20 Minute Insights with Jason Sherman - Mobile Payments
- Apr 18, 2014
An in-depth look at one of the hottest topics in the payments industry today - Mobile. Examining mobile commerce, mobile acceptance, and mobile payments, Cayan's Sales Training Coordinator, Jason Sherman, provides viewers with all the latest information they need to know about the world of mobile.
Hello everybody! My name is Jason Sherman and welcome to our very first 20 Minute Insights Session. So, today we are going to focus on mobile and how it relates to the payments world.
So mobile is a huge phrase in the payments world right now. There is a ton of stuff going on with it and there's a reason that a lot of the big players are focusing so much attention on it.
When we say mobile, there's three main elements that we're referring to. The first of which is shopping, mobile commerce. So these are purchases made from a mobile device, such as a smartphone or tablet. Lot of purchases, the actual volume on these purchases is growing significantly. Lot of opportunity for merchants with mobile-enabled websites and some solutions that are coming down the road that are going to make that much more attractive.
From there, mobile acceptance so Mobile Point of Sale. This is mobile acceptance, like a card reader attached to a smartphone or tablet that allows the merchants to take payments on-the-go. Huge thing, big in the industry. It really has enabled a whole new subset of merchants that were not accepting credit cards previously, to gain credit card acceptance. So a huge thing with mobile.
And of course, mobile payments. Something you guys hear us talk about all the time. This is referring to the mobile wallets of the world. Levelups, Isis. There's a ton of ones that are popping up on the market. And a ton of opportunity for both merchants and consumers with mobile payments.
I personally use them frequently. Today for example, I actually bought my lunch using my smartphone. I do frequently. So they are here, it's definitely not a thing out of the future. It's something that merchants should definitely be looking into as to how they're going to adapt.
And of course, you can't ignore the momentum of mobile. In fact, there's no denying that mobile payments and commerce are two of the hottest topics in the media. And there seems to be enough media coverage for everyone and anyone if it's mobile focused.
Media attention spans from endorsements, partnerships and new entries to leading retailer investments on mobile apps, in store mobile Point-of-Sale, mobile payments, mobile coupons and more. And trust me, it doesn't stop here.
For the relatively new players, like Levelup and Isis, the lens is on consumer adoption, acceptance points and add-ons. As an example, Starbucks who just announced they have over 4.5 million mobile transactions a week, up 1.5 million a week since the previous quarterly. Simply, all Starbucks needs to do, is update that figure and they're going to gain major press attention in the trades. Big thing. There's a reason that all these publications are focusing on mobile. Again, there's a huge opportunity around it.
Think about it. Step away from the payments industry for a second. People are attached to their smartphones. If I walk out of my house without my smartphone, I feel like I don't have pants on. I know I'm not the only one. It's huge. People are really attached to their smartphones, so it only makes sense for them to use them for more and more things, as the technology becomes available.
Let's take a look at some of the players. And the game is evolved. Things have changed from simply mobile flip phones that came out years ago. Smartphones, iPhones and the Androids of the world these days, there's so much you can do on them and the people have really changed.
One of the first people to get in the game was Google with their Google Wallet solution. This was a way to make payments from a smartphone at the merchant's point-of-sale. They focused on N.F.C. technology. They didn't have the most successful launch out there and the solution has kind of laid dormant for a while. But, they still have a great solution and I wouldn't be surprised to see it gaining some more traction.
Another big one is Groupon. Groupon started from a whole other aspect, they started with offering daily deals via website and a mobile app. From there, they've expanded their business model to bring in payments as well. Groupon actually offers merchant accounts. So pretty wild to see how mobile has changed even for one business quite like Groupon.
Another big one in the industry is Isis. Isis really blows me away. AT&T, T-Mobile and Verizon, three of the most heated competitors in the cell phone industry, got together and collaborated on Isis, cause they saw an opportunity. They realized that these smartphones are capable of doing much more than just making calls, checking email and checking Facebook. They can do a ton more with this. So they got together, formed Isis, as a new mobile wallet to use out in the market. They recently finished pilot in Salt Lake City and Austin, Texas. You're going to start seeing this pop up more and more.
Another one that I find very interesting is MCX, or Merchant Customer Exchange. This one is actually backed by the retailers. So Walmart, Target, Shell gas stations, WaWas if you're up in the mid Atlantic, these are all some of the names that are involved in MCX. Basically, this is the retailers saying, We realize there's a need for mobile. We need to get in the game as well. If the tech companies aren't going to offer us what we need, we're going to get in the game. So MCX is coming sooner than you think.
And some other interesting ones: Visa rolled out their V.me solution and MasterCard with their Master Pass solution. So now the card brands are even getting in the mobile game. These are two different options. They can actually be used for a simplified eCommerce checkout at this point, but their goal is to move into mobile and have a mobile wallet option.
Again, everybody sees the opportunity here. Someone that's been in the game for a while is Amazon. Amazon, they started off with a website, they were definitely one of the first ones out there to get a mobile site going. I make all my Amazon purchases from an app on my phone. It's way too easy. And they're smart. They did this on purpose. They've got all the user accounts in there, with linked payment information. This is exactly what they want. They want to make it as easy as possible for you to access their stuff and buy it.
And another one that's been in the industry for a long time is PayPal. Again, PayPal started as a way for me to send you money because you mowed my lawn or did something for me. Now PayPal offers mobile point-of-sale, virtual terminals, gateways that can be linked with a shopping cart on a website and so much more. They've certainly realized the opportunity in the industry and definitely have developed with mobile in mind. Even some brands are getting in the game. Uber, one of my personal favorites. Uber, the way it works is you link your payment method to your Uber app. You never exchange cash with your driver, everything is billed directly to the credit card you have on file.
And Starbucks, probably the most successful mobile payments brand out there. Starbucks started their mobile app a while ago, they are doing phenomenal with it. As I was mentioning some of the figures before, they are doing really well with this and believe me, every time I go to Starbucks, I whip out my smartphone. Makes it easier for me to redeem rewards and gain points.
And of course, one of my favorites, Levelup. Levelup is a straight wallet payment method. They're focusing on consumers, consumer adoption. And they're using the consumers to drive the retailers. Very interesting stuff. As a consumer myself, I use Levelup frequently. I've saved just under $300 as a Levelup user over the two years I've used it. That's worth it to me. That's a big thing. They're enticing users then they're using that data on the backend to entice the merchants.
And of course one of the big ones in the mobile space is Square. Square started out with just a little dongle you attach to a smartphone to accept payments. They've now expanded that into Square Marketplace, they've got Pay with Square, they're doing so much and it really all started with mobile and they're focusing on mobile. They're moving into more brick and mortar locations now, but definitely this is their bread and butter is the small micro merchants that are out there. They'll do a trade show, they travel around. This is what Square really started off with and where they've had the best success.
And then the question really becomes, When, not will, these other big ones join? Apple has the largest collection of payment enabled user accounts out there with their iTunes solution. It's only natural for them to adopt a mobile payments platform.
And Facebook has the most user accounts of any social media outlet. So it only makes sense for them to jump into the space as well. And we're very curious to see who else is going to jump on board.
Let's look at some industry predictions that have come out. Of course, like any evolving marketplace, predictions range for mobile. But there's no denying that rapid growth is common regardless of what is predicted or the source behind it. Right there, that really says a lot. One trillion dollars.
That's what the I.D.C. predicts worldwide purchase volume for mobile will be in just four years. Sixty-six percent of that should be mobile commerce, 25% should be via N.F.C. enable devices, 7% will be peer-to-peer and about 2% will be via barcode or QR code.
According to Gartner, it's anticipated that there will be some 448 million mobile payment users in the next three years. Your merchants want a piece of that.
Even more incredible, is recent research from Pew that indicates that 65% of tech experts believe that plastic cards and cash may be obsolete by the year 2020. That's only seven years from now and we're talking about payment methods that have been standard for decades. That's wild.
And of course, the consumer demand is building. As the technology continues to fuel the awareness of mobile, enhanced consumer opportunity around convenience and extended value is of course, rising to the top of the conversation. There's been so much conversation recently around showrooming, which is the primary source of more than 73% of consumers reporting that they have used their mobile phone in a store. In today's economy value is critically important for consumers. And the majority will not pay more if they don't have to. Making a smartphone a critical shopping accessory.
Believe it or not, 58% of smartphone owners regularly go to a store with the sole intention of trying on or testing products before purchasing them online. This is crazy. And I can say I've seen this personally. My parents are in the jewelry business. My father does not sell watches any more because people showroomed.
Literally, this is first hand experience. He carried watches for years and as the Internet became more and more prevalent, people would sit there, they'd try on a watch, find something that they liked and then they'd go home and buy it from a merchant who didn't have to pay for a physical location. Big difference there. This is something that happens frequently. And I can pretty much say we're all probably guilty of it, one way or another.
Another area where consumer demand is evident is in mobile coupons. According to Mercator, some 55% of consumers have expressed an interest in mobile coupons or offers. But only 10% have actually received one. Clearly, a huge opportunity for merchants. Successful coupon campaigns can help e-retailers acquire customers and drive online sales.
By 2014, the number of mobile coupon users is expected to increase to 53.2 million a year. At roughly 10%, the redemption rate of mobile coupons crushes that of print coupons which hovers around 1%.
In looking at an overall influence of smartphones on retail sales, there are some predictions out there that in just three years, those numbers will rise to 19% from just 5.1% last year. And much of that is based on the need for retailers and developers to support an omni-channel shopping experience. Creating a parallel shopping experience across all mediums: in store, online and mobile point-of-sale.
An overwhelming 89% of consumers said it's important for retailers to let them shop for products in the way that is most convenient for them. No matter which sales channel they choose. And that makes sense as well. If you're a merchant, you do whatever you can to get that customer back, to get them coming through the door. If it's the way that they want to pay is what's influencing that decision, absolutely cater to that.
Now let's take a look at some things that consumers want. Definitely right now, at the forefront of consumer demand is security. With all the news lately in the payment space, with the big breaches that have happened, that's a huge thing. After all, 10% of Americans have already been a victim of credit card fraud. People are on this, they're curious about it, they're concerned. Giving them security is extremely important.
Of course, another is speed. There's never enough time. Time is money. That's an important thing. People want to be able to make a payment as quick as possible. If mobile devices are making that simpler, they're going to use them. If it's taking more time, people aren't going to use them. And I'll give you guys a perfect example, there's one mobile application that I really like, Levelup, that I use constantly because it's just as easy as whipping out my credit card and handing to them.
There's another mobile payment option which I'm not going to mention, which I have used and I don't like. It's a clunkier experience, that actually takes me longer than just handing them a credit card. So I don't use it. So speed is massive.
Another big one is ease of use and convenience. Obviously, if it's simple to use, if it's easy, people are going to do it. If it's clunky, if it's annoying, people are just not going to adopt it.
A big thing as well is the value and discounts. Especially millennials, they'll do whatever they can to get a discount. It's all about perceived value. If they can do something, if they can open an app and pay instead of hand you a credit card and they receive better rewards for doing so, they absolutely will use it.
And finally, customers want recognition for being loyal. That's a big thing. They like that, it drives repeat business. And that's what every merchant's after so that's a win-win on both ends.
Now let's talk about the convergence point. Consumers, they've got all these things on the left. They've got cash on them, they've got credit and debit cards, they've got checks. They got coupons, paper coupons. Then they've got loyalty fobs and cards and the whole nine. That's a lot of stuff to carry around. I'm the first one to say it, I can't wait until the day that I don't have to carry my wallet any more. I'm sick of sitting on it.
What's going to make that easier, is combining everything onto a smartphone. These are capable, they have the technology out there. It's just happening more and more. And yeah, you're not going to be able to stuff cash into your smartphone, but with more and more merchants accepting alternate payment methods, it's only a matter of time before cash truly becomes obsolete.
And there's definitely some merchant pressures out there. While the consumers begin to emotionally and physically look for mobile as a holistic solution for shopping, merchants are facing their own pressures from both customers and developers as well. Also, that's in addition to preparing for a shift to E.M.V. in October of 2015. A transition that for the vast majority of small and midsize merchants, will require new payment acceptance technology.
They also have the challenges of activating loyalty programs that are easy for customers, eliminating the key fob and delivering instant value. Accepting new technologies, including the mobile wallets, N.F.C., QR codes, whatever the next technology on the horizon is. How to leverage these coupons, how to target them to customers to drive new and repeat visits and how to establish the partnerships that help them build their businesses.
And of course, they still need to worry about risk, security, regulations, compliance and running their day-to-day business. Merchants caught in the middle of this. So we really, as an industry, need to focus on how we can make this easier for the merchants. They are the convergence point.
So essentially, the challenge that's out there is how do you meet customer demands and preferences, while keeping up with the ever-changing commerce industry. And that is the question that I'm going to leave you guys with today.
We can definitely handle some Q&A after this, but essentially, there's so much going on with mobile what is going to be the ultimate convergence point, what is going to be the driver to get everybody on board with this? There's certainly the payments industry is on board at this point. Consumers are starting to adopt more and more. And the merchants are starting to adopt.
So it's only a matter of time before this truly explodes.
And of course, I'd like to thank you guys for sitting through this quick training with us. Really appreciate everything. Now we can take any questions that you guys have.
Alright, it looks like we have a question from John. John had asked, What do you think is going to be the winning mobile technology? And that's a great question John. Definitely some of the big ones out there: N.F.C., QR and there's probably some out there that we don't even know about. Honestly, I don't think there is going to be a clear winner. I think it's really going to be in the merchant's best interest to accept all of them. To figure out a way to accept all of these.
There is no clear winner at this point. And you really can't put all your eggs in one basket. That is a great question John.
And Colin, you're exactly right. As they keep adding more and more reasons for the consumers to use these, they keep driving more loyalty, more rewards, it is only a matter of time before every merchant accepts these. It only makes sense. If that's what the consumer wants to use, it's in the merchant's best interest to accept it. That's why there's credit card acceptance these days.
When credit cards first started, a lot of merchants laughed at them and said, I don't need to deal with that. Now the vast majority of them do. This is following the same steps.
Excellent. So that looks like all the questions that came through. So I would definitely like to thank you guys. We're going to look to do another one of these down the road. And again, I'd just really like to thank you all for spending some time with me.
Everybody have a phenomenal day and we'll talk to you soon. Thank you everyone.