As a consumer – the ‘C’ in the business-to-consumer (B2C) relationship – it may be many more years before the number and value of payments initiated on mobile platforms reaches critical mass. Indeed, a recent Bloomberg survey revealed that even users of the much-hyped Apple Pay are having trouble actually completing transactions at the point of sale (POS). Among the factors that might dictate the pace of growth are the following:
Need for Education:
- As various articles in gtnews’s recent focus on mobile payments pointed out, many consumers will still need to learn to ‘tap, touch and go’ before the process becomes routine. Education is a slow, laborious process.
- The long-anticipated introduction in the US of EuroPay, MasterCard and Visa (EMV) chip cards this year will require consumers to learn about these new cards, perhaps before turning to their phones as a solution?
Card versus Phone as Method of Payment:
- Using mobile payments requires the consumer either to already own or purchase the right mobile phone. The iPhone 6 still accounts for only a small percentage of platforms out today, with adoption of more popular android systems possibly still a year away. These devices are not free and could cost as much as US$500 -$600 upfront or over time. A card is free courtesy of your card company so why buy a newer phone?
- The rules governing debit card fraud are weaker than credit card rules. This environment argues for registering credit cards on mobile platforms, but credit cards are more expensive than debit cards to merchants. Where are their savings from the use of mobile platforms – especially if EMV cards are just as good at reducing fraud?
- Credit cards might be widely used in Europe and North America, but less so in countries such as India or China where debit cards are more prevalent. Will consumers use debit cards on their phones?
- Phones need to be charged regularly, do not like harsh conditions (such as on the beach, or in the snow) and are hard to read in bright sunlight. This potentially restricts the use of phones as a card substitute.
- In regions such as Africa, consumers have been transferring money using ‘dumb’ phones, not compatible with smart terminals.
Convenience and the ‘All-in’ Transaction Cost:
- The convenience factor could be overrated. There is effectively a labour charge in using a phone, represented by the time for a consumer to reach for or locate a card or a phone, place it in or near a terminal and then replace the card/phone back in its secure home. How convenient is it to use your phone as a form of payment while talking on it or trying to locate it at the bottom of your purse? Is time ‘savings’ really different than reaching in your wallet for a card?
- Financial incentives are a better incentive than convenience in convincing consumers to change. Mobile platforms may eventually become more convenient (despite the example above), but offering consumers a discount/reward for purchasing items is a tried-and-true way to quickly encourage change in behaviour and should speed the adoption by consumers of this platform. This type of cost is often not discussed. Should it be? After all, everyone likes a deal.
Common sense decrees that the consumer should never put all of his/her cards in one ‘basket’. In other words, consumers will continue to carry both a wallet (cards) and a phone.
- Only time will tell which form of payment consumers prefer, but the prospect of losing your phone and starving suggests consumers will continue to carry and use ‘back-up’ cards.
- Hackers are already cloning credit cards and loading them into iPhones proving that tokenisation is not the ‘fraud killer’ it was thought to be. Tighter sign-up procedures – possibly involving more education – will slow adoption until all parties change their internal policies and procedures and credit limits.
Frequent Buyer ‘Miles’:
- Most merchants offer discounts to the customer through loyalty programmes. Paying at these stores using their phone – meaning that the retailer takes Apple Pay – they still need to give the merchant a card so that the purchase counts towards the discount. Pharmacies and other stores also have their own loyalty cards.
- Until the loyalty process and the payment process unite, the two parts of paying and producing loyalty cards mean that this gap will retard the convenience of using a mobile platform.
The Bottom Line
Mobile payments is a payment form still in its adolescent stage. Education about convenience, the introduction of ‘adoption discounts’ and convergence with loyalty programmes could eventually overcome consumers’ reluctance to use mobile platforms. Yet convenience carries with it some less obvious costs to the card/technology companies and assumes that consumers are willing to modify their habits.
Judging by the percentage of individuals still using ‘inconvenient’ cash and cheques, persuading consumers to become fervent mobile platform users could take longer than the card and tech companies think it will.
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