The success rate of smartphones as the new payment method over cash or credit/debit cards is yet to be established. Apple’s introduction of the iPhone 6 with the Apple Pay, an electronic wallet did raise a few eyebrows in 2014 within the mobile payment sector especially with the brand carrying a high reputation for taking the markets by storm with each of its products. The sales records clearly state Apple Pay as a winner, but the margin of this success is yet to be determined.
Ensuring reach to the consumer market
It’s important to note that this determination can only be completed by understanding the influence of other modes of payment. Credit cards had to wait for 28 years to reach a market of 50 million users, despite entering the markets in the 1950s as Diner’s Club Cards in New York City. Similarly debit cards and PayPal users had to wait for 12 years and five years respectively to attain a similar consumer base. This means that merchants and financial institutions will have to merge to produce a similar response along with some financial aid from retailers with investment around $10 billion in order to keep the technology up to date.
None of the mobile payment methods currently available like the Apple Pay, Google Wallet or the Merchant Customer Exchang (MCX) CurrentC Platform and others, have been able to take the markets by storm till date and may not in the near future. Additionally early 2015 witnessed announcements like Best Buy, an MCX member planning to take its rival, Apple Pay; PayPal to acquire Paydiant, the technology behind MCX; & the CEO of MCX, stepping down and being replaced, that are evidence of the troubled times for these systems.
Can cards be replaced by mobiles?
It is estimated that by 2018, roughly 6 percent of overall card transactions will be represented by digital wallets. Although major hubs may not have witnessed any growth, in regions like Kenya & China mobile payment services like M-Pesa & Alibaba have collected close to 19 million people & 350 million users respectively.
It is being suggested that mobile money services are to be categorised for varying brands and types of transactions akin to the categorisation of credit cards based on daily or big purchases. However, only technology companies or banks or retailer consortiums or a combination of these is deemed to turn out as the last man standing when a crisis hits the industry, given the state of such platforms where only a few standard and established platforms survive.
The following are 5 significant elements that will be required in order to survive the stiff competition:
Approval by the dealer
Visa and master card’s success may be attributed to their acceptance at most of the merchant locations. If Apple Pay wants to rise high then it’ll need to be accepted at way more than its 700,000 locations, which is even less than 10 percent of the 10 million merchant locations in the U.S.
In order to increase its consumer market, Apple Pay needs to expand its coverage to all private-label store credit cards and regional debit networks although it seems to be bridging the earlier gap of 20 percent market that was unsupported by closing a deal with Discover in early 2015.
The primary concern for Apple Pay should be to conquer the fear of breach that majority of consumers have with mobile payments. In order to counter internet financial crimes, there has to be rigid encryption services. Apple’s use of fingerprint recognition technology suggests that it seems to have learned a thing or two from Target who lost $250 million along with its CEO and CIO to an infamous security breach in 2013.
Mobile Solution Integration
Milo and RedLaser, both acquired by eBay in 2010 locate the nearest store for online searches of products and locate the online/nearest store for the lowest prices of products through a scan of the barcode respectively. Interestingly, Walmart and Starbucks use their own mobile apps for the same. This is definitely going to result in sharper and smarter consumers in comparison with those of a mobile-based website. Mobile money services could also include loyalty points and the likes to enhance the transition.
Marketing fuelled by data
Currently, any transaction allows the consumer’s record to be linked to the merchants, thanks to the strong connection between mobiles, transactions and the online scenario. This is a boost for mobile services in a one-to-one consumer marketing where the merchant gets to communicate directly with the consumer and track their payment records. However, to make things clear this is not an easy process and comes with its own share of challenges. If used efficiently, traditional banks and financial institutions can claim this as their big ticket.
Nonetheless, it is clear that the one who is able to converge the above mentioned elements will be the clear winner. The result, it is being said will bring a major revolution to the relation between consumers and marketing.