Boost in Retailer In-Apps May Prod Mobile Payments Along
Advocates say stay patient. Mobile payments are coming, probably faster than you think.
But some contend that the relatively new transaction tool has not lived up to expectations because early promises were not kept, and right now, most consumers have yet to make a payment at the point of sale using a mobile device. However, a shift is starting to occur.
Ground zero for mobile payments at credit unions may be at the $699 million One Nevada Credit Union in Las Vegas, where Chief Financial Officer Paul Parrish is shepherding rollout to members of CU Wallet, a mobile point of sale platform with an initial pilot scheduled for late May or early June. The complete debut of CU Wallet's capabilities are set to roll out to the company's 47 credit union clients by the end of the year. He stressed why it is crucial that a credit union-owned initiative such as CU Wallet must work.
“Some credit unions think they should point their customers towards PayPal or Google Wallet – both offer mobile wallets,” he explained. “But that will strip away at member loyalty to their credit union. Google is not in the business of creating a wallet for credit unions. They want to control the data. That's our data. That is what CU Wallet is all about.”
Parrish's remarks underlined another reason for mounting optimism about mobile payments which is some of technology's biggest guns, such as Apple and Google, are plainly attracted to the business opportunity. They are joined by smaller, but highly innovative companies such as PayPal and Square. The bottom line is that, suddenly, there is a rush into the mobile payments space.
There are signs that the the glacier jam is starting to break up. For instance, the Starbucks mobile app is said to have generated over $1 billion in 2013 revenues, a number neither confirmed nor denied by the Seattle-based retailer.
McDonald's, Burger King and Subway have all jumped into mobile payments at the point of sale too. Industry experts also expect other fast food retailers to introduce mobile apps that permit ordering and paying via a smartphone sometime this year.
There is also significant growth in in-app purchases that go far beyond Starbucks and fast food. HotelTonight, known for its discounted, last minute lodgings, AirBnB for lodgings, and Uber, an app that connects consumers with car services, are a few examples.
Robert McCarthy, a technical adviser with Mobiquity Inc., a Wellesley, Mass.-based mobile strategy company, said it's not readily discussed but in-app purchasing is occurring now. It's estimated that hundreds of millions of dollars, possibly billions are already changing hands in in-app purchases each year. The growing usage is proof that the apps are helping consumers grow comfortable with using their phones as a means of payment.
Add it up and there is continued, brisk growth of mobile payments, said Christophe Vergne, a payments expert with Capgemini Financial Services, a global consulting, technology and outsourcing firm. According to his company's forecasts, mobile payments will grow 58.8% this year.
So, what's causing the delays? One reason is that some underestimated the complexity of the infrastructure build-out that is needed to mass deploy mobile payments, said Jon Eberly, CEO of Clock Four, a San Francisco-based strategy agency that focuses on mobile projects.
Mobile payments need three to agree to play: financial services companies, consumers and merchants. So far, merchants have dragged their feet because accepting mobile payments involves costly terminal upgrades, some experts have suggested. Since consumers have not been banging on cash registers demanding merchants accept mobile payments, many retailers have simply deferred decision making.
Some credit unions and regional banks, too, are sitting on the sidelines waiting for a clearer sense of direction before taking action.
“Many financial institutions don't know what to do. There is so much going on, they don't know what next move to make,” said Troy Land, vice president of emerging commerce at FIS Global in Jacksonville, Fla.
David Cooper, vice president of information systems at the $290 million Charlotte Metro Credit Union in Charlotte, N.C., shrugged when asked about his institution's plans for mobile payments.
“Right now, there are no winners, it's still bleeding edge. We have made no decisions,” said Cooper.
He did note that Charlotte Metro recently made a deal where PayPal will power person-to-person payments for the credit union and it could be used at the mobile point of sale. However, Charlotte Metro is not promoting the tool in that context, Cooper noted.
“Nobody is leading the mobile point of sale pack,” said Jean Maisonneuve, e-commerce vice president at the $2.2 billion Affinity Federal Credit Union in Basking Ridge, N.J., But, he added, “you cannot sit on the sidelines and wait for something to happen.”
Maisonneuve said his fear is that when mobile point of sale comes together, it will occur so quickly, Affinity would not want to be left in the rearview mirror. To compare the transaction technology to a similar trend, the same thing happened with mobile remote deposit capture when it went from fantasy to a must-have in just a few years. That is why Affinity is a founder of CU Wallet, he said.
While there are more choices than CU Wallet and PayPal, the present takeaway is that waiting for a winner to emerge is not a winning strategy.
“You can't wait for the winner and probably, there won't be one winner,” said Andy O’Dell, chief commercial officer and a co-founder of CLUTCH, a Philadelphia-based developer of mobile loyalty and wallet solutions. “This is like roulette. You won't win picking one number. And you won't win in mobile payments picking just one solution. It's too early to know the winner and, probably, there will be many winners.”
The parallel is with credit cards where, in 1949, Diners Club became the first card with wide distribution and national intentions. But it took at least 30 years before plastic reached ubiquity and, by that point, Diners Club had ceased to be a major player. However, Visa, MasterCard, American Express and Discover went on to carve out enduring roles.
Few expect instant success for mobile payments, but many are predicting it will be a boon when they find they’re stride. Land at FIS expects that to occur within the next five to 10 years.