March 2, 2012
There has been a flurry of news related to mobile payments of late but two very important stakeholders have been mostly absent from the announcement: retailers and handset manufacturers.
At Mobile World Congress this week, Visa, Intel, Vodafone and Chase were just a few of the companies with new mobile payments initiatives. However, retailers have been slow to adopt mobile payments beyond small tests in several stores because they do not see a lot of consumers walking around with NFC-enabled phones or demanding to be able to pay via their phones.
“Some retailers are ready for mobile payments and others aren't,” said Drew Sievers, CEO of mFoundry, Larkspur, CA. “There is a lot of experimentation going on without any one clear winner in the space.
“There is no hurry for merchants to accept mobile payments,” he said. “There just is not anyone offering a compelling enough value proposition that would warrant merchants moving quickly.
“Ultimately, if there is a clear value proposition for the merchant, they will move quickly to accept mobile payments.”
Adoption is slow
While retail adoption of mobile payments has been slow, some first movers are beginning to appear including Starbucks and Subway, which is letting customers pay via the Google Wallet at many of its locations.
Starbucks recently said that it is No. 1 in the world in terms of mobile transactions, payments and dollars thanks to the success of the Starbucks mobile app, which lets users pay via a bar code on their mobile phones.
However, no major mass market retailer has gotten behind a mobile wallet solution yet.
“What is going to make a big splash is if Walmart, Kmart or Target gets on board,” said Mark Beccue, senior analyst for mobile services at ABI Research, New York.
Part of the problem is that retailers who do not already have contactless POS devices need to make a decision on which technology is going to be right for them, whether it is bar codes, NFC or something else.
The complexity of mobile payments is also a challenge.
“There are many hurdles including POS readiness, POS clerk training, customer interest, card economics and new fraud types,” mFoundry’s Mr. Sievers said.
Retailers also need to be sure they are really ready for mobile payments because any missteps here could cost them. This means insuring that their back-end systems sync up with what they are doing at POS.
“Retailers have to test mobile payments extensively,” ABI Research’s Mr. Beccue said. “If it does not work when consumers want to make a mobile payment that could be a problem.”
Value proposition unclear
All of these challenges would be surmountable if there were a clear enough value proposition for merchants but with NFC-enabled handsets still only in a small percentage of consumers hands and no evidence yet that consumers are chomping at the bit to pay for purchases with a phone instead of a debit or credit card, there is little motivation for retailers to overcome these obstacles.
“There is no advantage for retailers to say they are ready when nothing is out there that consumers can use,” Mr. Beccue said.
“Most merchants are keeping it under wraps until we see some mobile devices in the hands of people,” he said.
All of which means it could be the end of this year or later before there is any significant uptake on mobile payments by retailers.
Several manufacturers have committed to offering mobile handsets with the Isis mobile wallet but none have been made available yet. Google Wallet also needs to be available on more devices before it can make a bigger splash.
“Consumers cannot do anything unless they have those devices in their hands,” Mr. Beccue said.
According to Mr. Beccue some retailers are working quietly behind the scenes to bring in POS solutions that will enable mobile payments.
There could also be some be some announcements from retailers once Isis officially launches in Salt Lake City, UT, and Austin, TX, which is expected to happen this summer. Isis has said it wants to sign up as many retailers as possible in each of these markets so that users will be able to pay with their mobile phones for a variety of transactions throughout their day.
“We could see a bunch of retailers follow this year when Isis officially launches,” Mr. Beccue said.
“Isis’ focus is to get a lot of retailers in those markets instead of focusing on national chains,” he said.
Chantal Tode is associate editor on Mobile Commerce Daily, New York