SMP Conference: Excitement High, But Fragmentation Slows Mobile Commerce
By Loraine DeBonis, Editor-in-Chief
A varied group of industry stakeholders gathered in Orlando earlier this month for the first Social: Mobile: Payments Conference. While opinions varied on what technology would ultimately take hold—the cloud, near field communication (NFC), barcodes, carrier billing, etc.—speakers seemed to agree that the time for mobile payments has come. One big problem, however, is market fragmentation and the plethora of new players looking for their share of the revenue in an already-crowded value chain.
“When the music stops, what do you want to be using?” asked David W. Schropfer, head of mobile commerce for the Luciano Group, a product development and advisory firm. “NFC will happen over time—and when it gets here, I think it will win—but in the meantime there’s cloud computing, there’s QR codes.” Ultimately, Schropfer said, any mobile commerce solution “has to reduce costs or drive new sales or it’s not a product that’s going to live. The third rail is security and accuracy—you don’t get a lot of chances to mess up here.” Security problems could set back any business model for years or kill it, he noted.
“If there’s one huge security breach, it could kill the [mobile payments] industry,” agreed Kolja Reiss, managing director of carrier billing company Mopay. “You don’t have a security problem yet because you don’t have adoption,” he said of mobile payments at the POS. “If you have a billion people on your system, it’s very likely that [the threat increases].”
“If there’s one huge security breach, it could kill the [mobile payments] industry.”
—Kolja Reiss, Mopay
As the industry grapples with securing the payments ecosystem as it evolves, another key issue is the “friction in the model,” according to Rich Clow, Citi’s managing director, head of consumer global mobile development. “How do you get banks and carriers and associations together?” he asked. “How do you get consumers to adopt? We’ve made a tremendous amount of progress,” he said, but “we’re not at the end or even at the middle. There’s still a lot ahead of us.”
Clow acknowledged that banks have not been innovating enough as it relates to mobile payments, but he said banks have an important role to play as stewards of the financial system. Creating a great user experience as well as a solution that’s fully compliant must go hand in hand, according to Clow.
“We can’t succeed with a winner-takes-all attitude,” Clow concluded, saying there must be shared risk and reward and collaborative ecosystems.
What Merchants Want
Although merchants were largely absent from the gathering, what merchants want and are willing to invest in came up often during the two-day conference. Bill Ready, CEO of e-commerce payments processor Braintree, said “solutions coming to market today aren’t driving simplicity for merchants. They are one-off solutions and they’re not integrated.”
“[Merchants] don’t want to make a bad bet [in terms of technology], and they don’t want to pay for hardware or software to get there.”
—Solon Kandel, Payair US
Solon Kandel, chairman and CEO of Payair US, a mobile payment solutions provider making its debut in the U.S. market, agreed. He likened the mobile commerce market today to a group of auto parts dealers.
“People are selling car parts,” he told attendees. “This person has digital receipts, this person has a wallet, that person has a checkout basket, etc., but what a merchant wants is an integrated platform that supports the entire shopping experience and has an integrated loyalty component. There hasn’t really been anything in the marketplace, until now, that provides [everything].”
Moreover, Kandel said merchants are looking for something that is technology-agnostic. “They don’t want to make a bad bet [in terms of technology], and they don’t want to pay for hardware or software to get there.”
Payair's technology platform, which has been operating in Sweden for the past year—and which Kandel said, delivers the whole package—will be rolling out stateside in May. In as little as 10 seconds, consumers can put an item in their shopping cart, self-checkout and pay with their preferred credit or debit card secured “in the cloud,” according to the company. Whether online or offline, including in retail, restaurant, entertainment and other shopping environments—even from a billboard, coupon or television—merchants can offer a fast, convenient and flexible mobile shopping experience, according to Kandel.
What Consumers Want
Philip Farah, principal, financial services, IBSG, Cisco Systems Inc., presented new research on day one of the conference showing that consumers still trust banks more than other players in the mobile wallet arena. “This is a business for the banks to lose,” Farah said.
In a survey of more than 1,000 online U.S. consumers representative of the overall U.S. population, Cisco found that 24 percent of consumers would choose to use a mobile wallet from a bank and 21 percent said they would choose a mobile wallet from their credit card company (e.g., Visa, MasterCard, American Express), compared to 11 percent who selected a peer-to-peer payments company (e.g., PayPal), 4 percent who selected a mobile phone operator and 3 percent who selected a technology provider (e.g., Google).
The survey also found that consumers were most interested in linking a mobile wallet with existing debit (27 percent) and credit cards (22 percent). Only 8 percent of consumers said they were interested in using a new credit card from the mobile wallet provider; 11 percent were interested in a debit card from the mobile wallet provider. Eighteen percent expressed interest in using a third-party payment service, e.g., PayPal, with a mobile wallet and 11 percent cited a prepaid account (e.g., Starbucks Card Mobile) as preferable. Interestingly, 47 percent of respondents selected unsure/none of the above.
To Farah, this points out that “a lot of consumers don’t understand exactly what we mean by the mobile wallet concept.”
That said, the survey found that a company “I know and trust” (31 percent) as well as strong privacy and security policies (46 percent) were important factors when considering which mobile wallet provider consumers would want to use. Thirty percent said wide acceptance was an important factor, while only 20 percent cited loyalty/rewards. When asked about the most important potential benefits of using a mobile wallet, however, the number interested in coupons and offers gets a bump. Twenty-four percent said redeeming coupons and special offers was the most important potential benefit of using a mobile wallet, while 16 percent chose receiving coupons and special offers when you are close to your favorite stores and restaurants. The most popular answer after “unsure/none of the above” (39 percent), was faster payments at retail checkout (32 percent) and one-click payment for online purchases (29 percent).
While NFC proponents say that speed is one of its advantages, experts say there still is a long way to go before we reach critical mass for NFC acceptance terminals, at least in the United States. For ShopSavvy founder John Boyd, the value proposition for NFC hasn’t been clearly defined. “Why should consumers change their behavior?” Boyd asked. “NFC doesn’t solve any pain for consumers.” While he noted that ShopSavvy, which provides a shopping app for consumers to compare products and pricing and receive relevant offers, would be happy to use NFC, he believes that providers will have to answer an important question before the market will shift in a big way toward NFC: “How are you actually making shopping better?”
“It’s clear payments innovation is significantly accelerating and reaching out across merchants and consumers to create incremental benefits for all stakeholders,” Jim Ackerson, senior vice president of sales and marketing for payments processor i2c Inc., tells Paybefore. “While NFC still remains at a distance in the absence of merchant POS adoption, mobile payments are clearly growing at a rapid pace,” says Ackerson, who participated in a Paybefore panel on the future of plastic cards.
“Today, we’re expanding the plastic card relationship with mobile applications associated with cards. Cardholders increasingly are selecting and demonstrating preference for this channel, enabling them to immediately access current card balance, history of spending, remote check capture, card-to-card transfers, location of reload network sites, access their coupon offers and more. To differentiate one’s program from others’, consumer engagement (including loyalty, rewards and communication) is key.”
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