Mobile continues to change the way consumers interact with businesses, and it’s spurred another development that’s finally been catching traction over the past few years — frictionless payment. Make no mistake, this is no fad, and you can’t afford to continue waiting to see how it continues to develop. In today’s post, we’ll take a brief look at four reasons why the answer to “Should I use frictionless payment at my store?” is “Yes.”
Understanding Frictionless Payment
As one of the key decision makers for your business, you’re unlikely to need to ask the question, “What is frictionless payment?” It’s all about making the purchase process as smooth as possible for customers, no matter what industry you’re in or what product or service you deliver. While many of the most obvious forms of frictionless payment involve mobile pay — we’ve all seen someone pay for their Starbucks or Dunkin’ Donuts coffee by tapping their phone against the appropriate card machine — other formats have existed for some time, while others are just emerging.
For instance, like e-commerce before them, most apps (from Uber to games with micro-payments) save pertinent credit card information for seamless checkout. Meanwhile Facebook is integrating payment options into its Messaging service. Even the companies that defined frictionless payment are continuing to push it forward. Most notably, Amazon developed the Dash button system, which bridges the digital and physical worlds to make reordering staples as simple as pressing a button (literally).
All this being said, the most important application of frictionless payment for your business is going to be in-store at the checkout counter. The number of these kinds of mobile-payment users is expected to grow 61.8% in 2016 alone, and the transaction value will skyrocket more than 210% to $27 billion. If that isn’t enough reason to move toward adoption, below we’ve got four more benefits that this payment type offers.
Expands Payment Options.
Thanks to the EMV mandate that went into effect in October 2015, most businesses will be updating their POS systems in the near future already. This is due mostly to improvements in security and the shift in liability for fraudulent activity, however, the additional benefit is that it opens a host of opportunities for frictionless payment. In getting the new card terminals, you can select the technology and payment processors that will work best for your needs and to match the way your customers want to pay. You can make a system compatible with NFC payment options from manufacturers or build a system around a branded app, or even use a combination of these. You have the opportunity to make the payment process extremely flexible.
Captures Millennials and Centennials.
Nearly a quarter of Millennials (23%) make a mobile payment at least one time weekly, and 52% of them use their smartphone as a payment device in general. More than a quarter of them (26%) would actually prefer using mobile payments at a self-service kiosk over traditional cashiers, as well. Given the age of most Centennials (a.k.a., Gen Z), the statistical information supporting the desire for mobile frictionless payment is mostly focused on Millennials, however, it bears noting that Centennials are not only digital natives, they’re mobile natives.
Here, we can see that it’s only a matter of time before mobile payments like these become a norm. The question is when you’re going to earn Millennial and Centennial loyalty — will you wait, and let them turn to your competition? Avoid the inconsistency and frustration that can drive these key consumer groups away.
Attracts New Customers.
Consider the fact that even Walmart is jumping on the mobile payments bandwagon. It’s utilized its app to offer Walmart Pay, which rolled out at the end of 2015 and, as of July 2016, can be used in all of its stores and Neighborhood Markets. The in-app system may seem reminiscent of Starbucks, and for good reason. The differences in their target consumer groups are proof of just how effective frictionless payment is for attracting customers. According to numbers released earlier this year, Walmart Pay was up 45% week-over-week.
Furthermore, 88% of customers that tried it continue to use it, and the brand is in talks with other payment systems to potentially expand the mobile payment offerings provided by the chain, a clear indication that mobile payments are a huge attractor. And Walmart isn’t the only one to see these benefits either; Paypal has had 10 million new users sign up for its One Touch smartphone option as of Q4 2015. For Apple Pay, a recent study shows that 70% of iPhone users are more likely to choose stores that accept the service.
Generates New Sales.
Speaking of Paypal’s fourth quarter in 2015, the company beat estimates by reporting revenues of $2.7 billion along with more than six and a half million new users overall. This is attributed in good part to its mobile payment volume, which grew 45% from the same quarter in 2014 to a solid $20 billion. However, the real revelations come from a study reported earlier this year with regards to Apple Pay:
- 22% increase in total revenue.
- 89% increase in revenue through mobile frictionless payment, including Apple Pay.
- 12% increase in total average ticket for mobile frictionless payment.
- 26% increase in overall transactions.
As you can see, frictionless payment isn’t just a potential tool for your business to use in the future. It’s a vital tool your business needs to be using right now. To be sure, you need to examine your options in full, both in terms of technology and in terms of the financial risk of certain applications. However, the time for hesitation is passed.