The global payment market remains one of the most active technology markets in terms of disruption, interest, and investment. Given a decade of unprecedented transformation brought about by new payment methods, technologies, business models, and competitors, the market has only just begun to integrate innovative technologies like blockchain, artificial intelligence (AI), voice commerce, and the Internet of Things (IoT).
The State of the Mobile Payment in Retail
Similarly, the mobile payment (mPayment) landscape in retail is highly dynamic in terms of the technology advancement as well as new mobile banking solutions. The emergence of regional mPayment players such as Alipay gives a strong signal that mPayment is becoming mainstream in retail, which is already at the very forefront of global mPayment scale and importance. While mPayment has already started to gain a foothold in the retail, but in the absence of a unified mPayment solution, the business model and adoption is highly varied. The strongest growth for mPayments will likely come from mobile commerce (mCommerce) as developing nations witnessing an Internet boom via smartphones.
As shoppers become increasingly connected in tandem with the growth of mobile devices, the retail industry is expected to lead the world in mPayment transactions. This leadership in terms of both volume and value of transactions driven by both a large number of regional mPayment players and a rapidly diversifying and evolving mobile influence. In addition to these developments, the current low levels of credit and debit card penetration in Asia will work to spur the adoption of mPayments in the retail sector. Low card penetration will invigorate the usage of bank account–linked mobile wallets as alternatives to the traditional card-based payments, especially for digital transactions and increasingly,
online to offline transactions; the ‘O2O’ space. mPayments such as mobile wallets are well suited especially to transactions in both the online and offl ine space that are of lower value. In mPayment,
customers value benefits such as speed, convenience, and efficiency over other factors such as security and transaction fees.
IDC projects that mobile payments will account for more than US $1 trillion in value in 2017. The big chunk of mobile payments
today come from remote payments, typically related to mCommerce transactions. However, proximity payments are growing rapidly. This is primarily due to the growth of NFC-based contactless payments, enabled by rising smartphone adoption and
the increasing availability of POS terminals. However, IDC believes that the majority of emerging Asian markets are unlikely to adopt NFC-based mPayment services shortly because of the overall lower penetration of NFC enabled smartphones and
respective POS devices at the merchant side. QR code payment solutions will gain traction as smartphone penetration is already high and continues to grow. One of the main advantages of QR code payment is that merchants do not need specific POS devices for the QR codes, merely a printed code to display. Beyond QR
code–based services, Remote mPayments is driven by telecommunications and local technology vendors including fintech players will also play an important and active role in offering mPayment facilities to both consumers and retailers.
What’s in it for Retailers?
The mPayment technology landscape continues to evolve, and new technologies are emerging worldwide. Understanding the benefits and cost of adopting each technology enables retailers to make a better decision that can ultimately meet customer expectations and increase their revenue. Besides, retailers need to understand the maturity level of each technology and deployment cost. As payment technology becomes more affordable and available, the key factor for mPayment adoption is the business model and associated charges.
The integration of mPayment enables retailers to understand the customer’s transaction behaviour and spending pattern. By utilising the transaction data, retailers can link the customer’s spending behaviour to their loyalty card. With this information, customer’s engagement can further be personalised via the mobile app, offering the right products at the right time. Additionally, mPayment motivate the customer to use discount coupons and other promotional offers.
As online shopping becomes ever more intuitive, Omnichannel retailers are investing in making the in-store experience just as
frictionless. Some ways that this can be achieved is through the adoption of innovative in-store technologies. mPayment can eliminate checkout queues by enabling staff to process payments anywhere on the shop floor. Through mPayment, retailers can utilise the data to engage and inform their customers. The key drivers for mPayments adoption in retail are; card spending, the proportion of debit versus credit card, mCommerce growth, the slow growth of card issuance, smartphone penetration, and maturity of NFC infrastructure.
mPayment is becoming increasingly competitive and attracting interest from players across the technology sector (e.g., Apple, Google, Samsung) and online marketplaces (e.g., Alibaba, Amazon). Currently, few mPayment service providers offer all-in-one (proximity and remote) mPayment solutions to merchants and consumers. A good example is Singtel Dash, which enables the customer to pay for a broad range of services such as public transport, taxi fare, and convenient stores using either an NFC-enabled SIM card or remote payment. The overlap of proximity and remote payment creates great opportunities and will attract more merchants and consumers due to increased payment choices. Proximity mPayment has been growing worldwide, and according to an IDC Asia/Pacific 2015 report, except in Korea, Taiwan, Singapore and Australia, NFC penetration for smart devices is below 20 per cent — in other words, the transaction volume still has not reached its full potential.
The rapidly evolving retail industry requires a unified and hybrid mPayment platform that is less dependent on hardware and software but can connect with other ecosystems and is also accepted by the majority of merchants either for online or in-store payments. The winners in mPayment will be those players that own the consumer and can adapt to ever-changing customer expectations rapidly. This includes understanding the customer’s transactional behaviour as well as the ability to offer a compelling value proposition to actively engage the customer over time and
increase the customer’s lifetime value (CLV). Although financial service providers and telecommunications companies are in prime
position to capture mPayment market share due to their existing relationship with customers, mPayment services across are mainly led by fintechs. However, any slow adoption of mPayment will not only increase the risk for retailers to be pushed out by emerging online retailers but also expose retailers to loss of mPayment market share.
Although mPayment technology may bring significant challenges and opportunities for retailers, they should also remain open to a new partnership model with technology companies willing to fund the implementationand deliver new services in return for customer information and service fees. Finding the optimal partnership model in this new business landscape will strengthen the retailer’s traditional role and improve customer experience and even help the retailer to compete more aggressively in the digital space.