By Natasja Bolton, Senior Acquirer Support QSA
In 2012, Mastercard published the results of their survey of the global mobile payments landscape in their Mastercard Mobile Payments Readiness Index. The survey recognised that while mobile payments adoption has dependencies on six major elements from infrastructure and financial services to regulation, the critical success factor for mobile payments is consumer readiness.
The survey stated that only with consumer familiarity and willingness to use mobile payments will mobile payments take off.
For years both the technology and payments industry ‘hype’ about mobile payments have been one (or more!) steps ahead of the consumer and the small business.
However, the most recent surveys now appear to show that consumers, having been increasingly drawn to mobile payments in the last 12-18 months, are at a level of readiness that the ‘turning point’ for mobile payments has been reached, in the US and Europe at least.
Given these signs, which we shall explore in this article, Sysnet believe 2016 into 2017 is the year when mobile payments truly become a consumer expectation. As a result, it is becoming realistic, maybe even a priority, for small businesses to make technology and investment decisions to address what consumers now want and expect in relation to mobile payment acceptance.
What do we mean by mobile payments?
Mobile Payments is a broad term covering the following consumer and merchant-initiated mobile payment methods. All of which take advantage of the connectivity and functionality of ‘smart’ mobile devices (phones or tablets):
- Mcommerce: Online card payments made from the consumer’s own mobile device (smart phone or tablet). This may be via a mobile optimized website or mobile app.
- Mobile NFC payments: Contactless card payments using the consumer’s own NFC enabled mobile device (e.g. Apple Pay, Samsung Pay, Android Pay)
- mPOS: Card payments made using a card reader attached to the merchant’s own mobile device (smart phone or tablet)
Ecommerce site browsing and online spending via mobile devices are comprising an increasing share of ecommerce sales. A recent Javelin report stated that even as ecommerce sales growth continues at spectacular rates, mobile purchases are comprising an increasingly large share of that growth.
Javelin estimates that mcommerce purchases will make up 49 percent of total online US retail commerce in 2020, with smartphone-enabled purchases set to grow from $122 billion in 2015 to nearly $319 billion by 2020. Indeed, it seems that UK consumers may be ahead of the US in mcommerce take-up.
Data from Criteo reveals that nearly half of UK ecommerce transactions take place on mobile devices. ING’s survey found that, in Europe, 66% of mobile device owners had used their device for purchases.
As Forbes explains, the opportunity for mcommerce growth has been driven by consumer impacting changes such as the launch of ‘buy’ buttons within the most popular social media platforms and mobile apps, and the realisation by marketers of the need to reach customers on their mobile devices. Javelin agrees: a combination of factors is driving mcommerce growth.
Big retailers are developing mobile-focussed offerings, such as Papa John’s app promoting buy online, pick up in store and IKEA’s in-store mobile app checkout. Other significant players such as Uber, are encouraging in-app payments. The support of issuers and card networks is enabling more mobile in-app and proximity payments.
It is surely no wonder consumers are increasingly gravitating towards mobile for their purchases.
This growth indicates increasing consumer willingness or readiness to purchase online using their mobile device. The major growth in ecommerce is the result of higher sales via mobile devices (up 88% in Europe). As consumer readiness develops, so too do their expectations that all retailers will accommodate online sales via mobile device – through optimised websites and mobile apps.
Recent reports, indicate that there is also increasing growth and consumer acceptance of mobile NFC payments. To the extent that EMVCo has recognised this growth in popularity and has updated their testing framework to streamline the process of certifying new mobile devices for NFC payments, to optimize product time to market.
Research published in May this year, reported that just over a quarter of US consumers, with a compatible smartphone, had used Apple Pay, Android Pay or Samsung Pay. Apple itself reports that Apple Pay monthly users went up 400% in twelve months (Q3 2015 to Q3 2016).
Some of that growth is driven by expansion of Apple Pay, Android Pay and Samsung Pay into new territories and increasing retailer capability to accept Mobile NFC payments. However, it is also clear that consumer readiness will also drive further growth. Auriemma Consulting Group’s research, found that 39% of US consumers with an eligible smartphone would use mobile NFC more, if more stores and apps accepted it.
Retailers appear to be accepting this trend as it is reported that more than three quarters of US retailers (72%) plan to accept mobile NFC payments by the end of 2017. Most UK retailers have less to do than their US counterparts to be able to accept mobile NFC payments.
They already have existing EMV payment terminals capable of accepting contactless payments and a payment provider or acquirer able to support it.
mPOS is a merchant-initiated mobile payment method. Initially targeted at micro-merchants, mPOS solutions were simple ‘plug and play’ mPOS card payment solutions reliant on the merchant’s own mobile device. They were designed as a method to tempt merchants, that had previously been unable or unwilling to accept card payments, into accepting consumer card payments.
The mPOS solutions were simple, inexpensive and flexible – often not obligating the merchant to pay monthly fees.
The mPOS market has since developed beyond these initial offerings to fullly functioning cloud-based mPOS solutions, reliant on purpose built mobile hardware. They still have the flexibility of the original mPOS concept but with greater functionality.
These cloud-based mPOS solutions offer small businesses the opportunity to leverage retail operations, business management and efficiency tools without the up-front investment or ongoing support costs of traditional POS solutions.
These solutions are also more flexible, have less overheads and are easily scalable. As a result, the mPOS market is growing while the traditional POS market is shrinking. A report by GrowthPraxis revealed that the US mPOS market is growing at a rate of 9.2%, while conventional POS sales are shrinking (-2.5%).
Adoption of mPOS solutions by in-store merchants has additional advantages, especially for US retailers that have not yet made the leap to acceptance of EMV and contactless. Most recently released mPOS solutions are able to support EMV and contactless, and hence also mobile NFC payments.
Therefore, one significant advantage that mPOS offers the small business, is a route to accepting both EMV and contactless transactions.
Vend’s 2016 Retail Trends and Predictions report predicts the continued growth in mPOS. Merchant adoption of in-store mobile technology is one of their 2016 top 12 forecasts for the retail industry. Experts predict that smartphone and tablet based mPOS will handle 40% of retail transaction value by 2021, annual mPOS growth rates of 50% are forecast for 2016 – 2020.
It seems, from all that we have examined, that mobile payments are no longer just hype nor a fad. All of the signs are that the convenience of mcommerce and mobile NFC has ‘won over’ the consumer; mobile payment methods have proven their usefulness and usability.
Small business therefore need to take steps to keep up with consumer expectations – shop and pay anywhere, anytime using their mobile device. Unless they are able to support that expectation, small businesses may find they lose out to the big retailers that spurred this revolution in the first place.
Consumers are won over by convenience, speed and simplicity: for example, ING’s survey found that 50% of European mobile shoppers are more likely to return to a store that supports one-click ordering by storing their payment details.
There is a risk that businesses that don’t adapt to changing customer expectations will lose custom as consumers may stop shopping around online and may never find them; consumers are swapping choice for convenience.
The growth in mobile payments is also moving us closer to becoming a cashless society – it is becoming an increasingly likely outcome. Indeed, in the UK charities and social enterprises that traditionally have collected donations in cash only, are the latest to recognise the value in accepting mobile payments through mPOS and contactless payment solutions.
There’s also a view that changing consumer attitudes to paying in cash are taking place across all age groups. It’s not just the millennials that are adopting new payment methods, Barclaycard reported that Britons over the age of 60 are the fastest growing group of people taking to contactless card payments.
Those micro merchants that don’t yet accept card payments will need to take action to make sure they are able to be paid for their services by all of their customers, as mobile payments change attitudes to paying in cash. Many small businesses comment that they don’t want to expense of implementing card terminals or of upgrading to accept contactless and mobile NFC payments.
However, as we have seen above, there can be other significant benefits for businesses from utilising the latest cloud-based mPOS solutions.
Talk to Sysnet about promoting your product set through our Merchant Contact Services. We offer a wide range of services from inbound terminal upgrade support through to outbound merchant contact, to promote terminals with new functionality such as mobile payments acceptance.
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