Trends show that consumers are adopting mobile payments at an increasing rate. A recent study from Gartner shows that mobile payment increased by 38% (to 141 million) between 2010 and 2011. Additionally, the Yankee Group predicts the value of mobile transactions worldwide to increase from $162 Billion in 2010 to $984 Billion in 2014, over a 600% increase. These predictions as easy to justify with giant players such as Verizon, AT&T, T-Mobile, Google, Sprint, Citi and MasterCard all jockeying for position in the virtual wallet space.
What is a mobile payment?
A mobile payment is the exchange of money through an electronic device such as a phone, tablet or any NFC (Near Field Communication) compatible appliance. NFC is the technology that allows for an electronic payment to be sent via contactless communication.
Will my merchant account be affected by mobile payments?
If your business has a retail shop, yes this trend will affect you. The assumption in the marketplace is that once consumers adopt the concept of a virtual wallet they will cease to carry conventional credit cards. A virtual wallet allows the consumer to convert their physical credit cards into virtual credit cards managed in a virtual wallet and accessible with a smart device (phone, tablet, PC, etc). If the consumer does not have a credit card to swipe and your business does not have an NFC compatible terminal you’ll be forced to key in the transaction and pay a higher rate. This is also known as a downgrade from a qualified transaction to a mid-qualified transaction.
What merchant opportunities are opening up with the emergence of mobile payments?
Mobile payments establish the convergence of payment, offer redemption, loyalty benefit and rewards all bundled seamlessly into the checkout process. Mobile payment enables merchants the ability to build a stronger relationships with customers through convenience, loyalty benefit and discounts.
Merchants can create offers or discounts for specific products and services that are delivered to your target market creating brand awareness. Offers are stored by the customer for redemption either in the store or online. Electronic wallet users can automatically store the offer within their wallet for automatic redemption.
Electronic wallets can also store rewards cards for participating merchants. This enables merchants the ability to seamlessly integrate offer redemption and loyalty benefits within the checkout process.
What equipment is necessary to take advantage of mobile payments?
Currently, the Google wallet (partnership between Google, Citi, MasterCard, First Data and Sprint) is utilizing MasterCard’s PayPass technology and is compatible with Pay-Pass enabled terminals. First Data also offers a contactless payment peripheral compatible with their terminals and POS solutions.
VeriFone reported back in March that all new terminals they manufacturer will be NFC equipped. VeriFone has also declared themselves neutral in the mobile wallet war providing terminals and POS systems that are compatible with ISIS (partnership between Verizon, AT&T and T-Mobile) and Google Wallet.
What to do?
Would you like information related to strategies on how to take advantage of the emerging opportunities being created by mobile payments? Click the image below.