Bob Johnson

Bob Johnson, President and CEO

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Mobile payments and the mobile wallet are getting considerable buzz these days. The concept seems like a winner of an idea because it sits at the intersection of money, sexy technology and the point of purchase, representing 15 billion to 40 billion retail transactions in February 2013 alone.

The major payment card companies have been working on this and have launched several products (MasterPass, PayPass, vim, pay Wave). Other firms with deep pockets (Google, PayPal, ISIS)have weighed in as well. But no one has yet found the secret to enabling rapid deployment and acceptance. I’m betting that over time the major payment card players will figure it out and grab the market share of mobile payment transactions, perpetuating their monopoly position in the payment space (sorry about that!). But how long will this take, and are there any profitable opportunities for convenience retailers to deliver a customized mobile payment offering in the interim?

I believe the answer is yes, definitely—for some retailers.

There are two defining characteristics of retailers positioned properly for building a solid ROI from mobile payments. First, the retailer must have a sufficient density of locations with a pre-existing, strong consumer brand preference. Otherwise, the cost of delivering a rewarding experience will likely be too high. But I’m convinced that a creative offering can increase your existing consumers’ visitation frequency and expand your share of their spend.

Second, you must have in place a solid POS technology platform upon which to add mobile payments. Most contemporary POS solutions should be able to address this new technology.

Easy, Valuable and Safe

To exploit the mobile-payment opportunity, retailers should consider a few key points, including ease of use, adding value and addressing security concerns. Simply having great technology will not lead to broad consumer adoption; being easy to use is critical. While certainly having some shortcomings, the Starbucks app is a good example of being easy to use. On the consumer side, you are ready to pay with one tap off the main screen. (The clerk side is still a bit awkward, because he or she has to “set up” the transaction to scan as payment.)

Adding value may be the most difficult part of the concept, because it requires considerable creativity to marry brand objectives with the technology. For some retailers with strong brands, a pure payment app with minor added functionality may suffice. Again, consider Starbucks, whose initial offering did little more than offer the functionality of a prepaid card—and still generated millions of dollars in cash flow. Short of that level of brand affinity, you’ll need to look to promotions, discounts, community building and social-media techniques to add value. Consumers need a compelling reason to download and learn your app.

Tempting the consumer with a financial proposition is the historical method of inducement. However, using basic human-interest in joining a “club” and competing for recognition can add value and interest to a program. Such “Gamified” programs are more about recognition than financial rewards, although you would likely layer that aspect into the program. An example of this is Foursquare, but it’s a generic program; any retailer can play along. If, however, one were to create a c-store-specific version of something like it, metrics that can be published and compared with others include number of stores visited last month, number of total visits, number of coffee/fountain drinks purchased, etc.

Addressing consumers’ security concerns will trump everything else in determining the adoption of your offering. The very fact that your mobile-payment offering is good only at your stores is helpful in keeping the bad guys at bay, but it is not sufficient. Embedding of technology to secure the application, as well as the transaction, are important in the design. And it’s worth your time to monitor transaction velocity, along with setting up a predefined method for answering consumer questions and concerns via a help desk.

The stakes are high in the mobile payment and wallet battles, and it will be fascinating to see how it all plays out. Well-positioned retailers can make substantial gains in loyalty and cost avoidance by implementing well-thought-out mobile payment solutions that appeal to consumers. 

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