When Apple Pay hit the streets on more than 10 million iPhones last month, it signaled that the tipping point for mobile payments is finally on the horizon — Google had planted the seed with Google Wallet two years ago, Starbucks had used a proprietary system to deepen relationships with its most loyal customers, and CurrentC, backed by a consortium of retailers, is being tested at places like Best Buy, CVS, and Target.
Soon enough, we’ll know how this shakes out.
In the meantime, though, it’s probably good to recap why mobile payments are enticing.
For the customer, a mobile payments system does two things really well: it provides for an easy and efficient payment system and it provides additional security.
Consider: If you are a regular customer at the local convenience store, the system makes that morning rush a bit easier as you can quickly breeze through checkout. Meanwhile, as holiday season ramps up and you are shopping for your niece in Nebraska in a store you didn’t know existed, you can now make purchase without worrying that you will read about a massive data breach in the news two months later.
You might be asking yourself: Why is an online marketer talking about offline payment technology?
A couple of reasons:
- First, whether it’s Apple Pay, CurrentC, or Google Wallet (remember that one?), mobile payment technology offers brands an opportunity to reach — and retain — a demographic they’ve been dying to turn into loyal customers: youth and Millennials.
- Second, deciding between Apple Pay and CurrentC has real, and far-reaching, business implications for a brand. Those implications will no doubt extend online in the near future.
So, let’s jump into these.
Mobile Payments Appeal to Younger Shoppers
The ubiquity of phones is unquestioned across all demographics, but make no mistake about mobile payments: this is a play at a younger demographic.
According to data released earlier this month by the National Retail Federation, 8.5 percent of all consumers between the ages of 18 and 24 plan to use mobile payment technology this holiday season. (In case you’re wondering, that statistic drops to 5.5 percent when surveying all consumers.)
If you’re after this demographic, you need to provide mobile payment as service.
Lock in customers with a good experience now to set yourself apart and give you an edge in an ever-evolving customer loyalty landscape. Then, work on expanding that relationship.
Picking a Technology Has Real Business Implications
When evaluating mobile payment technologies, brands need to answer the question of what’s more appealing from a business perspective: a customer’s lifetime value or the compilation of all the one-off margin gains you’ll get from not paying a processing fee?
The answer to that question has real business implications and extends far past a brick-and-mortar store’s point-of-sale system.
Before any brand makes (or re-evaluates) a decision on these technologies, they’ll want to fully understand who has a stake in the decision.
And it’s a few more people than you might, at first glance, imagine: the Customer, the Bank, the Store, the Payment Tool. And each has its own distinct set of needs in the payment ecosystem.
- The Customer: Needs universal (or close to it) acceptance of their payment type of choice.
- The Bank: Needs to provide the security on the front end, but also has to solve the complex fund routing problem.
- The Store: Needs any payment option to be turnkey. They have matrixes — in-store, backend and financial systems — that are not easily re-configured at the drop of a hat, nor do they want to invest large amounts of money and hardware to be an early adopter.
- The Payment Provider: Needs to simply work. “Work,” though, means more than being a technically sound product. In a nutshell, “work” means the provider needs to create a product that is easy for the customer to use and it needs to be accepted where he or she shops.
While potentially not a critical blow to long-term value, not having a mobile payment technology in place soon may have a near-term business impact as people use, adopt, and possibly gravitate toward brands that offer the service.
With that being said, how should brands who aren’t contractually bound to accept one form or another approach the possibility? Easy, start with your customer.
As mobile payment technology becomes more and more compatible with native apps and regular browser carts, you want to be where your customer is.