Now Accepting Mobile: Payment by Phone Hit or Miss?

I have always been fascinated with how quickly our society adopts new practices as technology opens new doors for us. I have been tracking the Google and Apple watches, and let me just say that as someone who grew up envious of the Power Ranger watch communicators, I will be one of the first to get one of these things. Something else that has been gaining attention by businesses and consumers is this shift to dependence on our phones. Because of this, retailers are trying out different methods of accepting accounts via our phone, as payment.

saywhat

No I’m serious. Garter predicts that mobile payments will surpass $235 billion in 2013. This article here, predicts that in the next 3-5 years, 50% of transactions will be mobile. In addition to money, mobile devices on us literally 24/7. I know that I get fidgety whenever my phone is more than 3 feet away from me. So why not use it to make purchases as well? Businesses also benefit because you are able to gather more information from your customers to use for personalization marketing strategies (cough database marketing cough).These are all promising points, but is mobile really becoming a mainstream mode of transaction? Are we ready to allow our phone, our most precious gadget, to become our wallet as well?

Types of Mobile Payment Options

Lets start by looking into the different types of mobile payments methods:

1. Near Field Communications

iphone5-nfc

You recognize this nifty scanner pictured above? That would be an example of near field communication (NFC) mobile payment.You link the phone either to a Google Wallet account (tied to your bank or credit card), to an NFC credit card account (like Mastercard PayPass), or to an Isis account (tied to your mobile phone billing), then tap a terminal at the checkout to pay.   Certain devices, mainly Android and Blackberry phones ( no Iphone? Whaaat?), have NFC capabilities. What’s cool about this is that businesses who accept NFC payments, pay lower interchange fees, which in turn can lower some prices for consumers since that “swipe fee” isn’t driving prices up. While this seems like a cool, futuristic way to pay, that seems to be it’s only selling point.  According to Garter, while in 2017 they forecasts $450 billion users will make mobile payments, only 5% of those payments will be from NFC.  Also, in order to use NFC, you would need to have one of the specific phone with NFC, and I wouldn’t pick one phone over the other only because of it’s NFC capability. Perhaps if NFC was more widely used, it would justify leaving the house without cash or credit card. 

2. Brand Specific Apps

starbucks

This is my personal favorite of the mobile payment types. Like I discussed in my previous post, apps seem to have been the way to go when it comes to alternative payments. With an app, consumers are able to input credit card info and “load” money on the app for in-store payments.  This benefits “regulars” the most; by combining the payment functionality with apps that track purchases and reward loyalty, they can go to their favorite shop without needing a wallet.  Best example? Starbucks app. Starbucks has been the pioneer in mobile app payments; by using their mobile app to connect with their loyalty program, it prompts users to use their phones over a card whenever they make a Starbucks run. 

3.Payment Apps

Smartphone buy application

As opposed to using a specific store app, companies like Square and Paypal allow you to store money in their accounts, and use their apps to pay for things like a digital wallet. Stores that offer payment by app either let you key in your mobile phone number and a pin or use location data captured by your phone, in which case the phone will generate a QR code to be scanned at the register. LevelUp, another front runner in the mobile wallet race, actually does this buy using QR codes to allow consumers to pay for items in stores. They also connect this payment option with a loyalty program, ensuring a steady amount of customers use that payment method. It seems to be working too, since over 3,800 retailers nationwide use LevelUp.  While stores still need special equipment or merchant accounts to run these, the credit card processing fees are cheaper for businesses, and opens up transactions to those who prefer their online account over a bank account.

So let’s tally up our score shall we?

Hits

-Cheaper Card processing fees

-More integration with a tool you use all the time anyways

-Easier way to store information of customers for database marketing

Misses

-Security 

-External Equipment

-Doesn’t Solve a Pressing Problem

My Opinion: While I believe mobile payments are logically the next step in our technological adoption, I don’t think we can call it mainstream just yet. The main problem with mobile payments is that it’s not necessarily “solving” anything pressing. I mean, how difficult is it to swipe a card?People mainly connect mobile payments with web transactions. I would rather, for example, pay for something online through an app or mobile website, as opposed to using it at a physical place. That’s what cards are for. I think mobile payments have their place, but only when tied with something else at this point and time. Now as far as using mobile payment equipment in a business setting, i think there is a market there. Lean start-ups may not have the money at the beginning to afford processing hardware, which is where companies like the ones mentioned would be of benefit. Square actually just came out with a Square Stand, which is a sleek, light weight replacement of the cash register, that takes away the card reader, and allows for more accurate card reading and expanded business operations such as inventory, and analytics for I-pads.

I had asked opened up a discussion on my Facebook account asking what people thought of using mobile for payments, and here were some of their thoughts:

” I don’t!! Too much can be accessed through cell phones. And are we really turning so lazy that we can’t carry wallets now? Businesses obviously want is to download google wallet or a Starbucks paying app to increase loyalty but I don’t think they are necessary from a consumer perspective at all. An advantage: while dangerous to put that stuff on your phone, might also be a better alternative to losing your card somewhere”

“Love love love paying with my Starbucks app and I am counting the days i can leave my wallet at home and pay for everything on my phone.”

“Our phone or any other mobile device is vulnerable to attack in public places – it’s extremely easy for you to get hacked by someone, especially in a store over WiFi. I’d advise against it – just use your card or plain old cash.”

“As a Starbucks employee, it is very helpful when people don’t have to rustle through purses (coats, pants pockets, etc) in order to pay. It’s very convenient for us and people who are almost always holding their phone in line anyway.”

What do you think of mobile payments? Do you use mobile? Where have you gone recently that accepts mobile?  Discuss with me what you think!

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