Mobile commerce readiness: A merchant and consumer perspective – Pt 1

With the underlying infrastructure for mobile commerce – payment tokenization, smartphones and contactless point-of-sale (POS) terminals, for example – taking hold, the industry must begin to shift its focus to value.

Technologies such as mobile wallets hold latent and largely untapped potential. But wallets and other next-generation commerce tools must first prove the existence of a two-sided value proposition that satisfies the needs of both merchants and consumers.

Developing a measurably better experience than what is delivered today through incumbent payment methods (e.g., credit cards) and shopping tools (e.g., loyalty punch cards) will be critical to ensuring the onward and upward trajectory of mobile commerce.

In a new Research Paper with Discover, we examine exclusive survey data to better understand mobile commerce readiness among merchants and consumers.

With smartphones increasingly part of consumers’ daily activities, it is not surprising to see that mobile commerce is trending.

This is particularly the case for commerce tasks that do not require a significant behavior change when performed on a mobile device. As seen in Figure 1, smartphone owners have already extended their e-commerce activities to their mobile devices, with more than three-quarters of respondents having purchased goods and services on a mobile website.

Purchasing goods and services via mobile apps, tried by 48% of respondents, is notably less commonplace than on the mobile web. But with the continued rise of app-based services such as Uber and Postmates, we are confident there is room for considerable growth.

More than half of respondents have used pay buttons, such as PayPal, on mobile apps and websites, underscoring the value these types of services deliver on small screens. In-store mobile commerce activities have seen varied levels of uptake.

Mobile rewards program apps and coupons, which are often digital surrogates of their predecessors, have been the most significant success story in the physical domain; 69% of respondents have tried them, which is indicative of their ease of use and value.

But mobile payments at the POS have been somewhat slower to evolve. Just 28% of respondents have used an NFC mobile wallet such as Apple Pay, with widespread adoption hampered by a variety of factors that we will discuss later in this report. Interestingly, merchant branded mobile wallets such as Starbucks’ have seen more significant traction than their NFC-based peers.

We believe this is largely attributable to the insertion of loyalty, rewards and personalization into the payment experience – an important concept that stakeholders across the mobile commerce value chain must make note of.

Mobile wallets have emerged as one of the most hyped payment concepts in recent memory. But as commerce becomes increasingly fragmented across myriad devices and channels, mobile wallets offer a proposition too valuable to ignore.

By acting as a digital container capable of uniting loyalty, rewards and payments in a single transaction, we believe mobile wallets harness the potential to significantly improve and streamline the shopping journey and contend that, in time, they will become a valued tool in the arsenal of every digitally empowered consumer. But first, they must abide by a hierarchy of needs to deliver on their latent promise (see Figure 2).

Below, we outline each stage of the mobile wallet hierarchy in greater detail. As with Maslow’s Hierarchy of Needs, each individual stage must be addressed before moving to the following stage so the mobile wallet in its entirety can reach its full potential.

• Security: This should be viewed as the foundational and most crucial element of a mobile wallet. While mobile wallets offer a security proposition far superior to traditional mag-stripe payment cards, providers must instill a sense of trust in their potential user base through messaging of security-centric features to ensure enrollment and adoption.
• Ease of use: To drive enrollment completion and ongoing usage, providers must create an onboarding and provisioning process that is free from friction while ensuring the overall user experience is intuitive. If the payment process is not easier than swiping or dipping a card, it should be considered a failure.
• Acceptance: Providers must work to ensure their mobile wallets are accepted where users already shop, nearly ubiquitously. This means acceptance must extend beyond in-store to the online domain. Mobile wallets should also add convenience to the checkout process, such as faster transactions and removal of manual card credential entry into online checkout pages.
• Value-added services: Value-added services will be the critical differentiation layer that helps position mobile wallets as superior payment mechanisms to cash and cards. Within this layer, a mobile wallet’s ability to store loyalty cards, coupons, receipts and transaction history are of high importance. We contend that although some wallet providers have satisfied several needs within the hierarchy, no single provider has fully addressed them all.

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