Mobile Payments Could Be a Gold Mine, but Need a Jump Start With Consumers

Marketers Need a Program of Education and Incentives to Promote a System That's Confusing to Use

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Mobile payments are touted as the next big thing in marketing. Brands can instantly access an individual customer's in-store purchase data and serve up targeted deals. The customer pays simply by holding up his smartphone to the checkout scanner -- no digging into the wallet for a credit card, dollar bills or, heaven forbid, loose change.

The Yankee Group estimates that the worldwide transaction value of mobile payments will total nearly $1 trillion by 2014, up from $162 billion in 2010. But then why does it seem that the only people using it are customers purchasing their their double-caffe skinny lattes at Starbucks?

Mobile payments may be a perfect mix of targeted e-commerce with bricks-and-mortar shopping, but the current crop of services is confusing to use for the average consumer.

Consumers' ambivalence about mobile payments is clear. Only 20 percent of people surveyed by IDC have purchased a product from a store via their mobile phone. And of those who have devices enabled with Near Field Communications -- the technology behind mobile purchasing --- only 2 percent are expected to use them in 2012.

Marketers have only themselves to blame for this lackluster penetration. The hype has not been backed up with proper education and incentives that make it easy for consumers to use and derive value from mobile purchases.

Bob Egan, an analyst at The Sepharim Group, offered a telling explanation for why mobile payments lag behind other forms of e-commerce in a recent interview with ComputerWorld. "There's no significant driver behind this technology that the consumer is aware of , or that a retailer is aware of , that will create a different buying behavior by consumers," according to Egan.

Still, many brands have jumped on the mobile-payments bandwagon. Adam Brotman, vice president and general manager of digital ventures for Starbucks, told eMarketer last year that the company has accumulated "more than three million payments made via mobile phones in the first nine weeks of [its mobile payments] program's nationwide launch."

For every Starbucks success story, though, there is a Google Wallet. Launched to great fanfare in 2011 , it has yet to reach full potential. Few devices allow access to Google Wallet, and Sprint is the sole carrier whose smartphones are optimized for it.

For marketers, this hype -vs.-reality conundrum presents a dilemma: invest in a new form of digital commerce that has significant potential but little consumer interest, or wait to see where the market (and consumer) goes. For those brands that were burned because of their reticence with the Facebook "fad," the latter option may not be all that appealing.

It's time marketers cut through the hype and get back to basics with mobile payments. Two concepts will help in this respect:

Make mobile payments simple to use. Marketers need to think of the point-of -sale value. This requires an intuitive payment process that delivers instant, targeted coupons and deals based on purchase patterns, location and advocacy opportunities built around social media.

Recognize the broader value of mobile payments. It's not the payment itself that is most valuable to brands (though that is important), it's the dynamic advertising/marketing/coupon opportunity available at the point of sale. Ostensibly, a consumer values a brand's product or service, having just purchased it via their smartphone. NFC-enabled smartphones offer brands an instant, direct-to-consumer touchpoint built around ads and coupons.

Before a new marketing gold rush is minted, brands need to get back to the basics. Mobile payments need to be presented to consumers as an added value rather than a neat marketing trick. Otherwise, much like the recent Facebook IPO, the hype may deflate before mobile payments' vast potential is realized.

Daryl Colwell is vice president of business development at MediaWhiz.
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