Catching five major mobile pay players under one roof doesn’t happen often, but when it does, it sparks a colorful discussion.
That’s what happened yesterday at R2, Retail Reinvention, where leading mobile wallet providers pitched why their platform is the “go-to” choice for mobile payments and how their model fits into where they think the industry is headed in the next five years. And outside of that, the mobile pay players gave their pitches about who is going to shift the mobile payment paradigm: the consumers or the merchants.
Yes, we’re back to the chicken-and-egg debate of mobile payments. Will it be up to consumers to adopt mobile payments so merchants realize their value, or will it be up to the merchants to adopt and tailor mobile payment solutions into their retail models so consumers begin to realize the value proposition behind ditching cards for a mobile device?
Even after a lively hour discussion that gave the audience a taste of what the mobile wallet leaders think today, there was no single conclusion about what the industry will look like in five years from now.
Mobile Payment Adoption: Merchant Vs. Consumer
So what makes the mobile wallet consumer adoption such a difficult task to crack? Well, there might just be too much on retailers’ plates at the moment. And without retailers seeing the value behind mobile wallets, they won’t be able to propel into the market as quickly as the tech companies would like. Consumers won’t ignite the mobile wallet market, the group concluded, merchants will. But it’s up to the mobile payment players to pitch to them why they should care.
“We are still in an early market — as much as I hate to say it. And when you’re in an early market and you have retailers at the tip of the spear and are willing to stick their necks out and try new stuff, and you have the early majority [and] the late majority … who will always say I’m going to wait for others to figure it out and wait to see what others are doing,” said Chris Gardner, cofounder of Paydiant, “I just think that that’s a characteristic of an early market.”
As explained by Will Graylin, global co-GM of Samsung Pay and CEO of LoopPay, the responses he’s seeing with retailers is they simply are overwhelmed with demand to keep innovating the point of sale. With the EMV migration right around the corner, most retailers are saying that if it involves another device, they don’t want to hear the pitch until next year.
But when the conversation changes from a payments-focused topic to a marketing strategy, that’s when the concept of mobile payments becomes more appealing, Graylin said, commenting that “when you start to talk to them from a marketing standpoint, then it becomes a lot easier conversation.”
Most consumers already walk around everyday with a miniature computer in their pocket, but Graylin said it’s up to the merchants to work with mobile payment providers to better understand how those mobile devices can be used to leverage payments, loyalty and experience in one single device. And, in turn, ditch those cards.
But that needs to be conveyed to the merchants, and it needs to be conveyed in a tailored approach to each individual merchant. As we’ve learned during the discussions, there’s not a one-size-fits-all approach to retail reinvention, and there’s certainly no one-size-fits-all approach to mobile payments innovation.
“When we get back to fundamentals, what problems are we trying to solve? The truth of the matter is there are plenty of problems out there. There are just different merchants with different needs,” Graylin said. “There’s huge opportunities within each of those pockets to solve merchants problems … There is an extension of that that comes from digitizing our credentials and holding it in a secure place and then letting conduits come access them.”
Sherice Torres, marketing director for Android Pay, said that what’s needed is really pitching the concept of making the process of adoption — both from a merchant and consumer perspective — as seamless as possible. This means reminding the merchant that they can work with the system already in place. That also means reminding merchants that NFC is just as critical as EMV.
“While these retailers must make their EMV upgrade, it seems common sense to include NFC in that upgrade because they see a proliferation of NFC devices across multiple carriers. I’m not here to say NFC is the winner, because who knows what will happen here. But we are at a critical time here because retailers do have to make that upgrade, and EMV plus NFC is not a horrendous incremental cost. They might as well future-proof their payment system now since they have to make the investment anyway,” Torres said.
But there really hasn’t been an incentive presented to the consumer or the merchant. And that’s where the mobile payment and mobile wallet gap exists in the market. And that’s why mobile wallet providers are after the same issue.
“Right now, what we’re all trying to solve is the basic problem of how retail is structured today with the evolution of payment. We’re just going from one form of barter to the next (coins to paper money to plastic cards to metal phone),” Torres later said about the evolution of the mobile payments discussions.
Those discussions, she later commented, are also tied to fraud. And that’s another piece of the mobile payment pie that’s complicating the recipe.
“Until there is something that rocks the financial basis of companies to their core, pushing them to change, we’re not just going to change because it’s nice to have,” Torres said.
But getting back to basics, the real question in the mobile payments and mobile wallet discussion centers on one key metric in the whole debate: consumers. And that’s what mobile payment providers and merchants need to stay focused on, the panel of mobile payment leaders concluded during the discussions. Torres, for example, pointed out that it’s about asking consumers what they want out of their payment experience, what their key pain points are when they are paying.
“What would payment be if you never had to pull anything out of your pocket? Not even a phone. That’s the foundation of changing the entire retail experience in trying to solve an actual problem the consumer has,” Torres said.
The other big question in the mobile payments debate: Will consumers push consumers or will merchant pain points push consumers? That’s still up for debate, but the early indication — at least from this panel — is that merchants are going to need to ignite the mobile payments spark in their customers, which means mobile payment companies will need to ignite the spark in their merchants.
Darren Beyer, head of platform for CARDFREE, agreed, saying the million-dollar mobile wallet question is all about adding value and convenience to the consumer and solving their pain points.
“For me as a consumer, if I can walk in a store, not wait in line and not pull anything out of pocket, that’s a huge win for me,” he said.
Seth Priebatsch, chief ninja at LevelUp, had a bit of a different way to express his thoughts on the evolution of the mobile payments discussion. In fact, he said that the future of mobile payments is dropping the conversation about the mobile wallet and instead focusing on the experience the technology can deliver. He also said NFC will be the technology that wins out.
“I kind of sidestepped conversation of what is a mobile wallet because I’m not entirely sure it matters. I think what the core question ends up being is what ends up being the winning experience,” Priebatsch said, citing the example of a consumer being able to drive through and having an order ready because a merchant recognizes them.
“That type of stuff is going to be what the future of payments looks like,” he said.
It is moving from a magnetic stripe to an NFC chip then that will have been a failing. “If we can move to an existing thing in the cloud to that data being connected to loyalty, to the power of the interaction being pushed to the consumer’s device, that will have been a win.”
Five Years From Now
Looking down the pipeline to five years from now, the panelists agreed that the mobile payments conversations will all be about what the experience looks like and what value it added to the table. So five years from now, it appears we may be asking some of the very same questions that the industry experts are debating even today.
“I do think it’s going to transform from a conversation about a form of payment to a form of retail … What does the retail experience look like? I think the consumer demand for increased ease, increased time savings, transform your store to your needs and my needs rather than the adjusting my behavior to your cue, your aisles,” Torres said.
Beyer agreed that the conversation will still be about merchant-driven solutions that make life easier for consumers. And in five years from now, the conversations will still be centered on how mobile payments can get more consumers through that door to make more sales.
As for Priebatsch, he thinks the conversation about mobile wallets will be about how retailers want to own the mobile wallet experience and if that is tied into operating system-based schemes in order to determine how they can better control the offers that consumers are getting.
That also means that the payments aspects of the conversation are going to be left behind, which is what Gardner suggested.
“The payments piece of interaction slide into the background, become less visible and let the retail and marketing interactions — even to the point where you get to see less of the counter interactions and more of the other types of interactions that happens in mobile,” he said.
And for Graylin, he believes the conversations are going to still be about the customer experience and who can truly create a value-added experience for that customer by creating the wallet that serves as much more than just a wallet. For that to happen, however, it means getting both merchants and consumers to buy in.
“Five years from now, I think it’s still going to be focused on what the consumer experience is going to be and how merchants are interacting with those wallets. Those who can create and really focus on consumer experience and adoption through not only the utilities inherent to the wallet, but also getting merchants incentivized to best push it, those are the ones who are going to be more dominant,” Graylin said. “Is there going to be room for more than one? Sure there is. Is there going to be a whole lot? No, it’s probably going to be less than a handful that’s going to be dominant. But the good news is, I think, in five years we’re going to see new application experiences that leverage the wallet that will create the experiences that more consumers will flock to.”