Imagine a world in which your wallet is made redundant. No cash, no cards and no paper. It’s hard to picture. The truth is you may not need to imagine for much longer, the vision is fast becoming reality. In 2016 retailers all over the world are shifting towards mobile payment systems, enabling consumers to pay for their products and services using a quick swipe or tap at the payment terminal using a smartwatch or phone.We recently covered the top 5 mobile payment trends for 2016. Today we’re exploring the phenomenal growth of mobile enabled payment mechanisms and what the ramifications might be for your company.
Research giant Gartner recently suggested that revenues in mobile commerce will expand to represent more than 50% of all digital online revenue by the end of next year. As consumers increasingly shift towards faster and more convenient mobile payment methods, as a business owner (particularly if your business is retail), it’s critical to understand the key drivers in the market and explore the factors that make mobile payment adoption tick.
Here are some of the main factors influencing the rapid adoption of mobile payment methods:
1.) Enhanced security features will come to the fore
When it comes to mobile payments, security is king. In fact, security is such a critical consideration, it’s easy to assume the right mechanisms are already in place and take it for granted. But as the mobile payments ecosystem evolves at lightning pace, financial institutions and technology companies are constantly working on new and innovative ways to make the mobile payment experience safer and easier for consumers. There are now multiple precautions that these companies can adopt in order to provide more protection. Tokenisation is one such method that enables transactions to occur without the exchange of sensitive information such as credit card details. In 2016 it’s expected that the evolution of these processes will massively impact the growth of mobile payments and increase consumer confidence in the technology.
Consumer confidence will play a crucial role in the adoption of mobile payment processes in 2016. In fact, it’s probably the most crucial factor. As with any new technology, especially where money is concerned, it takes time for consumers to trust new features and services. There are two key ways in which tech companies and financial institutions will start to build trust with consumers. This will involve companies investing heavily in mobile fraud prevention (and detection) technology in order to bolster consumer confidence. Companies will also need to demonstrate how they can recover from attacks. This means creating an emphasis upon the fact that the consumers hard earned money is always secure and to highlight ways in which they are covered should something occur. What we are now witnessing in the mobile payments market is a profound shift towards a new way of processing transactions at the point of sale and security will play a critical role in this evolution.
2.) Millennials will drive adoption of mobile deals and discounts
If you’re a marketer still trying to get into mobile, the time to do something is now. In 2016, some of the best deals and discounts will be offered contextually via the consumer’s smartphone or wearable device. These types of contextually aware offers and schemes are particularly appealing to millennials who are now reaching maturity in terms of spending and consumption prowess. A recent report highlighted the differences between millennials and baby boomers mobile payment habits. The report suggested that millennials were much more likely than baby boomers to adopt mobile payment technologies and associated discounts based on contextual awareness. In actual fact, the study discovered that over 60% of millennials respond to mobile discounts and coupons compared with 39% for baby boomers. If you’re in the business of mobile payments this is a fundamental consideration when marketing to different segments.
The key feature of mobile enabled discounts is the ability to provide contextually aware offers in real-time. The contextual nature of the offer is liable to result in a dramatic increase in overall uptake, engagement and sales. If customers decide to opt-in to your push messaging campaigns (see our recent post on how to create a killer push campaign), as a retailer, you can actually provide offers that provide a seamless way to enable a purchasing decision. If you’re new to the world of push notifications and looking for a suitable provider, or if you’re looking to find a solution to replace your existing push platform, check out our blog covering the top push providers in the market here.
There are some great real world examples of this in action, Starbucks being one of the best examples. Starbucks incentivised coffee drinkers to use their mobile app and payment system in return for enabling the consumer to skip the cue once in store. The Starbucks app in question now processes an astonishing 9 million transactions every week, whilst integrating the availability of discounts and coupons based on the consumer’s’ setting. Since the roll-out of the app, mobile based transactions and payments now account for one in five of the company’s in-store sales, more than 200% up on the previous financial year. This is a staggering metric when you consider how quickly the technology has proliferated mainstream consumer culture. The Starbucks app is also enabling the company to drive an additional 5% footfall into coffee shops through the mobile app rollout.
When it comes to mobile enabled discounts and offers, this is only just the beginning. In 2016, more retailers will harness the power of contextual awareness and use detailed analytics such as purchasing location and previous transactional history to provide tailored offers to mobile savvy consumers.
3.) Big players will join the mobile payments party
2016 will be the year that technology giants such as Apple, Google and Samsung embrace the mobile payments revolution. Apple are already using mainstream TV advertising to promote the benefits of using Apple Watch at the point of sale in order to process payment transactions. As the big players start to create a serious buzz around mobile payments, this will increase consumer confidence and adoption of the technology. But it’s not just about consumer confidence. Proliferation of mobile payments will rely heavily upon educating retailers in order to bring proxy transactions into mainstream consciousness. As the concept of using mobile devices to make payments gathers pace, the number of transactions conducted using a smartwatch or phone are set to grow exponentially.
Already by the tail end of 2015, Apple estimated that it’s Apple Pay app would be available in over 1.5 million retail outlets. Similarly, in May 2015, Google announced that it’s Wallet payment method would be available in over 700,000 outlets and via 1000 different mobile apps. Samsung Pay, which was tested in South Korea throughout the early stages of 2015, was also rolled out in the USA towards the latter part of the year. More recently, Microsoft has also outlined it’s plans for mobile payments with a big rollout and announcement expected imminently. When you take into consideration the number of apps and mobile devices controlled by these companies, it’s easy to see how rapidly proxy payments will grow in the next 12 months. In 2016 we can also expect companies such as Facebook and PayPal to get heavily involved in mobile payment transactions.
4.) Retailers will be forced to upgrade payment hardware
October 2015 represented a huge deadline for retailers using old school point of sale hardware terminals. When we say old school, we mean the type of payment terminals that require a swipe and a signature. Merchants are now being encouraged to adopt chip and pin hardware terminals at the earliest available opportunity. The penalties for failing to do this are now very severe. Whereas previously, the burden of liability rested with the financial institution, as of October 2015, any fraudulent transactions will be the liability of the retailer. So if you’re a retailer still operating a swipe and sign payment terminal, you’ll need to make sure you’re not processing any fraudulent credit or debit card transactions.
As retailers are being forced to shift across to new payment terminals, many will be keen to consider the long-term ramifications of an upgrade. Instead of making iterative adjustments to the hardware, smart retailers will seek to deploy the newest and most up to date payment technology available at their disposal. This means careful consideration when it comes to NFC (near field communication) technology as it represents the fundamental cornerstone upon which all mobile payment transactions are processed. It’s expected that these hardware upgrades will open the door for millions of retailers to adopt mobile payment technology.
The final word on mobile payments in 2016
What we’re now witnessing is an extremely profound shift away from traditional payment applications towards mobile enabled services and transactions. In today’s lightning paced business world, consumers expect things to happen quickly and seamlessly and mobile proxy payments fit perfectly with these requirements. From a retailers perspective, mobile payments make sense because they enable consumers to get what they need faster by increasing the speed and efficiency of every transaction at the point of sale. On the one hand, retailers are able to harness the power of mobile payments to provide a faster and more responsive customer experience, helping to build satisfaction levels. On the other hand, this dramatic increase in speed and efficiency at the checkout is helping retail businesses to process more customers in a shorter timescale in order to boost revenues and profitability. Expect 2016 to be a huge year in the rapidly expanding world of mobile payments.
If you’re a business looking to get into mobile, or enhance/market an existing app, check out our recent blog on the top mobile trends for 2016 for some inspiration.