To say that “mobile payments” is the pervasive buzz phrase du jour would be an understatement. The mobile payments ecosystem is getting increasingly complex and now includes even more players – issuers, card networks, mobile operators, online payments companies, Google, Apple, and now retailers, handset operators and emerging payments platforms like Square.
With the recent announcement of the Merchant Customer Exchange (MCX) and Apple’s Passbook, mobile wallets and mobile payments have clearly become a battleground that many of the constituents in the ecosystem are fighting to own. While it remains unclear who will win, how, and if these players can coalesce to a unified system, there are ample indicators that mobile payments are here to stay and that adoption is beginning.
But what is working in mobile payments today? The real key to mobile payments success and increasing adoption is the consumer, not the many companies pushing their own technologies. For any mobile payment system to thrive, there has to be obvious benefits for the consumer, including convenience and speed. Even more importantly, consumers need tangible benefits such as rewards incentives and personalized shopping experiences. And of course, this all relies on the user experience being intuitive and simple.
Increasingly, consumers are getting comfortable with the many capabilities offered by smartphones. eGift Cards in particular have become an early means for driving comfort and adoption. Starbucks, which offers a closed loop card and eGift Card, is a primary example of this. Since launching its mobile bar code-based system nearly 18 months ago, Starbucks has had more than 20 million redemptions at the point of sale. Its customers have certainly demonstrated that they are comfortable buying and paying for coffee with their smartphones through the Starbucks wallet. And now Dunkin Donuts has also entered the space with its own app that lets customers pay for their orders by scanning their mobile Dunkin’ Donuts Cards in-store.
However, even with Starbucks’ and Dunkin Donuts’ double shot of caffeine helping to drive consumer adoption of mobile payments, many questions still need to be answered before we reach critical mass, including:
- When will enough retailers have POS systems enabled to accept mobile payments?
- When will the many strange bedfellows in the ecosystem stop competing for their own advantage and work together to develop a single standard for all consumers and retailers?
- When will the companies that control portions of the mobile payments ecosystem work together to provide real tangible benefits to the consumer?
For now, eGifting and barcoding remain the best examples of mobile payments in action. Mobile eGift cards are easy, well understood and don’t require a special app or an NFC-enabled phone – just access to the mobile web. Consumers purchased an estimated 12 million eGift Cards in 2011, with gift card purchases through the mobile web at as high as 33 percent and gift card opening on a mobile device at nearly 35 percent. Additionally, the $30 billion market for loyalty and rewards gift card market is increasingly shifting toward digital as well.
eGift cards are no doubt serving as a catalyst for other mobile payment forms. We will see with time where the mobile payment industry heads.
As CEO and co-founder of CashStar, Stone is a recognized leader in innovative payment systems and loyalty solutions, with more than 20 years of executive management experience with Fortune 500 and emerging growth technology companies. Recently, he has been named a Prepaid Top 5 Entrepreneur, Mass High Tech’s eCommerce All-Star and a 2012 Mainebiz Business Leader of the Year. Prior to CashStar, he worked with Intel Capital’s Mobile Commerce team to identify new applications for mobile and digital couponing. He has also served as a senior executive in several financial services firms, including American Express, where he pioneered the first universal prepaid product, the American Express Gift Cheque, which quickly grew to sales in excess of $300M. For more information about CashStar, click here.