Over the last two decades, the mobile marketplace has evolved exponentially – from those very early days of the simple feature phone, when mobile access to the Internet was still a novelty, to the iPhone’s launch in 2007 and the app economy that has been ballooning ever since.
Fast forward nearly 10 years since the start of the smartphone revolution, and today’s phones serve as a fully capable extension of – and often a replacement for – tasks or functions typically performed manually or via a computer. Even though KPCB Analyst Mary Meeker predicts a worldwide leveling off in the growth of smartphone usage, actual smartphone subscriptions continue to rise, estimated to reach 6.4 billion by 2021, according to the 2016 Ericsson Mobility Report.
The reality is that businesses are nearing a point of evolutionary transformation in which mobility will be paramount to survival. All consumer-facing businesses need a mobile-first or mobile-only commerce strategy – not simply a bolt-on to an existing commerce plan – if they intend to capture the mobile opportunity and expand upon it.
But the near-term and very real potential of the mobile marketplace isn’t in smartphone subscriptions or usage. The power of its future – and where the real money is now — literally and figuratively, is payments.
According to data from TrendForce, global mobile payments will rise from $620 billion in 2016 to $1 trillion by 2019 – the collective result of consumers’ gradual adoption of new (and alternative) payment methods. These include Android Pay, Amex Express Checkout, Samsung Pay and Apple Pay, as well as various regional payment technologies and greater support from global banking systems for mobile-enabled payments.
Simplifying the buying process, or improving pathways to purchase from a mobile device, will greatly increase conversions from “looking-to-buying” or “looking to booking.” Adding simple, fast and effective payment processes that match consumer’s mobile preferences is key. Simultaneously, merchants and retailers can benefit from alliances with industry trendsetters around consumer interaction, such as Google, American Express, Amazon and Apple.
Which raises the question: are businesses prepared for all of those mobile transactions, not to mention the revenue streams that flow from the mobile channel itself?
The Current State of Affairs
Mobile wallet transactions in the European Union are growing annually at nearly 62%, according to Intelling, and predicted to pass the USD equivalent of $1.1 billion by 2021. And direct revenues from mobile apps will reach $57 billion (USD) worldwide by 2021, according to IDC data.
18% of Americans routinely use mobile wallets for payments, a figure that rises in higher-income and lower age groups, according to Fortune. The 2016 Kount Mobile Payments & Fraud report notes that 12% of merchants generate half their revenues in the mobile channel today, a figure expected to double within two years.
Starbucks, long considered the mobile payments pioneer, currently collects a significant 21% of its revenues from the mobile channel – a figure that could rise to 50% in a few years.
For any executive still hesitant about investment in the mobile channel, the above figures should serve as both a warning and wake-up call: mobile is where the future of commerce lies.
What Can Your Business Do Now to Board the Mobile Bandwagon?
The following tactics, culled from my experience in the rapidly growing payments ecosystem and the implementation of comprehensive mobile payment solutions for airlines and other travel-related businesses, can help companies in all industries develop and implement “mobile-first” strategies now so they’re prepared for what’s ahead.
First, Understand the Benefits
The key payoffs of a “mobile-first” payments strategy include:
- An increase in revenues from consumers who can buy more products more frequently from their always-connected smartphones and devices with simple, fast and effective payment processes
- A decrease in operational costs, represented by more self-service capabilities and less reliance on manual processing and reconciliation of payments. Combined, lower operational costs + increased revenues = higher profits and better profit margins
Second, Plan Now, But Be Ready for Constant Change
The payments ecosystem never stands still, shaped as it is by new technologies, ongoing mobile wallet deployment schedules across different regions, and continuous upgrades in devices and operating systems. As such, businesses must pay attention to key challenges, including:
- Geography & Availability: Major wallet providers roll out their solutions by country and in partnership with regional or global banks. Make sure your strategy is in sync with the country-by-country roll-out plans of such providers as Android Pay, American Express, Samsung Pay, Apple Pay and others.
- Adoption Differences: Some countries and regions are more prepared and enabled for mobile payments than others, according to the MasterCard Mobile Payments Readiness Index. Internet-connected Singapore and Canada rank highly, for example, as does Kenya, where ubiquitous smartphones now provide payments and banking services to remote and physically underserved markets.
- Customer Differences & Behaviors: Study the countries and regions where your customers are active, and deliver the mobile wallets they prefer on the devices and operating systems they use most.
Enable and Support Security
Accepting mobile payments is faster than accepting traditional credit and debit cards, because payment data is pre-stored in the device and can be activated by a swipe, touch or scan. But what happens if a customer’s phone is stolen or lost, or if fraudsters attack? The Nexis Lexis True Cost of Fraud 2016 study finds that mobile-channel fraud among large merchants has risen 26%-35% year over year for a variety of factors – including numerous channels of entry, cross-border transactions, weak verification processes or the ability to buy from a smartphone and pick up in-store without additional payment verification.
Proper security measures are critical to mitigate the risk of fraud and its related costs. Options include:
- Real-time fraud monitoring, based on data profiles and risk-based rules engines that can stop fraudulent transactions as they occur and delay them until they can be verified.
- Identify verification, including biometric fingerprints, iris scans and facial recognition or voice technologies that can strengthen ID verification.
- Payment authorization, including step-checks, tokenization and one-time passwords that can build in necessary levels of authorization to ensure the legitimacy of payments.
Create a Great User Experience
In the airline industry, we encourage operators to make their digital and mobile interactions “passenger-centric,” a concept that broadens to “customer-centric” in other sectors. The user experience of any mobile commerce solution, regardless of industry, should be focused on making it as seamless and frictionless for the user as possible, while offering the consumer all the options they need. Mobile payment solutions must:
- Support omnichannel payments, meaning the ability to service all direct-channel interactions seamlessly without interruption. A typical omnichannel travel scenario involves a passenger who begins a transaction on one device (e.g., laptop at home) and completes it on another (e.g., smartphone en route to the airport); context-aware information is delivered seamlessly and accordingly from one device to the next.
- Make payments easy to use, meaning the ability to pay in as few steps as possible. Do not make customers re-enter the same information several times, or switch from one channel (online, mobile, call-center) to the other as they engage with you. For example, we often integrate one-click purchase capability for our airline customers. The ability to purchase a ticket with one click by selecting a previous but similar journey is a huge convenience for the passenger who travels regularly to specific destinations. One-click functionality eliminates the need to enter or repeat the same data on a small screen.
- Incorporate loyalty and rewards into payments: The airline industry enables passengers to use frequent flyer miles as a currency for tickets and other items, by redeeming their points or miles for purchases. This concept can be applied to all businesses that have loyalty programs, especially if incorporating this capability increases the likelihood that a customer will return to you rather than switch to a competitor.
Put Data to Work in the Mobile Environment
Mobile payment transactions are data-intensive, framed by the need to collect, store, connect and manage massive amounts of data from a variety of touchpoints: consumers, payment technology vendors, and merchants. Databases, for example, must connect, reconcile, verify and process customer name, account number, type of mobile device, operating system, contact information, preferred payment method, language, currency, loyalty program, payment processor information, and internal transaction processes.
Businesses might also need to offer a variety of payment methods or options, depending on their respective customer base and markets – a decision that adds more data to the mix. In this data-rich environment, choose payment vendors wisely, and ensure they are able to support a rapidly changing and constantly evolving payments landscape – securely and cost-effectively. Payment solutions must be able to store data, support various payment technologies and alternative payment methods, and connect data and customer profiles from centralized, easy-to-manage platforms. And they must be agile in order to stay ahead of a payments ecosystem being widely disrupted.
As global markets prepare for what Ovum researchers call an “m-commerce explosion” and 4.7 billion mobile customers by 2019, merchants and businesses across every sector must prepare now to ensure they have a seat on the mobile payments bandwagon. Just as airlines and travel brands support customers throughout their entire journey, businesses must be positioned to serve their customers from the moment of mobile search to the final click of a smartphone-enabled payment.
Written by: Kristian Gjerding, CEO, CellPoint Mobile.