For years, when shoppers checked out their purchases at physical stores, the payment options were cash, check or plastic. That changed in 2011, when Starbucks launched its mobile payment app for caffeine fiends to pay at the register.
Using mobile to pay at the register is promising way to replace cash, improve security, and directly access shopper data. It also can preserve retailer margins that would otherwise go to banks. Yet, for each benefit there are as many hurdles. So, eight years later, the payment revolution that industry watchers predicted has yet to take off. To understand what went wrong and how to move forward, Ipsos conducted research and panel interviews with payments industry experts.
Problems slow growth
According to the study, while mobile wallet use is growing faster than credit card use, shoppers are holding back on trying the technology. They feel embarrassed because it holds up the line. They find it easier to use the credit card and this links back to habit of using a more “trusted” method of payment.
Four of five shoppers who’ve used mobile wallets say they prefer traditional methods, according to proprietary Ipsos research. The goals of the shopper impact their choices, too. Rewards-oriented shoppers prefer to pay with credit cards at the register. Speed-oriented consumers prefer a retailer-specific app. People who shop out of habit rely most on debit and cash payments. The shoppers most concerned with security tie their mobile wallets to cash and checking accounts.
Four areas to fix
Through its research, Ipsos saw four recurring themes that can help or hinder shoppers in making mobile their go-to payment choice at retail:
Tie it to shopper habits
Part of the success of the Starbucks and Dunkin’ mobile payments are that these trips are part of the shopper’s daily “coffee-and” habit. The frequency and repetition make it easy to tie the mobile wallet to the habit. “You go to a really decent Starbucks and you see it,” says Val Cole, former senior director of business development at Apple Pay. “There’s all these people not going through the checkout. They just pick it up and go.”
Make it ubiquitous
The more people see others pulling out their phones to easily pay at the register, the more likely they will want to try it. The more outlets, the more opportunities to see it in action. “It starts with a degree of ubiquity for consumers and merchants,” says Peter Donat, founder of Commerce Technology Partners and former senior vice president of business development at First Data Corporation. “The lack of ubiquity has led to a lack of habitation.”
Give shoppers a reason to prefer them
The technology that allows mobile transactions to accumulate loyalty points and encourage shoppers to trade up for bigger rewards. But it has to be fast and easy to execute.
“For the consumer, the best experience is invisible,” says Jim McKelvey, co-founder of Square, in an Ipsos webinar on mobile payments. “Friction from the purchase is one of the things that is a killer of commerce. We don’t want the payment system to kill the sale.”
Make it easy for retailers to explain
The checkout and operations are critical barriers, says Meysam Mouradpour, former director of digital ventures at Yum Brands’ Pizza Hut. “Do they have enough signage within the store? If so, can it simply explain what you do and why it is beneficial to you?” he says. “Does the staff know how an Apple payment is supposed to work? We only had success with our payment strategy at Pizza Hut when we provided enough training for the staff.”
A lesson from the recent past
It comes down to a lack of incentives for retailers to commit to mobile payments at the register, says Jeff Repace, senior vice president, Ipsos US Customer Experience. He likens the situation to moving retailers to the chip and PIN technology now widely used after several high-profile security breaches.
The true lever was for Visa and Mastercard to tell retailers, “‘We won’t reimburse you for theft and fraud,’” he says. “The risk of taking on full liability for all losses was what drove retailers to use a chip reader.”