There’s a $15 Trillion war being waged in retail over mobile payments. In the past few weeks alone, mobile payment companies like ApplePay and CurrentC are literally battling it out for retail presence. But by partnering and entering in exclusive relationships with mobile payment consortiums, retailers are connecting themselves to both benefit and risk.

Whether this “war” ends in scorched-earth or the promised land, retailers risk a significant fallout in customer service, security and satisfaction.

Consumers want mobile payments but are they informed? Are retailers ready for the challenges that come from partnering with mobile payment companies like CurrentC that fund directly from consumer bank accounts? Will consumers experience new challenges in data privacy and security? Will they trade credit card company customer service for checkout convenience? Retailers need to be wary of the potential for unintended backlash.

Both retailers and consumers are driving the demand for mobile payments:

• Retailers want mobile payments – Notably, retailers want to jettison the 2-3% fees imposed on them for credit cards. They want valuable, personal data they mine though transaction history – even the lightly sanitized data about individuals’ purchases across an entire mobile payment network. And with NFC-enabled payments retailers also get key traffic location data.
• Consumers want mobile payments — They want to leave their wallet behind and pay with their phone (that’s already in their hand), see what they spent online, and save receipts electronically and effortlessly. ApplePay’s adoption frenzy is just the beginning.

This is the first significant payment decision consumers face since credit cards were popularized 50 years ago. How will they choose? After the convenience halo fades away they’ll face an experience measured against at least three key criteria:

1. Payment Source choices (bank accounts vs. credit cards)
2. Account and Personal Data Security issues
3. Customer Service from the payment provider coupled with their bank

ApplePay, Google Wallet and others receive funds from consumers’ credit cards. As such, consumers still have as much as 30-days’ use of their own money until payment is due. Large purchases don’t debit immediately. Errors and fraud don’t hit consumer bank accounts directly. Most credit card companies have “innocent until proven guilty” policies where fraud resolution is on their dime until resolved. Customer service is often a seasoned, well-staffed and reasonable process. And in the event of a security breach, the consumer changes their credit card account number and not their bank account. Loss and fraud exposure is limited to the transaction; not the consumer’s entire bank account. And the retailer doesn’t suffer by association with “bad practice.”

Consumers Bear the Brunt
Payment systems that draw from consumer bank accounts such as CurrentC, Square and PayPal allow retailers to avoid dreaded credit card fees by debiting immediately from consumer bank accounts. Consumers’ 30-days-to-pay advantage of credit cards is lost. Fraud and other error is literally funded by the consumer until and unless resolved. This is a challenge for anyone, but what about the consumer who’s left without enough money to pay their rent until a resolution?

Just this week there was a well-publicized Uber misunderstanding where the consumer’s direct-charge affected her ability to pay her rent. Will consumers be satisfied with the experience of calling CurrentC, or Square or even PayPal when they have an issue? And CurrentC has already been hacked. Data is famously shared between credit card companies and retailers, but will consumers’ bank account data be made available? Balance, credit history, off-line purchases, etc.? And true or not, will the retailer be hurt by a negative perception of newly available Personally Identifiable Information (PII)?

Mobile payments are riding a retail adoption freight train. Money2020 this week is a 7,000-attendee sold-out show. Consumers have shown a deep desire for the convenience of mobile phone payments, but do they know what’s “in store”? Is informed consumer preference a factor? Not yet.

Today the story is adoption and the battle between mobile payment giants. But retailers need to be ready when the resulting mobile payment customer experience, beyond the register, becomes the story.

Categories: Articles, Mobile + Location

Tags: mobile commerce, mobile payments, ApplePay, CurrentC