The simple fact is, with four out of five Americans carrying a smartphone and an anticipated one in four utilizing a wearable device, mobile payments are on the rise. Even aside from the exponential lifts in m-commerce, people are beginning to use their phone as their wallet more and more, especially among younger generations. (Nearly a quarter of Millennials will make this kind of mobile payment in-store on a weekly basis, in fact, high-income consumers are even more likely at 38%.) Even so, you might feel that mobile payment at point-of-sale is growing too slowly to warrant attention. Retailer payment apps only saw an eight point lift while the major players (i.e., Apple Pay and Samsung Pay) only lifted by 7 points in 2015. However, this doesn’t take into account that traditional payments are on the decline, especially with regards to credit cards, which dropped from 55% of transactions in 2014 to 50% in 2015.
The shift to Europay (EMV) compliance presents an opportunity to acquire the technology to keep up with your customers’ desire for frictionless payments. Below are two of the big answers to “Why use mobile pay in my store?”
The Ultimate Convenience
Customers already have their phones in hand when shopping in store, ready to do anything from compare prices and look up reviews to check details on the branded app. It only makes sense that mobile payment would break the bond between consumer wallets and the payment terminal, and both app developers and retailers are doing their best to give consumers a reason to adopt the format. Depending on the mobile pay provider, a customer can access their loyalty program, add loyalty cards to scan at POS, add coupons or other special offers to scan at POS, add gift cards as payment methods, and add multiple types of payment accounts and credit cards.
The other part of convenience is the number of retailers that are beginning to adopt mobile payment methods. Some are developing their own payment apps, most notably Kohl’s and Walmart, which fold in other branded aspects, including applying rewards to purchases and making smart shopping lists. Starbucks is perhaps the most easily recognized for developing its own payment process, which includes loaded payment methods like gift cards as well as options to place a drink order ahead of arrival to skip the line. More straightforward payment options are accessible at various retailers. For instance, Android Pay is available anywhere that accepts generic contactless payments, such as stores from Barney’s New York to Chevron gas stations. Apple Pay is available at even more places, from Sephora to Game Stop, and there’s a host of locations now capable of accepting both, like Walgreens, Toys’R’Us and Trader Joe’s. Still other locations have access to alternate payment methods like PayPal One Touch, including Airbnb, Uber, and Home Depot.
Shifting Perspectives on Security and Fraud Protection
Unfortunately, the simple truth is that fraud is on the rise, especially CNP fraud, or card-not-present fraud, which includes online purchases and mobile pay. Mobile pay only represents 14% of CNP purchases, but it represents 21% of fraud cases, and this sort of CNP fraud costs merchants just over $3 per $1 spent fraudulently. There is not a perfect payment system to avoid fraud completely, especially not at scale, and merchants and customers alike have to look to the most secure options available.
Most of the time, this growing fraud is not based on the mobile payment platforms themselves. It starts with stolen credit information, or relies on other confidence scam tactics, such as posting false advertisements and collecting that information from customers through phony versions of trusted payment apps, such as Google Wallet. This is why your approach to security needs to be holistic no matter which types of payment methods and data warehousing you plan to utilize.
Certainly, mobile pay makes customers feel more secure and in control. Part of mobile pay’s resilience is thanks to device technology, such as biometric scanners, which use fingerprints as passwords. What’s more, BLE and NFC connections used to communicate between the mobile device and POS system provide secure exchanges of information. The third layer of protection comes from the payment platforms themselves. Both Apple Pay and Android Pay utilize tokenization and other encryption to exchange data at POS, meaning the customer’s data is never at risk in store. Some platforms add even more protections; for example, Apple Pay only stores secured elements on the device, which are encrypted data about your banking information that is tied directly to device identifiers that allow your bank to prevent applying account information to magnetic strips or other mobile devices. Most platforms require user login to use the app or require the user to keep their device locked, and many provide around the clock monitoring, dispute resolution, the ability to lock accounts if something is wrong or to lock them remotely if the device is lost or stolen, and more.
To be frank, mobile payment isn’t going away anytime soon. It’s quick, simple, and well-suited to consumers on the go. Understanding the why use mobile pay psychology should illuminate the benefits it can bring to your business.