21 March 2014
The uprising of mobile payments
If you’re in a store to buy coffee or a book and you have the possibility to pay with cash, credit card or with your mobile phone, how would you make the transaction? Almost everyone has a smartphone in their pocket, but paying with it isn’t second nature yet. According to a recent survey from management consulting firm Bain & Company, only a quarter of respondents in the US and Western Europe are willing to use their mobile devices for in-store payments.
Of the 25.000 people that were asked in the survey, 40 per cent are unwilling to adopt mobile payments, as they don’t see the need to change their payment behaviour. This unwillingness can be partially explained by the fact that a lot of people don’t recognise the benefits, but are aware of the risks of mobile payments. Many consumers are anxious over potential data security and privacy breaches. “In some markets, speed, ease of use and the ability to choose funding sources are also concerns. Once these concerns are addressed, mobile payments are poised for rapid adoption over the next three years”, states Bain.
Adopting new technology
The survey found that consumers are adopting new forms of financial technology at increasingly faster rates. “The annual growth rate of mobile banking was 59 per cent in its first four years, as compared with a 35 per cent annual growth rate on online banking in its first four years. While only three to seven per cent have used mobile payments in stores so far, 16 to 27 per cent said that they are willing to try it.”
The key is to persuade more consumers to switch over from debit and credit cards by convincing them of the value available in adopting mobile payments, such as faster checkouts, discounts and/or promotions, access to real-time balances and location-based marketing offers. For retailers the use of mobile payments is an interesting business, because those who use mobile payments are statistically big spenders. On average, these users spend roughly twice as much through all digital channels (including mobile web and internet shopping) than non-users.
A Total Retail business model
Retailers can’t ignore the trend of mobile payments anymore, it’s best if they see the opportunity and adapt their way of doing business to modern standards. PwC’s Global Total Retail Survey recently showed the necessity for retailers to invest in a ‘Total Retail’ business model, a unified, always-on consumer experience. Digital commerce is more than thinking multichannel or omnichannel. “Customers have embraced show-rooming, learned how to exploit their own shopping data for deals and become experts at taking advantage of online coupons and offers”, according to PwC. “To respond, retailers need to embrace Total Retail. This means two things, a unified brand message across all channels that promises a consistently superior customer experience and an integrated back-office operating model with agile and innovative technology.”
A customer-driven approach can help retailers strengthen their position in the market because consumers are embracing new technologies to make life (and the shopping experience) easier. In this year’s research (5 continents, 15 markets, 15.000 online shoppers), 41 per cent of the shoppers bought products through tablets in 2013, compared with 28 per cent in 2012. Of the respondents, 43 per cent purchased products using their smartphone, compared with 30 per cent in 2012.
A favourite device for online shopping
PwC also researched the question why mobile payments aren’t that popular. The survey showed that online shoppers already had a favourite, trusted electronic device to shop with, the PC. Purchases via a PC are still dominating the online purchasing process, but mobile payments are gaining market share.
The group of mobile customers is growing, but there are still a lot of people who are unwilling to use mobile payments. PwC found that 40 per cent of the people don’t use their mobile phone for shopping because the screen is too small. Cyber security is also a major issue for the respondents. In fact 43 per cent said they worried about the security of their personal data, in 2012, 41 per cent answered similarly. Of the respondents, 20 per cent said they didn’t own a phone, 16 per cent didn’t have a data plan and 13 per cent said they had a slow connection.
With the improvement of technology in a few years (screens getting larger and increased speed), there is no big barrier for customers not to pay with their mobile devices.