By Keith Brown, Managing Director, paythru.
It's impossible to deny the surge of interest in m-commerce, which is set to intensify over the coming months. ABI Research predicts that the worldwide mobile shopping market will grow to $119 billion by 2015, but how will retailers implement the right technology to enable mobile payments?
One of the front runners is Near Field Communication (NFC). This is certainly one way to make quick and easy payments. However whilst this is a step in the right direction for mobile payments, particularly for low-cost items, there are a number of limitations, which need to be carefully considered.
As it stands, implementation has remained limited and adoption in the UK lags behind other markets. QuickTap, launched by Barclays and Orange, is the most widely used system by retailers and has been implemented at eateries such as Pret A Manger, Subway and EAT. In this environment it makes sense as it can help to reduce waiting times, especially during peak periods such as the morning coffee run and at lunchtime.
Slow out of the starting blocks
Major fashion or electronics retailers, however, have been slower off the mark. One of the main reasons is growing consumer concern over the security of NFC mobile payments, as card details can be easily 'swiped' from your back pocket. Even the likes of Google Wallet have uncovered major security flaws. To add to this, whilst NFC is good for low value items, it's yet to be proven for larger purchases. This is a major sticking point as the technology is expensive to install and retailers are unsure when or if they will see a return on that investment. They also want to be sure it will enhance their customer experience, something that is increasingly important in luring people away from online and back to the high street.
Aside from this, there is the question of whether mass adoption is really viable as yet. The mobile technology and standards needed to support NFC are largely in development. Nokia has said that it will look at creating an NFC enabled chip but currently it isn't supported by some of the most popular phones in the market.
Furthermore, retailers relying on smartphones to deliver a mobile experience of their e-commerce websites risk losing revenue through payment technologies not optimised for small screens. In addition, they also risk disenfranchising a much wider pool of non-smartphone users. Banks like Barclays have also introduced NFC-enabled stickers to put on phones, but this will be limited to their customers only and the retailers they have chosen to partner with.
Looking for mass audience appeal
Ultimately, retailers don't want to offer restricted mobile payment methods with customer present transactions and Point-of-Sale contactless payments only. Instead, having a ubiquitous mobile payment method available to any device on any network at anytime from anywhere will widen the opportunities with m-commerce. Unlike e-commerce, the real opportunity with mobile comes from increasing the value and loyalty of customers by understanding their personal spending behaviour from practically anywhere: in the food aisle, at the dinner table, standing in a queue or walking down a street. This means retailers can deliver advertising messages, coupons, promotions and loyalty programs directly to mobiles to create a more personalised experience.
For such enormous cost, it would seem that at the moment NFC and focusing on smartphones is a very narrow approach for retailers to adopt. Amidst all the hype, there is also a battle brewing in the industry to determine which organisations will handle the payment process with retailers, as mobile operators and banks are competing for a slice of the mobile payments pie.
The likes of Mastercard, Visa and the major banks are all bringing out different mobile payments strategies. However, not only are they conflicting, but they also risk confusing the customer by offering too many 'new' payment methods and as such aren't really catering for consumer needs. In fact, Google and PayPal recently spoke out against Project Oscar the joint mobile payments initiative involving Vodafone, O2 and Everything Everywhere saying that its strategy is anti-competitive and risks hindering the widespread adoption of mobile payments. Namely, operators might refuse to sell or subsidise phones that could independently run a rival mobile wallet. What's really required is an open standard that all parties can adhere to: one simple way for customers to pay using their mobile phone.
Enabling true m-commerce
The fact is that mobile commerce can save, as well as make, retailers millions a year, but the key is to get it right. M-commerce should empower buyers and merchants with the benefit of anytime, anyplace purchases from a variety of devices. Retailers need to be able to cater to the connected customer regardless of whether they are on an iPhone, Android smartphone or tablet. That means providing simple, easy access to an entire spectrum of payments via a mobile device.
As such, increasing numbers of retailers are looking at cloud-based mobile payments as they remove the complexity and make it possible to accept and process transactions on any device, via any network and with any merchant or bank. This means that rather than having to implement a mish-mash of technologies that will confuse customers and become costly and onerous to manage, they can instead meet the needs of all their customers via one platform, rather than a selected, smartphone wielding segment. Furthermore, the consumer will be familiar with the technology as it replicates their current behaviour through other channels. As a true enabler of m-commerce, the cloud can help retailers build trust and loyalty for today's retailers.