Of late there has been a lot of Buzz on mobile payments, especially in the point of sale retail (grocery stores, retail stores, etc) and field services (plumbers, gardeners, on-the-go small businesses, etc) segments. Is this just a trend that will wane over time? Or is it the beginning of a revolutionary way that redefines how we make and receive payments? Time will tell. However here are some factors that are worth considering in mobile payments:
WHAT’S IN IT FOR THE SMALL BUSINESS/MERCHANT???
Unless there is sustainable value for the small business, they will not be inclined to adopt mobile payments. Sustainable value can come in many forms some of which are:
1. Cost parity or additional savings
Mobile payments have to be billed as card present transactions with the same rates as plastic cards in a retail store.
2. Loss reduction
Accepting mobile payments drastically reduces merchant losses.
3. Barriers to entry
The cost of implementation should be $0 or very minimal.
4. Competitive edge/increased sales
Accepting mobile payments increases sales per merchant or puts the merchant at a competitive edge over others. In the case of Square and Intuit’s GoPayment, this is the area where significant merchant value is delivered.
5. Associated revenue streams
Accepting mobile payments renders additional revenue streams such as location based coupons, deals, analytics, etc
WHAT’S IN IT FOR THE CONSUMER???
Does a mobile wallet replace everything in my physical wallet or does it only replace my payment cards? Typically a consumer has 1) Payment instruments (Credit card, debit card, cash, etc), 2) Loyalty cards (Grocery card, library card, etc), 3) Identity cards(Insurance, drivers license, etc) and 4) Other (coupons, business cards, post its, etc) in their physical wallet. By replacing only payment cards, is there a real benefit to the consumer?
2. Added security
Are mobile payments more secure than using a credit or debit card at the point of sale?
3. Cool factor
Using my mobile phone to performs tasks is way cooler than logging in or using my wallet. This factor could be related to certain demographics and generations.
In conclusion, companies should start investing in the mobile wallet space even though future US growth factors are uncertain at best. Investments should be in the form of pilot projects with limited capital expenditure and focused on in-market learning. That way, if a few years from now there is mass mobile payment adoption, the firms that have invested in this space are not left out.
Thoughts and comments from our users are welcome. Please post comments.
- Chetan Sukthanker