Easy and Intuitive Is the Way To Win with Mobile Payments
With the introduction of new technologies such as Apple Pay, and its soon-to-debut competitor CurrentC, mobile payments have picked up significant transaction at the point of sale (POS). A recent study from Gartner predicts that mobile commerce revenue in the United States will account for 50% of all digital commerce sales by 2017.
It has been challenging for retailers to get consumers to embrace mobile payments. Prior to Apple Pay’s launch in October, customers were happy to pay with their magnetic striped credit cards, accepted at virtually every retail POS. For many, the idea of moving to a mobile “wallet” was fraught with worry about data security. For example, in July, the U.S. Computer Emergency Readiness Team issued an advisory that more than 1,000 U.S. businesses have been affected by the Backoff malware, which targets point-of-sale (POS) systems used by most retail industries. That’s a lot of worry to go around.
In addition, some consumers had tried mobile payment apps, and were frustrated and disappointed. Even the uber-popular Starbucks system can get hung up on a finicky scanner. So the message from consumers is loud and clear: If it’s not secure and intuitive (i.e., easy), we’re not interested.
Apple Pay may have overcome those hurdles. For now, it is focused on providing secure mobile payment for consumers, in an efficient, simple manner, via Near Field Communications (NFC). It works with credit card companies, rather than around them, as CurrentC does. But, while Apple focuses like a laser beam on transactions, CurrentC incorporates customer information, including loyalty benefits. That could make for a complicated, though more complete, rollout for CurrentC. Meanwhile, Apple does plan to include more features in the months ahead, but has chosen a more integrative approach.
The credit card companies typically charge 2% to 3% of a given transaction to the merchant; CurrentC saves that fee normally imposed by credit card companies from the payment process by circumventing them and using automating clearing house (ACH) payments. However, in an online introduction to Apple Pay, the company said it won’t charge users, merchants or developers for transactions. It’s likely that Apple is collecting a fee for each transaction, but mum’s the word on those details right now.
It is interesting how Apple forged the partnership with the three biggest card networks, Visa Inc., MasterCard Inc. and American Express Co., to process payments. As a former vice president of a large upscale department store explained to us: “Apple’s negotiation and techno-skills won them the distinction of having Visa, MasterCard and American Express recognize Apple Pay as a ‘Card Present’ transaction, which will definitely be a big disrupter in the payment ecosystem. This is especially true if your payment solution doesn’t produce the single-use cryptogram and Token thus relegated to the more expensive ‘Card Not Present’ space.”
But there is that pesky issue of security. Users with Apple Pay installed on their phones have very little to do a locked phone held over the payment terminal wake up with a finger on the TouchID scanner and the transaction is done momentarily. It might take a bit of persuasion to convince Mr. and Mrs. America that their credit card numbers are not floating around in cyberspace.
“I was directly involved in the early deployment of Google Wallet at a large national retailer, and I agree that adoption was impacted by low consumer confidence in the security and the high concern (quite justifiably) that their purchase histories would be sold,” the department store exec said, noting that Apple has publicly stated it doesn’t collect purchase history. So, not only does Apple not know what was bought, it doesn’t know where you bought it or how much you paid for it. “Assuming that is true, which is actually harder to do than you’d think, that would address a big part of consumer fears. From a technology perspective, Apple has combined multiple on-phone and in-network security strategies to deliver one of the most secure payment methods available. That said, most consumers — especially those who already mistrust big banks and big business — don’t really understand the security measures that have been in place for years. Even the Apple faithful have recently lost a little confidence with the recent iCloud exposures.”
Although consumers are becoming more comfortable with the idea of mobile commerce and payments, the average consumer needs reassurance that these systems are safe and secure. It’s one thing for a customer to use mobile payment method at Starbucks for a $4.52 grande caffe latte, and another to use it to buy a $850 48-inch plasma television. A retailer must be prepared for both transactions.
