Mobile Payment Options

by Raymond Pucci 0

Can shoppers be weaned off paying with plastic? Not so easily. Even though smartphones are now ubiquitous and consumers have more options from which to choose. The following article details some of the expanding mobile payment functionality.

The idea of paying on a mobile device once seemed like a scene straight out of “Back to the Future,” but more Americans now own mobile devices than do not. Using a mobile device to pay from anywhere in a store or at an offsite location is no longer reserved only for the tech-savvy early adopters, it’s the new normal for both merchants and customers. While conversations about mobile payments once focused on functionality, security and cost, there’s only one question to be asked: What’s next? Here’s a look into what the future may hold for mobile payment processing.

Consumers haven’t ditched the role of physical cards as readily as some mobile industry experts originally predicted, despite the massive launch of mobile wallets by major mobile manufacturers and tech providers. Though 15 percent of consumers reportedly used mobile wallets as of 2015, CIO Magazine says that consumers’ adoptions of mobile payments facilitated by other mobile technology like near field communication (NFC) is on the rise.

The reason that NFC has generated greater adoption than mobile wallets is twofold: Unlike mobile wallets, NFC doesn’t require merchants to invest in a particular mobile wallet provider’s technology to accept mobile payment, and it reportedly results in more robust data insights that merchants can use to market to consumers who pay using NFC-based mobile payments. NFC allows for consumers to pay using their mobile device, and a direct link to their bank account or card to pay for items at the point of sale when the cashier scans a barcode generated by the device. As a result, experts predict that as NFC mobile payments and mobile wallets are more widely accepted by businesses of all sizes, consumers will steadily shift away from the need to carry a physical card.

It’s one thing to have available payment technology and another to use it. Adoptions rate on mobile payments has been disappointing. Apple, Android, and Samsung are now more widely available at checkout, but getting shoppers to break the habit of pulling out a credit or debit card has not been easy. To get consumers to use mobile payments, there must be more reasons to do so. When mobile payments are tied to loyalty programs or product offers, then shoppers are more engaged. Starbucks gets about 25% of in-store transactions paid via a mobile app, tied to their loyalty program. The lesson is simple—build an integrated mobile pay app and shoppers will come.

Overview by Raymond Pucci, Associate Director, Research Service at Mercator Advisory Group

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