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Making mobile technology pay

Thursday January 12 2012

Adoption of mobile or so-called ‘m-commerce’ is growing in strength. While analysts predict revenues from this channel will grow rapidly, payments expert Keith Brown argues that NFC is only the tip of the m-commerce iceberg

Adoption of mobile or so-called ‘m-commerce’ is growing in strength. While analysts predict revenues from this channel will grow rapidly, payments expert Keith Brown argues that NFC is only the tip of the m-commerce iceberg


Research from eDigitalResearch and IMRG found 35% of UK consumers intended to do more shopping on their smartphones during Christmas 2011. According to Juniper Research, m-commerce sales will amount to £200 billion this year. Near field communication (NFC) technology is set to arrive in 2012 as well. But how will people pay for their goods?


Transition from e- to m-commerce


Keith Brown, managing director of mobile phone payment provider paythru, told Retail Technology that NFC alone will not drive the full growth potential of m-commerce. “Indeed, with a massive infrastructure yet to be rolled out and maximum spending limits of £15, it is only a small part of m-commerce,” he said. “We estimate mainstream adoption of NFC payments is probably two to three years away. However, this is clearly not blocking the m-commerce ambitions of some large retailers. Marks & Spencer has seen customers happily use their mobile to purchase items priced as much as £3,000.


“When you consider how rapidly e-commerce transformed the retail sector, the tipping point for m-commerce could literally come overnight,” Brown continued. Gartner has predicted more than 190 million consumers will use their mobile phone to make payments within the next 24 months. According to figures from Morgan Stanley and the CTIA, in the US the PC took 16 years to become adopted by 50 million users whereas the number of mobile phone subscribers reached 100 million users in the same amount of time. “Generation M is driving the change but, while 94% of retailers see mobile as a real opportunity, there is a risk that they are missing the true potential,” he suggested.


Maintaining business as usual


Trusting a mobile internet browser alone to deliver a good shopping experience is a big risk. “Research from Compuware showed 40% of people abandon mobile sites due to problems completing transactions, while mobile apps such as those recently offered by Starbucks are useful but naturally have limitations. Over time, an individual app for every different payment becomes frustrating, particularly for impulse purchases. Mobile wallets have yet to experience significant interest, largely because they require pre-registration and are expensive to integrate, but mainly because consumers are reluctant to deposit money with the scheme,” Brown said.


Instead of inventing a new wheel, the mobile payments firm boss argued that the best starting point is to look at what people are already using instore and online i.e. with credit/debit cards. “These trusted payment methods require no registration, are familiar to customers and secure – in that they are PCI DSS [Payment Card Industry Data Security Standard] compliant. They are also widely accepted and incur little additional charges for retailers. More importantly, they don’t require a major behavioural change, from either consumers or retailers,” he said.


The wider world of m-commerce


“In order for m-commerce to flourish, the experience of mobile payments should be ‘frictionless’ – freeing retailers to connect with customers and build loyalty in new ways. For example, fashion retailers can encourage someone who has purchased a handbag from their mobile to come into the store and try the matching shoes with a mobile discount voucher. Mobile payments can also act as an extension of self-service tills we commonly see today, by allowing customers to pay for items instantly using their mobile phone and leave the store without having to see the back of a queue.


“More broadly, as we are already seeing, certain brands are taking advantage of Location-based services inherent to mobile phones to deliver targeted offers to customers. What’s often missing with these offers is that when the customer leaves the store, retailers have no information about who that person was. Mobile payments can close this gap and in turn enable even more relevant, targeted offers.


"Similarly, online only stores can use intelligence gathered through mobile payments to enhance their customer relationships. For example, on the High Street, we’re starting to see the growth of ‘pop-up’ stores, where online only retailers are giving customers a physical or offline experience of their brand. Here it’s possible to use mobile payments intelligence gathered from high street footfall trends to identify the ideal place to open a pop-up store.”


Brown concluded: “M-commerce is, like e-commerce, as much a retail strategy as it is another channel. It’s therefore critical to ensure that technology decisions support greater choice in mobile payments.”