Consumers ready, but merchants see complications with mobile payments

For mobile payments to succeed, both consumers and merchants have to be on board. But up to this point, marketing efforts by the companies that want to win the mobile wallet war, especially the card brands, have been aimed at consumers. Shoppers are promised the benefits of convenience and utility, but what are merchants promised?

According to some analysts, merchants are being promised additional expense, security concerns and more complexity at the point of sale – not the most compelling reasons to join the mobile payment revolution.

Consumers warming to mobile payments, say card brands

On the consumer side, studies are showing education efforts may be slowly paying off. Surveys of consumers in both the U.S. and U.K. are show consumers warming to the idea of contactless and mobile payments.

A study from global payment brand MasterCard released earlier this year found that consumers are ready to trade their wallets in for mobile payment methods. The study said that 62 percent of Americans with cell phones would be open to using mobile devices to make purchases.

The study also found that younger consumers are more comfortable with using their mobile devices to make a purchase, good news for the future of mobile payments. According to the survey, 63 percent of those between 18 and 34 are ready to adopt mobile payments, while only 37 percent of respondents over 35 said they would be comfortable making a payment with a mobile device. Sixty-five percent of the 18-34 group also admitted they felt "more naked without their phones than without their wallets."

"Consumers are already living a mobile lifestyle, so using their phones to make payments on a daily basis is a natural next step," said Mung Ki Woo, MasterCard's group executive for mobile.

A study conducted by Visa's UK group released last week found consumers like the convenience of contactless payment cards, often viewed as a precursor technology to mobile payments. More importantly for mobile payments, the survey found 53 percent of respondents like not having to hand their card over to a cashier. Fifty-five percent of respondents said they appreciate not having to carry cash in their wallets or purses.


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“We are now taking the first steps on the road to becoming a ‘less-cash’ society," said Mark Austin, head of contactless at Visa Europe, adding that the survey offers a snapshot of changing attitudes towards payment technology and consumer experiences of using it for shopping.

Austin said that one of the key takeaways from the survey was the need for retailers to keep pace with consumer demand.

Merchants, a definite maybe

But are merchants paying attention? The answer is a decided maybe. A study of businesses by consulting firm KPMG released last month shows mixed feelings about mobile payments from merchants. Only one in five respondents to KPMG's survey said they thought mobile payments are very important today. More than half said that mobile payments are still in their infancy. A majority of companies surveyed (75 percent) said they believe mobile payments is still two to four years away from mainstream adoption.

So the question becomes, what's holding merchants back? And why aren't they adopting available technologies to support mobile transactions?

According to Jeff Muscarella, an IT spend expert who works with retailers, the answer is merchants have a lot riding on the point of sale process; it's a process that affects every system within a retailer's business. Merchants can't risk any downtime.

Muscarella said that while many of the merchants he works with are looking at mobile solutions, once they begin to dig into an implementation they realize how many of their processes and systems it will touch.

Mobile payments touches a merchant's POS, its processing, its security, and its device management, Muscarella said. He added that retailers are then faced with questions like, "What happens if these things break? How do we get them fixed?"

"When you add up all those touchpoints, and the costs associated with them, it can be more than what (merchants) initially thought," Muscarella said.

Muscarella believes at this point that consumers have a better idea of what companies and industries will provide them with mobile payments than merchants. He said most people feel that the banks and the credit card companies are going to be the leaders in enabling consumer-facing technology.

But for merchants, it may be just too soon to tell who to trust.

"There are no clear winners yet," Muscarella said, "no dominant players that I'm aware of."

Like the companies surveyed by KPMG, the clients Muscarella is working with are still looking a couple of years down the road at serious investment in mobile payments.

"A few early adopters have (mobile payments) on their docket to rollout in a serious way in 2012," Muscarella said. "But I think it's going to be 2013, from what we hear from clients, before it's finally well-adopted and supported."

For more stories like this, please visit our Retail or Restaurants research centers.

(Photo credit: Calamity Meg)

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