The not-so-secret dirty little secret about mobile payments is that consumer adoption has been slow, maddeningly so. There have been some notable successes. Person-to-person payments are taking off in developing markets and with the unbanked. On the retail side, Starbucks' has a hit with its extremely successful mobile payment app. The company's app has been used for more than 42 million transactions since its launch in January 2011.
Unfortunately, in the 18 months since Starbucks launched its app it remains the only example of a successful program for paying at the point of sale using a mobile device. Meanwhile, other high-profile programs like Google Wallet continue to underperform.
The sad fact is that along with slow consumers adoption, mobile payments has another issue: Merchants are ambivalent about them.
That's not to say that integrating mobile devices into payments isn't being embraced by certain merchants, albeit small ones. Square, Intuit and other mobile point-of-sale providers are doing a booming business offering a solution to micromerchants like dog walkers and lawn services. Square alone has signed more than 1 million small businesses.
But what about the big merchants? What's the value of mobile payments to them? How is the industry supposed to get those merchants on board the mobile payment bandwagon?
"Retailers are hearing that mobile payments are important, but not from the right people," said retail customer experience expert Mike Wittenstein. "They're not hearing from the customers, they're hearing it from people who have something to sell them."
And right now, those sellers may be selling something retailers don't want.
The Wall Street Journal recently reported that big box retailers like Target and Walmart are so disenchanted with the options being presented by companies like Google and Isis, they have begun discussing their own mobile wallet project, one driven by the merchants. The details are sketchy at this point, but the fact that such a partnership between such fierce rivals sounds plausible is evidence in itself that current options may leave merchants unimpressed.
Wittenstein, an authority on customer experience and design, recently addressed the issue of retailer's uncertainty about mobile payments at the Electronic Transaction Association's annual meeting. According to Wittenstein, merchants are facing too many options, and too few people are providing answers.
"Retailers are aware (of mobile payments)," Wittenstein said, "but confused and afraid."
What's worse, the normal partners a merchant would look to for answers -- payment vendors and providers -- can only provide their own small piece of the mobile payment puzzle, Wittenstein said.
Melissa Morrissey, who has worked with merchants as an organizer of the Retail RAMP conferences on mobile and alternative payments, agrees that payment companies may not be best suited to help merchants with mobile payments. While speaking with retailers, she's heard a lot of buzz about mobile payments. But it's not the payment part that retailers care about.
According to Morrissey, that's why companies making mobile into a marketing and customer service channel make better partners for retailers looking at mobile payments.
"The companies doing mobile marketing, things like location-based services, understand," Morrissey said. "The payment companies may not be as willing to understand or change because they have so much invested."
That's because making a payment isn't that exciting to merchants.
"Payments is where the money is," Morrissey said, "but the excitement isn't the payments." Retailers know that the transaction is only a necessary piece of the puzzle, it's the data about consumers, what they're buying and why, that interests retailers.
A mobile payment is a novelty, but something like having a high net worth shopper with all their information in a loyalty program is worthwhile," Morrissey said.
"That doesn't negate payments, but every transaction through a mobile phone is just a transaction. They need to tie into the backend," she said.
Connecting the backend
It's those backend processes -- the ability to send offers, bring customers in and make the entire shopping experience better-- that mobile payments can facilitate. And to find the right solution, Wittenstein advised merchants to look at how payments fit into that customer experience.
"Retailers need to be directing their brand people to start looking at mobile commerce," Wittenstein said. "They need to find the solution that fits their brand promise. And they need to involve customers in those discussions."
He also suggested retailers stop looking to vendors to provide answers when it comes to mobile payments.
"Retailers need to take accountability for the experience they provide customers and employees," Wittenstein said, "experiences they'll notice, remember and want to share."
At this point, that may be easier said than done. Wittentstein said the current approach of merchants may not lend itself to intergrating mobile payments into the customer experience.
"Retailers are taking a very narrow view and people are picking what works for their departments," he said. "They're sending people out to figure out mobile payments and it's filtered through a lens that is best for a department or what will sell in the company. And the bar is so high for the right solution.
Regardless of how retailers begin to fit mobile payments into their operations, Wittenstein warned that adoption will come sooner or later, so merchants need to overcome their uncertainty and start figuring it out.
"Mobile payments is changing the retail game; it's changing the way customers perceive retail value," Wittenstein said, and added, "It's a disruptor, and because it's disruptive it's something every retailer will have to respond to."
But that doesn't mean they need to be wary of the disruption.
"Change doesn't mean upheaval," Wittenstein said.
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