Mobile Payments: What Might Tip the Scales from Early Adoption to Widespread Use

picture1Editor’s note: Prior to Money20/20 2016 in Las Vegas, we took the opportunity to speak to Rod Katzfey, our Vice President of Sales & Business Development of North America, about mobile payments from the perspective of American business.

What is your opinion of the various mobile payment options available today?

Contrary to popular belief, I believe we have not reached wide-scale adoption for all of the various mobile options on the market today. On the surface, it may seem that 2016 will be the year that mobile payments finally reach global mass adoption. Between the technological advancements developed over the past few years both on the card-not-present and card-present side, such as mPOS, in-app payments, NFC/contactless, combined with the 800-pound gorillas – Apple Pay & Samsung Pay – snatching up partnership deals with retailers and banks across the globe, it appears that mobile has reached a turning point. But I truly believe we are still in the hype vs. reality stage and still awaiting to be embraced wholeheartedly by consumers.

There are several key factors attributing to this slow uptake, but the ones I continue to witness first-hand are the following:

  • Consumer confusion: Particularly in the US market, there are too many choices, especially on the mobile wallet side, from financial institutions to singular and multi-merchant m-wallet offerings. Consumers are being forced to select from a confusing array of options. In addition, most consumers, even millennials, do not quite fully understand the benefits of using a mobile wallet and are resistant to adoption.
  • Fragmented payment ‘channels of choice’: On a global scale, consumers are not fully committed to one singular payment channel of choice. Consumers continue to want the freedom to shop wherever and whenever they want — say in-store, leveraging traditional POS, or shopping via PC or on the go with mobile devices. Mobile is certainly not the channel of choice yet, and I believe we still have a few more years to go to see if mobile is the clear winner or if consumers decide to opt for the much hyped ‘omni-channel’ payment However, until then, I believe we will continue to live in a multi-channel payment world, where payment choices are fragmented and inconsistent.

Objectively, most analysts agree that we are still in the early stages of mobile payment adoption. A recent report developed by Edgar, Dunn & Company and Wirecard sums up the current and potential market penetration. They conducted an industry survey in developed markets and reported that in 2016 we are seeing slow adoption or even declining usage rates of mobile payments among consumers. The industry is divided in its evaluation of this data. Some observers say that the low usage rates are indicative of a weak consumer value proposition and are very skeptical about the future of mobile wallets. Others, however, are more optimistic.

What technologies do you feel make for the best merchant and consumer experience?

I believe the answer is different for merchants and consumers. For example, while a merchant cares very much about the consumer’s shopping experience, as that ultimately will lead to sales, right now, many are very focused on security issues surrounding both card-present and card-not-present transactions; mobile payments are obviously part of that. The primary security concerns can include theft of consumer payment credentials, theft of consumer account/transaction history and identity theft.

Because of these concerns, I think many SMBs are embracing mPOS solutions, as it allows them to integrate EMV security measures and provides them with some sense of control against card-present fraud.

Consumers, on the other hand, tend to care mainly about fast and convenient payments. Is security a concern for them? Yes. US consumers may be particularly worried about fraud, but convenience is a sure winner for them. I believe the advancements made on the in-app payment side, allowing consumers to conduct transactions with their mobile devices and not rely too heavily on walking around with cash or credit cards, is groundbreaking and will only grow. It is not yet widely adopted, but it is certainly on the way.

I also would like to add that the Internet of Things (IoT) will also soon have a large impact on consumers’ “best choice of mobile commerce experiences.” The rapidly growing wearables market is projected to reach $53 billion in sales by 2019 (according to Juniper Research), and there are tremendous breakthroughs in IoT consumer commerce solutions being developed for this market. For example, as part of the initial rollout of their IoT banking platform, Intelligent Environments integrated the Pavlok wristband, a wearable interconnected device that “delivers an electric shock” to users’ wrists when they exceed predetermined spending. So a user who sets a limit of $1,000, for example, will receive a shock (they can control the level of physical interaction, from vibration to shock) if they spend more than this amount. While this may seem extreme, this is to give you an idea of where IoT is heading in the mobile space. Consumers will have plenty of exciting ways to explore this up-and-coming technology attraction.

Do you see clear mobile payment winners emerging? 

I think it is too early to tell who the clear winners are. As in every industry, there will be a shake out and only the strongest will survive. There will be consolidation, but we need to wait at least five more years to determine who will be victorious.

Have you adapted your business model to incorporate mobile payments?

I believe it is impossible to be a merchant acquiring bank and not adopt mobile payments. Consumers are demanding it from merchants, and merchants are demanding it from their payment providers. Acquirers will inevitably need to adapt their business and technological solutions to meet this demand. In the second half of 2015, Credorax launched ePower 2.0, a singular acquiring and payment platform, and one of the key integrations we included in the platform is a robust solution for managing mobile payments. We are able to adapt the technology to meet both mobile POS and m-commerce solutions, and several of our PSP partners are leveraging this technology.

See Rod at Money20/20, come to the Credorax booth, #2441! To book a time to talk with us there, contact us at meetus@credorax.com.

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