Mobile Payments Unriddled
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Apple Pay. Google Pay. Alipay. Wait, how do I pay?
With 48 million people over the age of 14 using mobile apps last year, mobile payments have brought much-needed innovation to a legacy payments industry traditionally controlled by uninspiring bank technology. The emergence of the “Pays” has forced merchants to take a deeper look into their payments strategy, often unearthing a larger need for an overhaul of both the online and in-store checkout experience.
EMV to Mobile
With the industry migration from magnetic stripe to EMV (e.g., chip cards) acceptance, merchants were required to purchase new payment hardware to avoid fees associated with the EMV liability shift. Fortunately, but unbeknownst to many, that same payment hardware has enabled mobile NFC payments for hundreds of thousands of merchants across the United States. So, if acceptance at the point-of-sale isn’t the issue, then what is?
The Winners and Losers
Although the popular mobile payments providers like Apple Pay and Google Pay utilize NFC communication, many of the more popular mobile apps, such as the Starbucks app, use QR code based payments. NFC, which is a standard payment type with upgraded hardware, is much easier to implement than QR code based payment methods. Where NFC will work “out of the box” in most instances, QR code payments generally require more costly integration work with the point-of-sale system and the backend provider. If QR code acceptance presents a larger barrier to entry for mainstream adoption, then why are QR code based mobile payment option, such as the Starbucks app, Alipay and WeChat Pay, seeing significantly more success than the NFC based mobile payment options, like Apple Pay, Google Pay and Samsung Pay?
Although year-over-year growth in mobile adoption is promising, non-affiliated mobile payments (e.g., Apple Pay, Google Pay, etc.) still only account for less than 1% of all merchant transactions in the U.S. Compare those numbers to China, where more than 90% of all transactions made by users in more than 10 different provincial regions were conducted through mobile devices. The delta? Value added services. Mobile apps like Alipay, WeChat Pay, and even successful merchant apps like Starbucks, have had a hyper-focus on providing value added services through their apps instead of focusing solely on conducting a payment. Whether it’s the ability to earn redeemable points, order ahead, or pay your utility bills through a single app, successful mobile players have created an experience that gives power back to the consumer. The lagging mobile players in the U.S. need to focus on more than just payments processing. Ensuring a seamless consumer experience that emphasizes value added services works to ingrain mobile usage into a consumer’s everyday habits, creating a cultural shift towards mobile that is much larger than simply asking the question, “how do I pay?”