5 Nov 2014

Mobile & Payments


Over the past few weeks, the tech world has seen a controversy erupt over retailer resistance to Apple Pay and other NFC based mobile payment systems (like Google Wallet). The short version is that retailers are interested in pushing their own (poorly designed) payment alternative that circumvents fees collected by companies like Visa and Mastercard. Interestingly, this controversy seems to obscure the fact that we still aren't sure what consumer benefits are targeted by mobile payments.

In my opinion, if mobile payments are to reach mass-market acceptance, they need to target a use case that mainstream consumers find valuable. However, so far, mobile payments seem to target "incremental convenience" as the primary benefit. This certainly appeals to technology enthusiasts like us but as I wrote in my analysis of Apple Pay, its appeal to the mainstream market is more difficult to gauge:

Many attempts have been made to explain the lack of traction seen by mobile payments -- ranging from infrastructure problems to a lack of trust. In my opinion, the primary reason for this is that credit cards seem to be "good enough" for most consumers. As a result, consumers don't see enough value to change a habit even if a new payment system is superior (measured by security, ease of use, etc.). While technology enthusiasts may remember to pull out their device at a payment terminal, the vast majority of consumers will instinctively reach for their card. Therefore, the success or failure of any mobile payment solution will depend on overcoming this challenge.

At this point, it may be useful to look at the primary benefit that smartphones brought to consumers, i.e. ubiquitous computing. Tasks that were previously restricted to a stationary desktop or semi-stationary laptop could be accomplished on the go. Unfortunately, the same benefit doesn't translate to mobile payments, as existing payment solutions are just as mobile as smartphones.

This means that neither convenience nor ubiquity can be the primary basis of competition for mobile payments. This leaves privacy and security. Mobile payment systems, like Apple Pay, are certainly far more secure than existing payment solutions. But in order for this to become the new basis of competition in payments, mainstream consumers would need to view security as a key attribute that requires improvement. That remains unclear.