Mobile Payments: Consumers Seem Ahead of Retailers

Mobile Payments: Consumers Seem Ahead of Retailers

April 10, 2013
Retail Industry Insights

The payments world is evolving untethered.  Who will cash in on the need to deliver speed, mobility, safety and convenience to shoppers and secure transactions at lower costs to retailers? It’s too early to tell—so many technologies and security standards compete in the vast payments market that retailers are slow to commit to any one until leaders emerge. 

A few trends are clear, however:

  • Landlines are on the wane.  Already, about 80 million adults (34% of the U.S. adult population) lived in households with wireless service only during Q2 2012, as did 30 million children (40.6%).  That adds up to 36.8% of U.S. households, says the Center for Disease Control’s National Health Interview study.
  • Smartphone penetration continues to surge.  For instance, more than half of Walmart’s U.S. customers reportedly own a smartphone.  The chain, which has been criticized for low staff levels and long checkout lines, has NCR installing 10,000 self-checkouts in more than 1,200 U.S. stores by the end of 2013.  It is also testing the Scan & Go app for iPads in about 200 stores; it requires customers to pay at self-checkouts.
  • Most consumers (61%) feel smartphone payments will replace cards and cash for most purchases; many (26%) feel this will happen within five years, says a recent Harris Interactive poll of 2,383 U.S. adults.  Already, 13% say they’ve paid by tapping their phone against a retailer’s POS terminal or watched someone else do it; among smartphone owners, the figure is 18%.  Just 27% overall and 44% of smartphone users have an interest in this payment method, while only a respective 8% and 16% say they are very interested.
  • This could be a gateway to Millennials—40% of this age group and 34% of Gen Xers want to pay by smartphone, vs. just 18% of Boomers and 7% of mature consumers, the Harris study says.

With this timeline ahead, retailers may be able to watch the market develop a while longer without losing competitive advantage.   They just can’t wait too long before integrating mobile into their consumer-centric strategies.  

According to an RSR Research survey of retailers, The Impact of Mobile in Retail: Benchmark 2012-2013, 88% say “one of their Top 3 business challenges is consumers using mobile as part of their shopping experience. [Yet most] retailers don’t see that translate in the context of influence over total consumer purchase behavior.  Only 52% believe mobile devices are used at any point [in their paths to purchase] less than 25% of the time.  Another 32% believe mobile influences consumer purchases between 25% and 50% of the time.”  RSR calls this “retailer’s mobile blind spot”—saying retailer estimates “are very low compared to the reality of mobile’s current role” in shopping.

More promising is a separate RSR study, Retail Payments: When the Future is Now, which concludes, “Retailers expect mobile and digital forms of payment to be a dominant form of payment in three years—a tremendous shift.  Increasingly they are turning to consumer-focused technology companies like Google and PayPal in the hopes they will take charge.”

Uncertainty about the future of payments trumps all—38% of retailers feel “they are stuck until some solution to rising processing fees is presented to them,” one RSR finding showed.