Smart device, smart pay: Taking mobile payments from coffee shops to retail stores
Mobile payments, or mPayments, have grown from a niche market to a potential $700–800 billion opportunity by 2017. Deloitte’s Craig Wigginton spoke with Tanya Ott about the factors related to mPayment’s growth, such as new wearable technology, consumer habits, and retailer investment.
TANYA OTT: This is the Press Room, Deloitte University Press’s podcast on the issues and ideas that matter to your business today. I’m Tanya Ott, and I don’t know about you, but I am tethered to my smartphone day and night.
I’m checking email and social media. I’m reading news sites, stalking real estate, paying bills . . . heck, I even use my smartphone to buy coffee.
It’s so convenient. It makes me more informed and, hopefully, more efficient.
I’m what you’d call a super user. And I’m not alone. According to Deloitte’s latest Global Mobile Consumer Survey, collectively Americans look at their smartphones more than 8 billion times a day. A DAY!
Craig Wigginton leads Deloitte’s US and global Telecom sector. He writes about the survey in an article about using your smartphone or other mobile device to pay for things. mPayments, as they’re known, used to be a small niche for early tech adopters. But they’re steadily growing.
CRAIG WIGGINTON: [The article] shows that 18 percent of consumers have made in-store payments. That’s up nearly fourfold from the prior year. And granted, the timing of certain technological rollouts has helped that; but again, it’s still a pretty good piece of momentum building. And of that 18 percent, just so you know, about 3 percent say they use in-store mobile payments on a daily basis, and 8 percent use it weekly. It’s a niche, but there’s more opportunity for advancement there.
TANYA OTT: One of the reasons that it’s so popular is that it helps streamline the checkout process. What all can consumers do with just the swipe of a screen?
CRAIG WIGGINTON: Tanya, the speed of checkout via a swipe or something else is definitely a benefit. I look at it as a few things that benefit a customer. You know, speed of a checkout is No. 1. It can be faster than fishing out a credit card, and you’ve got the convenience factor of your smartphone always there at your fingertips, or, as I always look at it now, it could be right on your wrist with a wearable, right? But again, the ability to do a rapid checkout with an mPayment is there with either a swipe of a screen [or] using a biometric or plugging in a pin code, and then just tapping whatever payment method you want to use.
TANYA OTT: I’m reminded of that television advertising campaign where a shopper pulls out his wallet and tries to pay with cash for his lunch, and chaos ensues. The takeaway message, of course, being “Hey dude! Use your credit card or your debit card. You’re jamming up the process here.”
CRAIG WIGGINTON: There are some current parallels to that commercial and mPayments today. The failure factor today is consumers may not know how to use a capability. There might be an interface issue. And there could be just a simple issue of them getting nervous while trying to check out and fumbling around with it and screwing up. Most humans don’t want to be that person in the coffee line or at the turnstile at the subway station or about to get on the bus that’s bogging down the process—like that commercial, right? Everybody’s jamming up behind you, and there’s a little bit of peer pressure there. Focusing on some of the mellower or isolated activities could definitely help even the user getting comfortable with the process—parking meters and maybe even gas stations, where there’s not so much excitement. Or going off-peak hours. Go pay for coffee, but you might not want to go pay for coffee at 8 a.m.; maybe go at six, or maybe go at noon, when things are a little bit slower.
TANYA OTT: Do you use a device for mPayments?
CRAIG WIGGINTON: I do, and it’s somewhat mixed, to be perfectly frank. There’s a lot of good experiences, a lot of bad experiences. Frankly, I’ve had some user interface issues. Just the other day, I was pulling into a coffee shop, and I was planning on using mPayments. I didn’t have my wallet handy. And my phone slid off my console in my car, and it went between my seats. Digging that out became a challenge, so I ended up just digging out some cash instead. The other day, too, it was kind of interesting, it was yesterday morning. I filled up with gas. It was freezing cold in New York, and I had to go to the back of my car, dig my wallet out of my gym bag to find my credit card. And only after I had paid did I think about paying at the gas pump with mPayments.
TANYA OTT: That’s kinda funny that you’re embedded in this, and you still didn’t think about it as the first choice necessarily.
CRAIG WIGGINTON: Absolutely.
TANYA OTT: It’s hard to get over habits.
CRAIG WIGGINTON: Yeah, I look at it as, habits are one thing—just a behavioral modification thing that we’re all going to need to go through. Once that’s first and foremost in your mind, that’s easier to do.
TANYA OTT: So let’s talk for a moment about the technology, or I guess I should say technologies, because there are several different types of mobile payment point-of-service options. Give us the lay of the land.
CRAIG WIGGINTON: There have been a variety of different payment options via your device for a number of years now. There were very simplistic things like a bar reader. There was even text commerce earlier on, where you could text a vending machine and a soda or a pack of gum will pop out. And then there’s also Web-based checkout via smartphones. There’s pre-paid options available. Those were really what I would call the dawn of mPayments. Whether you really want to call them technology or not, that’s kind of where we got our start.
But now the real thing from a technological perspective that’s really giving us some momentum around this, and really the top choice right now, is something called “NFC” or “near field communication.” It’s a contactless technology that has embedded chips, embedded hardware in the device, and then there also has to be the comparable terminal in the retail store in order for you to connect the device to the point-of-sale system and complete a transaction. Most of the mobile-pay-type initiatives that are gaining popularity right now are all NFC-based. Then there are some other variations of that. You might have a software-based one; you’ve got cloud-based; you’ve got one that’s based upon Bluetooth; and there’s also some QR code-based mPayment solutions right now. There’s also some biometric solutions as well. So, for example, authentication might occur with your fingerprint rather than a PIN.
It’s a little counterintuitive given the typical comfort level of new types of services, new technological services, but our Global Mobile Consumer Survey said security is the No. 1 reason people don’t use mPayments. And the reality is mPayments are just as secure, if not more secure, than other forms of commerce. Even more secure than credit cards because, again, stuff can be encrypted in your device. And maybe it’s even better than cash because it can generally be more secure than cash. Yes, you could lose your phone, but you don’t lose any value with the embedded mPayment technology, and you’re generally covered for fraud in these types of situations.
TANYA OTT: You mentioned earlier about how the survey results might have been pushed up a bit because of some product rollouts we’ve had recently; obviously, Apple is getting a lot of attention right now for its OS 2 Apple watch, which has Apple Pay. And they’re making a big deal out of that. Is there a technology that’s rising to the top of the field right now?
CRAIG WIGGINTON: Wearables, to me, right now are very interesting. I just see that as simpler because it keeps you from having to dig out your phone, and whether the phone is in your briefcase, your bag, your pocket, it slides down into the seat of your car like I experienced. As long as you have that Bluetooth connection, you can pay with your watch right now; or also, going forward, there are some watches that are disconnected from the standard smartphone device. I think those are going to make it easier to make mobile payments and point-of-sale systems.
TANYA OTT: So we’ve been talking a lot about what the likely benefits are to consumers. What are some potential benefits for retailers, besides the fact that you might actually push people through the buying process faster?
CRAIG WIGGINTON: It’s definitely interesting. One of the biggest barriers for mPayment adoption for retailers is they didn’t really want to spend the money—because it is big money to install certain point-of-sale systems to take on NFC technology or different kinds of mobile payments.
TANYA OTT: What kind of money are we talking about? Typically, how expensive is it?
CRAIG WIGGINTON: It really depends, and the prices are coming down quite a bit, but, in the aggregate, for a large retailer you could be talking about millions of dollars of equipment that needs to be put in place. Frankly, up until a short time ago, they probably weren’t ready yet, and now there are a couple of things that have broken to kind of push that forward. There’s the mandated regulations around EMV credit card security, which were put in place in October 2015. That just meant more secure credit cards: The chips that are now embedded in the credit cards were mandatory. You needed a new credit card, but you also needed new terminals at point-of-sale locations. Once those had to be updated, the idea of throwing in incremental technology for mPayments, and NFC in particular, were incrementally smaller, so that was probably one key thing that’s driving this. That helps the retailers get over the hump of actually investing in this.
Then it becomes a customer demand issue. You know, in Field of Dreams, “If they build it, will they come?” And I think that that was a wait-and-see type situation. But I think finally retailers are finally realizing that there is customer demand for mPayments. It even harkens back to the days of credit card usage, right? [In] a lot of the smaller places, you weren’t able to use credits cards years and years ago: Fast food, coffee shops, etc., didn’t always accept them. Once the momentum swung, and a couple places started accepting them, they rolled out a lot, lot faster.
Last, but not least, for the retailers, there’s also the potential of having better insights with analytics. You might get even more details on exactly what your customers are doing, what they’re spending on, etc.
TANYA OTT: How would you get more than what you might already have? What kinds of information?
CRAIG WIGGINTON: You can find through information and analytics more details on your customers. This is always a sensitive topic, in needing to balance the privacy aspects of it with being able to really round out a full customer experience. For the retailer, there’s a lot of information you could get: what else the customer’s buying, rather than just that particular thing. Maybe even the mass data of where else they’re buying it. Are they going to other coffee shops? Are they going to other coffee shops when your lines are too long or on certain days of the week? So there are a lot of insights that could potentially be garnered there.
TANYA OTT: As you’ve said, this is a quickly evolving field. I’d love for you to take out your crystal ball and tell us where you think it has the potential to go.
CRAIG WIGGINTON: We need to keep it simple. Most consumers are using it for small purchases right now. So start small, start simple. Starting with the younger generation is always a plus, and that’s where some of the coffee shop payments come in. But there’re other things. Public parking happens to be a top choice of where to use mobile payments from our Global Mobile Consumer Survey, and that actually beat out coffee shops by two spots. Gas stations were actually No. 2 on our Global Mobile Consumer Survey. And then, as I said before, it’s the education of that consumer. They probably need a little hand holding, at least for the first purchase or two. That gets also to the sale associate—maybe a little bit of training on how to guide the customer. Maybe it’s instilling a little bit of patience in the process and a little TLC. So I do expect this to take off, not necessarily overnight, but we will see significant increased usage in 2016.
TANYA OTT: Craig Wigginton says all of this is just tip of iceberg. The statistics vary drastically, but Craig says he saw a report about a year ago that showed, through 2017, mPayments had the potential of being a $700–800 billion dollar opportunity. Some of that’s shifting from other forms of commerce. He says we won’t necessarily be a cashless society—but we could be a cash-lesser society.
Of course, there is still that issue of privacy. It’s something we’ve talked about a lot in the podcasts:
MICHAEL RAYNOR: Your car, your house, your sneakers, your tennis racket . . .
BRENNA SNIDERMAN: Customers know that their data is being gathered and analyzed, but they don’t want to feel watched. And they don’t want to know that they don’t have a say in the matter.
MICHAEL RAYNOR: Those disclaimers that some people tend to just walk past as a necessary check box before they can get on to what they really want to do—I think it will be increasingly important for people to understand precisely what it is that they are agreeing to.
TANYA OTT: You can hear that conversation and read Craig Wigginton’s article Smart device, smart pay: Taking mobile payments from coffee shops to retail stores at dupress.com.
I’m Tanya Ott. Thanks so much for listening to the podcast. Be sure to subscribe so you don’t miss anything—and, hey, give us a rating and leave a comment. It helps us show up better when someone searches the podcast store. Follow us on Twitter @du_press, and you can always email us at firstname.lastname@example.org.
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