Just about everyone in business is developing a mobile payments strategy or app: Starbucks and Square have a big deal. The major wireless providers–Verizon AT&T, T-Mobile, and Sprint–are launching their mobile payments campaigns. PayPal, NCR, and VeriFone have all successfully launched programs. In fact, there isn’t a major retailer that doesn’t have a mobile payments program under development. Scores of startups are swarming all over the field, too, many with innovative and clever ideas.
With predictions that mobile-payment transactions will soar to $600 billion in four years, and with most Americans already possessing a mobile phone, it’s no wonder the field is attracting so many players. For marketers, it’s a lot to take in. How can CMOs pick their way through the mobile payments field, which increasingly looks more like a minefield?
“It’s safe to say that mobile transactions are the wave of the future,” said Dr. Siddharth Shah, director, Business Analytics at Adobe, in an interview with CMO.com. “It’s a question of whether and when CMOs want to enter the field. Right now the focus of CMOs should be [which] device is most appropriate for making mobile transactions better.”
Already, several companies have unveiled card readers for retailers, threatening to confuse consumers with a lineup of terminals awaiting their “clicks” at cash registers when they pay for their purchases. “You don’t want a separate device for each retailer,” said Ray Pun, senior manager, product marketing at Adobe’s Digital Marketing Business Unit. Consumers will eventually demand consistent standards.
So far, little coordination has occurred among mobile payments players. The latest notable development–the formation of the Merchant Customer Exchange (MCX) by major retailers–places an 800-pound gorilla amid the field with the potential clout to dictate much of the mobile payments future.
Created last month by merchants with some $1 trillion in retail sales, the MCX has a goal of building a standard for smartphone-based transactions for all major platforms. Its members include retailing giants such as Best Buy, CVS, Sears, Shell Oil, Target, and Wal-Mart Stores. “We’re open to all partners, but it has to be beneficial to member merchants in a way that improves the system and doesn’t layer on additional costs,” said Wal-Mart's corporate vice president in a recently published statement.
Shah and Pun indicated that successful apps will have to have strong consumer appeal, and there will be a wait for that to happen–possibly a very long wait. Consumers are hesitating for a variety of reasons, chief among them: The crowded field is confusing. And when people are confused, they don’t commit. Security is a major issue, too; a recent Market Strategies International survey revealed that 60 percent percent of respondents were concerned about security.
The chief weapon to protect security is near-field communication (NFC), a chip- and software-based short-range technology that enables the secure transmission of data between two devices–typically a smartphone or tablet and a mobile payments terminal.
“We’re approaching a tipping point in the mass adoption of mobile commerce as new smartphones arrive NFC-enabled,” said ViVOtech CEO Mick Mullagh, in a statement. “Bringing the industry together behind a common set of technology standards and platforms is a crucial step toward igniting the mobile economy.” ViVO develops contactless applications.
One player committed to NFC is Microsoft, which is using the wireless technology to prepare for the launch of a complete mobile payment system. According to recent Microsoft announcements, its payment system will be incorporated in its Windows Phone 8 platform, which will support an app for credit card storage, promotion coupons, and even frequent flyer account information.
Presumably, the Microsoft application will give the software colossus a leg up on rival Apple, whose Passbook app doesn’t yet include NFC capability. The Apple application uses bar codes for the redemption of purchases.
Shah and Pun urge CMOs to begin preparing now for mobile payments so they are well-positioned when the wallet technologies have matured. In a startling finding in the 2012 Internet Retailer Mobile Commerce Top 300 guide, it was revealed that smartphone consumers had only a 1 in 5 chance of obtaining mobile content from the largest U.S. retailers. By preparing to fill the gap now, retailers should be better able to take advantage of the mobile payments surge when it becomes a reality.
One of the most pressing challenges facing mobile payments is the reluctance of major business leaders to move to adopt mobile payments processes. “The fact that almost half of the Fortune 500 don’t have mobile-focused sites points to a critical disconnect,” said Interactive Advertising Bureau (IAB) official Anna Bager recently. “And considering these are major corporations, we can only imagine how many smaller businesses are in dire need of a mobile upgrade.”
Bager, who is vice president and general manager of the IAB’s Mobile Marketing Center of Excellence, has some ideas for helping companies improve their mobile marketing objectives. She points to the IAB’s “Tap into Mobile” initiative, which seeks to help businesses develop mobile-friendly Web sites. The IAB campaign cooperates with Google’s “GoMo” program, which also is working to help businesses to develop mobile-friendly Web sites.
Additional research reported by Adobe Digital Index uncovered much mobile consumer behavior that can be exploited and prepared for use going forward. For instance, tablets are likely to be an important device of choice for mobile payments, surpassing even smartphones eventually. Many mobile-optimized experiences are launched via Facebook fan pages, opening up another opportunity for CMOs to exploit.
The ADI research, Pun noted, found that the scanning of QR codes has become a mainstream activity, with 38 percent of young people and 40 percent of middle-aged consumers scanning them in recent months. Consumer incentives are causing location services to rise, too.
“The most surprising metric to me is that over 42 percent of our sample have clicked through on mobile advertising displayed on mobile Web sites,” Pun said. “This is noteworthy given some of the recent challenges that Facebook has experienced on monetizing social media consumed on mobile devices. ”
Teamed with Sprint, Google’s Wallet program has incorporated its mobile payments effort nationwide for users of Samsung’s Galaxy S III smartphone. In addition, the ISIS team of AT&T, T-Mobile, and Verizon has been testing its service in Austin, Texas, and Salt Lake City in anticipation of taking the program national. Each of the wireless providers uses NFC technology.
Some of the most interesting apps have been developed by start-up companies, which use location technologies mated with promotion and loyalty programs. Shopkick, for instance, provides consumers who have signed up with a retailer with rewards for simply walking into the retailer’s store. LevelUp, an offshoot of parent SCVNGR, is offering a no-fees wallet solution that accepts payments from NFC-equipped phones. GoPago is giving retailers free of charge an entire system, including software, tablet, printer, and cash drawer.
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