Be truthful. How many times have you asked the following question:
“How long will it take for mobile commerce to reach critical mass in the U.S.?”
Well, I have the answer. It depends. (I know, not the answer you were hoping for).
So, here’s the deal (If you want to save time reading, just punch thru to these two slides which give you the story in pictures!)
One the one hand, mobile commerce in the U.S. could take forever and a day to ignite. After all, we’ve been talking “the promise of mobile” since way back in about 2004 when some of the first forecasts were published about mobile payments and NFC adoption. (See my piece about the Inevitable Shrinking NFC Technology for details on those analyst projections over the years.) And, just about a decade later, we’re still pretty much nowhere when it comes to mobile at the physical point of sale which is where 95 percent of the action still happens in payments. Sure, mobile commerce via connected devices – phones and tablets – is starting to juice up online commerce sales, but I don’t think it’s at all controversial to say that we have a long way to go before 95 percent of commerce via mobile happens in a physical storefront – even for glass-is-always-half-full-optimists like me.
The reason that mobile commerce ignition has been as slow as summer coming in Boston every year and could take a decade or more to ignite is because it will just take that long to affect change at the 62 million-plus card accepting point-of-sale (POS) terminals in the U.S. today. Moving from magnetic stripes to mobile isn’t only about changing out 62 million units, mind you, it’s about integrating whatever the new technology is with all of the software that enables the complex merchant front- and back-office activities, retraining the sales clerks (and everyone who touches the POS and/or store operations), and getting in the IT queue. That takes time and costs real money. And there are risks associated with doing that, especially when that something new isn’t yet “standardized,” and for the big ones at least, there is a real risk to saying yes to something today that will take 18 to 36 months to implement, depending on the size of the merchant.
Then, there is of course the consumer side. Outside of the little technology bubbles in which we all live, most consumers don’t feel that they have a payments problem that needs to be fixed. So, anything that’s “harder” than whipping out a card and swiping is DOA, not to mention scary – consumers still say that paying with mobile makes them nervous. So, consumer apathy/nervousness coupled with not many places to use mobile payments technology and lack of a value proposition for consumer or merchants does not a formula for ignition make. Glom onto that the ongoing arm-wrestling among all of the major stakeholders for “top-of-digital-wallet” branding, data and customer access and the long arm of the regulators stretching into this new digital domain and you have the potential for a Long. Slow. Torturous. Tediuos. Uphill. Expensive. Painful. march to mobile ignition.
But, that scenario assumes that the shopping experience of tomorrow looks like and acts like it does today – terminals of some kind in merchant stores that use new technology to connect with consumers carrying digital devices that enable payment for goods purchased within the physical storefront.
And, that’s where I kind of think all bets might be off.
We’re starting to see glimmers of a retail reinvention powered by connected devices, applications, data and the cloud take shape. Innovations in cloud-based POS solutions with their slick consumer- and merchant-facing interfaces make it easier than ever for merchants to use powerful new channels to reach their consumers in real time in their storefronts. Merchants large and small now recognize the benefit of changing the POS experience because they can influence the consumer buying experience within their four walls – well before the payment experience ever happens. Merchant interest in leveraging these cloud-based solutions is driving another outcome – interest on the part of app developers to create the “killer apps” that will persuade consumers that they actually can’t live without the new commerce experience that mobile/digital enables for them. More consumer and merchant interest leads to more developer interest which, in turn, breeds “competition” among these developers to step up their game. And, that whole process is made easier and cheaper than ever because these developers can leverage powerful new software platforms that connect new apps to existing payments rails.
But, suppose that all of the innovation around apps + the cloud + mobile + data + software platforms was harnessed in a way that could completely transform the retail experience by taking payment completely outside of the physical storefront? So the 62 million POS terminals become to payments what VCRs have become to watching movies – completely and totally irrelevant. In this scenario, payment happens in the cloud while shopping happens in the store. Merchants don’t need terminals in the same way they need them today because they don’t need to be used for payment. Instead, they need tablet-like devices that can be used by sales associates to access product information and customer preferences but the consumer actually initiates and controls payment on their device – and even before they ever get into the store. There are some exciting possibilities to consider here – all made completely feasible because consumers and merchants can now connect with each other via apps and software that helps everyone skip a few giant POS steps over hardware on the way to a new retail experience. Then, glom onto that scenario a payments enabler that could bring a couple of hundred million digitally enabled wallets with them to a merchant and you could see merchants run, and not walk, to the nearest innovator to sign them up.
And, that could make mobile ignition not only fast but anything but tedious. Still hard, of course, but a different effort and with a very different sort of payoff. So, what do you think? Mobile commerce ignition in the U.S. … fast or slow?