How Connected Consumer Lifestyles Will Drive Forward Mobile Payments
Merchants are striving to respond to the ever-changing behaviors and expectations of consumers by creating seamless purchasing experiences that engage customers and keep them returning for more. In turn, payment service providers (PSPs) and technology vendors are endeavoring to meet the needs of those merchants by providing appropriate supporting technology and services.
Who is in charge? What drives mobile payments innovation?
Within the world of merchant payments, mobile is dramatically altering the landscape. Recent research from ACI Worldwide and Edgar, Dunn & Company indicates that merchants recognize this shift in the payments outlook, with 48% of those surveyed already using mobile wallets (a number expected to rise to 77% within 12 months) and 59% viewing the use of in-app payments in-store as a major factor that will impact the retail industry.
To provide the best support to merchants, PSPs cannot afford to merely be reactive to the growth and changes in mobile payments, but should try to anticipate changes and develop solution sets accordingly.
The motivation for mobile
The ways that mobile devices are used around the world to shop and to make payments are hugely diverse – just like the people that use them. This can make it difficult for merchants and payment providers to determine which route to take when devising a mobile payments roadmap.
Ultimately, though, consumers care about solving their own real-world problems, and not about the novelty value of mobile solutions. This should be the single most important point of focus for any mobile payments strategy.
At a broad level, convenience, speed and security are vital to consumers who lead busy lives and often want to conduct transactions ‘on the go’. Mobile payments – whether in the form of mobile wallets, mPOS or in-app payments – deliver against these consumer ‘must-haves,’ naturally driving adoption as they gravitate towards the payment methods that fit best with their lifestyles.
In one example, emerging markets are a high growth area for mobile payments. With limited banking and payments infrastructure in many of these markets, mobile offers consumers a much-needed way to transact, and with rapidly increasing smartphone penetration in these markets mobile devices already play an important role in the day-to-day lives of the average consumer.
Another example (from a mature market) is the city of Saarbruecken in Germany. It has seen a 45% increase in revenue generated at parking lots after mobile-apps for parking tickets were introduced alongside traditional coin-based ticket machines. In this case, the mobile payments capability solves the problem of drivers who don’t always carry spare change, and those who might need to extend their parking ticket without the hassle of returning to their car.
These examples illustrate how important it is for merchants and payment providers to think more about pairing mobile payments with lifestyle issues – to solve real pain points for consumers. That calls for more user-led research and development, rather than product-led payment solutions.
Delivering solutions that meet consumer demand
Rather than forging ahead in developing and deploying brand new technology that supports completely new mobile payment methods, it could be more advantageous for payment providers to step back and explore whether certain lifestyle use cases can be matched with the dominant payment method in each sector and geography. This could be the key to unlocking strong mobile payments: focusing more on mobile use cases than on mobile payment schemes. In some cases, traditional payment instruments leveraged by service apps could potentially be more impactful than adding more payment methods.
However, staying ahead of the mobile payments curve will require agility and responsiveness when developing solutions. From a technology standpoint, open payments infrastructure allows merchants to respond to consumer demand fast, deploying new payment tools quickly and without extensive redevelopment costs.
There is certainly going to be a major advantage to first-movers as smartphone adoption continues to increase and mobile payments infrastructure develops, but there is also a need to continue supporting older technologies in parallel, at least for the foreseeable future.
Partnering for success
Since mobile use cases and ‘lifestyle issues’ vary significantly across geographies, it is important to localize mobile payment solutions. This requires consideration of regulations, data protection laws, pricing quirks and consumer preferences in each market. This is not an easy task and it is the reason that even the largest vendors and solution providers are working with partners at a global level to leverage shared market expertise.
Beyond the challenges of regional market nuances, partnerships among payment providers can act as a broader foundation for successful mobile payments growth and innovation; supporting speed to market, simplified relationships and more comprehensive solutions that allow merchants to readily adapt to consumer demand.
For merchants, this means seeking out vendors who have open technology and a well-thought out partner network, which underpins that technology with powerful local insights and market access. For payment providers, this may mean partnering with companies they may have traditionally considered competitors – to better meet the needs of merchants and their customers, and to effectively support the overall growth of mobile payments.
Download the survey report: ‘Payments trends in the European retail sector’, by Edgar, Dunn & Company and ACI Worldwide. For further information on omni-channel payments and customer experience, download ‘The role of payments in the customer experience’, by RetailWeek and ACI Worldwide.
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