Over the years, powerhouse companies such as Sears, RIM, Kodak and Blockbuster have had incredible successes, only to be followed by dramatic downfalls. The lack of innovation, linear thinking, and speed of technological adaptation is what brought many of these great companies to fall into the trap of degeneration. Because retailers fear falling into this trap, they are eager to find new and innovative approaches to answer some of their age old problems:
- How do we get customers in the door?
- How do we increase consumer spending?
- How can we get to know our customers better?
In an effort to stay on the cutting edge, retailers are experimenting with new technologies, one being mobile payments. Most recently launched mobile applications such as ApplePay, CurrentC (Merchant Customer Exchange) and the veteran Google Wallet seem compelling, however, do these solutions bring innovation or just put a shiny new wrapper on an already fragmented industry? Let’s dig in a bit further.
Put aside the hype- for any technology offering to be adopted, it must add value to both retailers and consumers. In the large majority of cases, the brunt of the cost lies on the shoulders of the retailer. As for mobile payments, where is the benefit to the retailer? At this time, there is no clear indication that there is any benefit. The retailer doesn’t garner any additional data from the transaction (i.e. name, email, phone, etc.) than currently received by the use of a plastic card. It’s also a cumbersome and expensive process for some retailers to adopt a technology with no clear value proposition. How will the retailer then benefit from accepting mobile payments? Will they get more sales or gather more insights about their customers? This seems unlikely. Paying with a phone doesn’t magically make someone want to spend more…oh, and the insights, forget about it!
So, how about the consumer? Well, after reaching into my pocket, pulling out the phone, finding the app and fiddling with the pass-code (on an android), the experience is more cumbersome than efficient. The CurrentC app (by MCX) is even more cumbersome as it requires the use of a QR code for payment (though it does have some nice value props for retailers). Maybe that’s why Google Wallet only has a meager 19% usage rate compared to the total 89.4 million Android user base in the U.S. Perhaps it’s because the consumer can add all their loyalty cards in one place, or maybe it truly is the ‘more secure way’ to handle your accounts; but again, unlikely (barely after initial launch CurrentC has already been hacked). Consumers may believe that “ApplePay is awesome, O.M.G.!” However, most merchants don’t quite feel that way. This is revealed by the lack of merchants who have adopted and employed the systems, including large retailers such as BestBuy and Wal-Mart who are part of the MCX network. CVS and Rite-Aid have had so little success with mobile payments that they recently announced they are terminating acceptance of any NFC payments.
The problem is that these new services don’t drive innovation to the retailer’s current process, nor do they solve their burning problems: customers, sales & insights. In the age of big data, consumer & behavior, custom & demand pricing and complex incentives, retailers need solid solutions, and unfortunately, none of these mobile payment gateways solve any of the retailer’s needs.
It always seems to come down to a battle for consumer data: who owns it, what data is revealed, when and for whom? For quite some time in the payments arena, data has lived with the retailer and the card issuer. Currently, the retailer receives the first and last four digits of your CC, transactions and timestamp and when employing a mobile payments system, the retailer continues to receive this data. Since the retailer does not receive a name, email or phone number (which the mobile gateway does collect) in order to attribute the transaction to a consumer, the retailer must request permission from the consumer, typically an email or phone number which is the key to appending third party data attributes for deeper customer insights and buying behavior. The mobile gateway requires the consumer’s name, email and phone to sign-up to the service, however, they don’t receive any card or transaction level data. So herein lies the conflict.
The winner of this epic battle will ultimately be able to best predict and control buying behavior and consumer insights, and ultimately, media dollars. With consumer spending accounting for 71% of GDP, the battle for consumer data ownership continues. Who will benefit the most from these mobile payment systems? The retailer, the consumer, the card issuer or the payment gateway…this will reveal itself as the mobile payment industry continues to evolve.