts that by 2017 more than one in three (37 percent) of 25 to 34-year-olds will be using mobile payment technology. Vendors targeting this demographic particularly should be among the early movers implementing contactless payment solutions.

Mobile payments can deliver substantial customer engagement and loyalty benefits when implemented effectively. According to Gartner almost nine in ten (90 percent) of companies believe customer experience will be the most competitive part of their industry. Some forward thinking brands are integrating mobile payments into their broader apps, encouraging customers to purchase using their smartphone and managing rewards programs that way, removing the problems caused by lost cards, printed coupons and paper vouchers. This in turn offers much more efficiency and creative options for managing customer loyalty.

The greatest benefits for vendors will come from how seamlessly the mobile transaction element is integrated into the overall shopping experience. As the population in the United States and worldwide moves increasingly mobile-first, and away from cash and credit, companies in all sectors need to start understanding how they could start implementing contactless payment in their businesses.

(source: 2016)