The Future of Mobile Payment

There may come a day when pulling out a wallet is today's equivalent of still using a Bag Phone. But for the foreseeable future, wallets and money clips have their place alongside smartphones, even as mobile payment moves toward the goal of offering consumers the convenience of a mobile "wallet" that can store credit, debit and loyalty card information.Consensus is that mobile payment will eventually gain large-scale adoption, but no one knows when – three to five years is a common prognostication – or what that brave new world will look like. To be sure, "Everybody knows examples where retailers are already using mobile payment. It's already here," says Valerie Jacobs, vice president and managing creative director, trends, at Cincinnati-based LPK, an international brand-building firm. "But it will take a while for consumers to feel comfortable using it in every retail environment, and before retailers are all on board."One of the biggest barriers to adoption is fragmentation and its concomitant lack of technical interoperability. Unlike credit card terminals, which work similarly from one retailer to the next, mobile payment isn't standardized and there are too many competing platforms and technologies, most notably Google Wallet and Isis, the struggling joint venture launched by wireless carriers Verizon, AT&T and T-Mobile. Consumers won't take to mobile payment if they need to download and use a dozen different apps, says Keith Anderson, digital advisory practice leader at RetailNet Group, Waltham, Mass.MCX and NFCTwo recent developments could affect how soon mobile payment goes mainstream. The first, addressing the interoperability barrier, is Merchant Customer Exchange (MCX). The purpose of the retail-led initiative – involving Target, Best Buy, Walmart, 7-Eleven, Lowe's, CVS/pharmacy and other big names – is to offer a broad, seamless way for customers to pay with their smartphones across all retail formats. Reportedly, the consortium came about because retailers are dissatisfied with current mobile payment options.The second is the release of Apple's iPhone 5, which lacks one feature that many in the mobile payment space were expecting – NFC, or near field communication, which enables communication between electronic devices in close proximity.Until those two developments, many thought NFC was the likeliest mobile payment method to succeed because it is standards-based, while there is no one accepted standard for methods relying on 2-D codes and their readers.In a 2011 report called "Mobile Payments 101," Networld Media Group's MobilePaymentsToday.com called NFC "the most powerful and promising of mobile payment methods," stipulating that it's also the most problematic – it requires a significant hardware investment, and then the NFC-enabled POS systems need to interact with many mobile operating systems.With NFC, all the necessary hardware and data reside on a shopper's smartphone. She enters a PIN to choose a payment method (debit, credit) or access a default account and then holds the phone within a few inches of the POS terminal. American Express reports that NFC transactions are 63% faster than cash and 53% faster than credit card payments.Challenge: Create Enriching ExperienceIn reality, perception can override statistics. It seems easier to simply whip out and swipe a card as opposed to setting up and using a mobile device to pay for stuff.Mobile payment will only take off "when the experience is superior to traditional payment methods and when it's cheaper for retailers to process," says Anderson, adding that retailers are reluctant to spend money on something most customers have yet to see the need for.So what needs to happen for mobile payment use to accelerate? The main stakeholders – wireless carriers, merchants, financial institutions, technology companies, consumers – each must benefit sufficiently for this to gain traction. Ultimately, they may need to work together to set up a backbone for a standardized mobile payment system."Payment service providers have the most to lose," Anderson says. "They've benefitted from a lot of retailer dollar volume. Mobile payment introduces a choice; retailers may be able to reduce the cost of payment processing."For some, security and privacy are concerns that need to be addressed; however, Anderson downplays them, as it won't be long before we're a society made up entirely of "digital natives."Large-scale adoption more likely hinges on the resolution of issues other than security. "For me, the two big questions are: Who owns the transaction? And, who pays for the infrastructure?" says Patrick Rodmell of Rodmell and Co., a Toronto-based creative agency specializing in brand and marketing strategy.Retailers also want to retain "ownership" of customers and are reluctant to provide access to shopper insights to third parties like Google, Anderson says.Perhaps most important, in order to induce consumers, mobile payment needs to be developed and marketed as an enriching experience, not just a way of transferring funds. "The stakeholders in the mobile payments value chain understand that the experience needs to add value for shoppers. It can do so by removing friction, getting rid of what adds time, cost and distraction to the shopping mission," says Michael La Kier, group director, shopper marketing strategy & capability, Coca-Cola Refreshments.Communication With RetailerWhat are the potential implications of large-scale adoption to retailers and brand marketers? "It could change the way we deliver incentives and offers, and the way we capture data and learn about individuals and households," says Brian Cohen, executive vice president, general manager, at Westport, Conn.-based Etailing Solutions, an online sales and marketing consultancy.One of the reasons NFC seemed so promising is that transferring funds is just one application of the technology; it can also be used to exchange digital content and for location-based services.Kraft recently piloted an NFC program at select grocery stores, placing RFID chips in shelf talkers inviting shoppers to tap their NFC-enabled smartphones to access recipes and food facts. Kraft reported significantly higher engagement levels compared to QR codes.At its best, "Mobile payment becomes sort of an on-ramp for the customer to communicate with the retailer," Anderson says. The technology driving it would have the capacity to make personalized offers based on purchase history, where you are in store and the items you are scanning. With proper opt-in, "It could persuasively recommend things like Amazon does," he says.If a mobile payment program incorporates location-based services, "Then all of a sudden, CPG marketers have access to information as I walk through the store. So if I buy cereal, Chiquita has an opportunity to sell me bananas," Rodmell says."Dynamic pricing might be made possible as a result of the data being spun off by mobile payment systems," adds La Kier. "While this example may not initially impact shoppers, it would be a game-changer for retailers, and the implications for manufacturers are equally powerful."'A World With No Cashier'St. Petersburg, Fla.-based Catalina Marketing, with its April acquisition of Modiv Media, has the capability to build white-label apps for retailers that enable shoppers to scan and bag products as they go, says John Caron, Catalina's vice president of marketing. (With its broadly deployed Scan It! scan-and-bag program, Ahold's Stop & Shop is an early adopter.)In Caron's vision of mobile payment's future, it's just one part of a process and technology that takes into account the entire path to purchase. Already in existence but yet to be applied, the technology would allow you to scan the code on an empty milk carton at home to start building a shopping list.Later, mobile device in hand, you would enter a store and open an app, which signals a personal shopper to come and greet you. In this hypothetical scenario, "There's no checkout, just people throughout the store, like meal planners" so your shopping experience is not devoid of human interaction, Caron says.If you scan a cake and paper plates, the app may ask if you need napkins and birthday candles, too. When you're finished shopping, you just press a button to pay for all your scanned items and leave – "no check out, no receipt," Caron says.Rodmell wonders, "How does the front of the store look in a world with no cashier? That's a significant change." Anderson agrees: "A lot of profit gets added to the basket as we wait in line to check out."As for relying on location-based services to spur impulse purchases throughout the store, Walmart's vice president and assistant treasurer Mike Cook has dismissed location-based mobile payment methods, saying they are not scalable.Although Caron's vision is easy to imagine and not beyond the reach of today's technology, neither he nor Cook can say with certainty what the future holds for mobile payment. "There is this Utopian dream," Caron says, "that my phone has all my loyalty programs in one place, and it's a singular experience across all retailers. But that's still to be determined. We need a crystal ball."

The Future of Mobile Payment

P2PI MEMBERS

JOIN P2PI

Related Topics

Related Images

Business Topic

P2PI MEMBERS

JOIN P2PI

Related Topics

Related Images

Related Articles

Business Topic