Guest Analysis: Predictions for Mobile Payment in the US
Gordon Saussy
October 15, 2014 – For the past five years, we’ve heard from both analysts and vendors that we’re just a year away from widespread adoption of mobile payment solutions. Yet despite rollouts by Google, Isis (now SoftCard) and various others, mobile payment has not achieved broad consumer or merchant acceptance, and the Starbucks mobile app remains the only form of mobile payment seeing genuine usage by US consumers.
Disappointment has not discouraged innovation and investment in the space: Google has revamped its offering with Host Card Emulation (HCE); Apple is releasing Apple Pay, incorporating the latest tokenization technology; and MCX, the merchant-led wallet initiative, is finally planning to roll out its barcode-based solution (called CurrentC) in 2015. So will 2015 be, at long last, the year that mobile payment goes mainstream?
This is really a two-part problem. Consumers need to adopt mobile payment solutions, and merchants need to accept mobile payment in their store locations. This is often characterized as a “chicken and egg” problem, but in reality, merchant acceptance is the major obstacle to widespread use of mobile payment, since many barriers to consumer adoption can only be addressed with aggressive merchant participation.
This paper examines five major areas of consumer “friction” that must be addressed before consumer adoption of mobile payment can accelerate. A majority of these are significantly dependent on active merchant participation.
The paper likewise examines four key areas where mobile payment solutions must align with merchant priorities and requirements in order to gain merchant acceptance. Large merchants with a high frequency of consumer transactions are the ideal target for mobile payment, but these merchants will only adopt solutions that are tightly aligned with overall merchant strategies for consumer loyalty and mobile marketing. Integration of mobile payment capability within a merchant app is the key strategy that will drive merchant acceptance, and along with it, consumer adoption of mobile payment.
Without a doubt, the mobile payment landscape is fundamentally changed by the launch of Apple Pay. Apple has successfully eliminated several major areas of consumer friction and is positioned to remove some of the major obstacles to merchant adoption. The other players in the space are challenged to keep up with Apple.
The key to widespread adoption in 2015 is the merchant app. If multiple large merchants incorporate mobile payment into their apps, either via Apple Pay or HCE on Android, and promote the use of mobile payment, then consumer adoption will accelerate. NFC adoption can proceed in parallel, but this isn’t (for now) the key to rapid expansion of consumer use.
Viewed in this light, the refusal by several major MCX merchants (WalMart, Best Buy) to deploy NFC isn’t really an issue, if these merchants offer payment within an app as an alternative (as Target appears to be doing). But if merchants instead try to force consumers into an either/or choice between MCX and other forms of mobile payment, this will end up slowing overall adoption.
2015 should be a good year for mobile payment, with millions of iPhone 6 users trying out mobile payment for the first time. If merchants move quickly to add mobile payment within their apps, and promote this heavily by the end of the summer, 2015 could be the first significant year of mainstream growth for mobile payment. The key is in how aggressively the major merchants are willing to move ahead.
Gordon Saussy is an independent consultant working in the field of mobile payment and commerce. He can be reached via [email protected].
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