From Coca-Cola Machines to the Apple Watch: A Look at How Mobile Payments are Evolving

By Gary Lombardo, VP of Marketing

Apple Pay

Image from Forbes

Will 2015 be the year that mobile payments finally go mainstream? If you read the news regularly, it certainly looks that way. For the past few months, services like Apple Pay, Google Wallet and LoopPay (recently acquired by Samsung) have dominated headlines. And, according to Forrester Research, U.S. consumers are on pace to make $52 billion in mobile payments in 2015.

Mobile payments have certainly come a long way from their 1997 debut, when Coca-Cola set up vending machines in Helsinki, Finland that could accept payment via text message. Today, services like Apple Pay utilize near-field communication (NFC) technology, allowing shoppers to simply tap and pay with a mobile device, such as a smartphone or smart watch. While it sounds convenient, consumers aren’t completely sold on mobile wallets quite yet.

Apple Pay adoption is improving, but slowly. Just 15 percent of potential users had tried the service as of March 2015, according to the InfoScout/PYMNTS Apple Pay Transaction Tracker survey. So what’s holding the other 85 percent back? It’s simple: most of them are content with what they’re currently using. After all, is it really much easier to pull out your phone than a credit card? Retailers themselves have been slow to adopt Apple Pay, also contributing to slow consumer adoption.

As with any new technology, there are kinks to work out. Two out of three Apple Pay users have reported a problem at checkout, mostly relating to terminals not working or taking too long to make the transaction, says a study by Phoenix Marketing International.

Functionality woes aside, vendors like Apple Pay will need to come up with ways to give shoppers something they really want in order to entice them to go mobile. The ability to pay with a phone or the new Apple Watch simply isn’t enough – shoppers want to be able to earn loyalty points, save money through in-store offers and receive real-time promotions at their fingertips. This use of “branded currency” – the convergence of gift cards, coupons and loyalty rewards into a single asset that retailers can use to influence purchase decisions, drive consumer engagement and build customer loyalty – is something we’re already seeing with services like Apple Passbook and Google Wallet, which are taking steps in the right direction by allowing consumers to store not only credit and debit cards, but loyalty and gift cards on one device.

So what does the future hold for mobile payments in the retail industry? In-person mobile payments at retail POS terminals have the greatest growth potential, according to Forrester, and these types of transactions are expected to grow from nearly $4 billion in 2014 to $34 billion in 2019. In a Timetric survey, 31 percent of consumers also said they were anticipating an increase of up to 25 percent in payments through their mobile phones during the first half of 2015.

Shoppers are clearly interested in paying with a tap, but after curing any technological hiccups, retailers and payment vendors need to provide them with the extra incentive to take out their mobile device at the cash register. As technology continues to evolve and retailers respond to consumers’ demand for convenience and immediate fulfillment, mobile payments are poised to take off and revolutionize the in-store experience.

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