It’s a big question in the payments industry right now. In an earlier article, we discussed how the U.S.’s eventual transition to EMV could accelerate the rise of the mobile wallet as a payment medium. But we also discussed some of the problems, and there are many problems.
First things first: are mobile wallets safe?
One of the primary concerns amongst consumers is whether or not mobile wallets are a safe form of payment. According to the 2014 Digital Wallet Usage Study by Thrive Analytics, “Security concerns remain the main barrier to adoption.” These results closely follow from those of Accenture’s Consumer Mobile Payments Survey.
The concern is legitimized by media coverage of major recent data breaches and smartphone malware incidents. Consumers need to be reassured that their data is safe, and they want to take the least risk necessary when making payments or providing account information. Traditional credit card transactions, although unsecure compared to EMV transactions, may appeal to consumers because they don’t appear to expose any information. The challenge for mobile-capable merchants and for mobile wallet providers certainly lies in reassuring consumers that mobile wallets are safe in general, and much safer compared to traditional magnetic stripe card payments.
What about competition?
Many retailers are interested in creating their own proprietary mobile wallet applications, but this may impact the way consumers perceive mobile wallet technology as a whole. Ron Herman, CEO of Sionic Mobile, expressed his concerns about consumer “overload” in the app store: to the average consumer, it may be very difficult to differentiate between the countless applications already available. In a sense, the market may inadvertently be training them to look for the name on the application rather than what the application provides. This is bad news in an industry that is ultimately focused on driving spend by improving the consumer experience.
Companies should be focused on offering a complete package to consumers. Many would-be mobile wallet users are looking for incentives to try mobile wallet payments; headaches and confusion are only likely to turn them away from this payment medium.
What about mobile wallet acceptance?
Another major hurdle for mobile wallet providers is the slow uptake of mobile compatibility amongst U.S. merchants. The problem is cyclical: merchants don’t view mobile wallets as a major player in the payments ecosystem, so they are hesitant to enable mobile compatibility (if they even have it); consumers then see that many merchants are still not mobile-compatible, so they are hesitant to begin using mobile wallets.
If left to continue, this vicious cycle will prevent mobile wallets from reaching their potential as a payment medium. What can be done to solve this problem? A few things.
First, mobile wallet providers need to emphasize to consumers that mobile wallet technology is secure and worth pursuing. It’s best to address the market’s primary concerns, and data security is a hot-button issue nowadays. Accenture’s findings indicate that consumers are much more likely to continue using mobile wallets if they make at least one payment through a mobile wallet application. To get that far, though, consumers need to be reassured that they are protected from the risk of exposure (and from the risk of fraud).
Second, mobile wallet providers need to emphasize to merchants that mobile wallet technology is becoming more prolific and is therefore worth supporting. The main concern amongst merchants is that mobile wallets don’t represent a significant portion of payments, and that the technology is therefore not worth pursuing. In fact, mobile wallets present promising opportunities for merchants, especially given the trend toward a cashless or less cash dependent consumer base. EMV compliance could be used as a selling point here; EMV technology supports mobile wallets, so the push to establish EMV compliance in the U.S. could be presented as an opportunity for merchants to support mobile wallet transactions.
What do consumers want to see?
The vast majority of market research tells us a few things about consumers’ wants and expectations when it comes to mobile wallet technology.
First, consumers want to know that their data is being protected. Security is consistently at or near the top of mobile wallet survey results; consumers need to feel confident that the technology they use is safe to use.
Second, consumers want to know that their payment methods will be accepted at a range of merchants. Consumers are less persuaded — and even dissuaded — by limited applications. If they can’t be sure that mobile wallet technology, or a certain mobile wallet app, will give them greater freedom, they won’t be willing to add it to their payment arsenal.
Furthermore, incentivization drives mobile wallet use. Part of the draw of mobile wallet technology is the potential to integrate customer rewards programs and promotional campaigns into a system that already handles payments and many other non-commercial activities. The convenience of bringing together the payment and customer service utilities is a significant contributor to existing mobile wallet usage, and it stands to reason that further developing and emphasizing these features is one of the keys to increasing mobile wallet usage and customer spending.
What can we expect to see?
There are a lot of forces at work here. Nobody can be absolutely certain about what will happen with mobile wallet technology down the line, but it’s clear that consumers are hesitant to make the transition from cash and cards to app-based payments. What we hope to see is a rise in emphasis on the consumer: the mobile wallet should empower consumers by facilitating convenient and simple payments and supporting incentivization. So long as consumers are concerned about mobile wallet security or confused by what’s being offered, they’ll cling to what they know.
Interested in accepting mobile wallet payments?
Host Merchant Services offers EMV solutions for business owners. If you’re interested in getting a head start on the rest of the U.S. market, contact an HMS sales representative today and ask about our EMV-compliant equipment and processing options.