Transaction Trends Merchant's Holiday Guide to Mobile Payments

Transaction trends

Merchants’Holiday Guide to

Mobile Payments Benefits, technology options, and everything you need to know about accepting mobile payments at your business

T

Holiday Shopping

By the Numbers 2012 $1 billion

Consumers spent more than on online purchases on Black Friday and $1.5 billion on Cyber Monday—both all-time highs.

18 percent

of consumers used More than a mobile device to visit a retailer’s site—an increase of 70 percent over 2011, according to IBM.

$1 out of every $4

Adobe estimated spent online came from a mobile device.

2013 Holiday e-commerce retail sales in the U.S. will rise about 15 percent, matching last year’s gains, according to projections by eMarketer. In total, U.S. retail e-commerce sales for the holiday season (November and December) are expected to reach $61.8 billion, up from $53.7 billion last year.

Mobile commerce is expected to account for 16 percent of total holiday retail sales.

I n total, mobile commerce sales are expected to reach $41.68 billion and, by 2017, retail sales made on mobile devices will climb to well over $100 billion, according to eMarketer.

20 November 2013 | Transaction trends

he holiday season is upon us and with it brings the busiest shopping period of the year.

Increasingly, consumers are making their holiday purchases from their tablets or smartphones. For merchants looking to cash in on this holiday shopping season, the ability to accept mobile payments is vital.

Not since the advent of the credit card has payment technology so significantly shaped American consumer behavior. With 6 billion mobile phone subscriptions globally, mobile communications have a profound effect on people’s lives, both socially and financially. As a merchant, this means that consumers are walking around your store with a little computer in their hands that allows them to compare prices, read reviews, find deals, and inform their friends—all within the confines of your store. You need to be able to harness this new tool and ensure that it is working for you, not against you. If you are an online retailer, you need to leverage the power of this phenomenon to your advantage by providing a truly optimized mobile web and/or native application experience. If you are multi-channel, then you need to plan support for your mobile consumers, no matter the channel.

There are many estimates on the size of the opportunity presented by mobile payments. Juniper Research predicts $670 billion in transaction value by 2015, and Yankee Group believes that mobile transaction volume will be $545 billion by 2015. In the U.S., nearly 87 percent of phones being sold are smartphones. Whichever prediction you believe, the fact remains that mobile is having a profound impact on consumers’ purchasing experiences and, as a merchant, you need to have a strategy on what to do and when to do it.

For merchants and business owners, mobile payments present a unique opportunity to connect with customers and deliver value in a more personal way. Merchants should accept mobile payments not just be-

cause it’s the latest trend, but because it can enhance and deepen their relationships with existing customers— and it can create opportunities to attract new customers.

Transactions Trends’ first-ever Merchants’ Guide to Mobile Payments is designed to help merchants adjust to the changing payments landscape with practical knowledge regarding mobile payments acceptance.

Merchant Benefits

As a merchant, the benefits of mobile payment acceptance will vary depending on your type of business and consumer demographics, but here are some of the benefits to expect when deploying a mobile payments system: 1. More consumer data—Many mobile payment services also include online transaction reports, which can

provide a better understanding of consumer behavior and how to better service customers’ needs. For example, you could use this data to ensure that the favorite products of your best customers are always in stock, or to deliver more targeted, promotional offers for products that consumers desire.

2. Increased consumer control— Mobile payments empower your cus-

Mobile Payments Technology Explained Select the right solution to fit your business strategy, from these major mobile payments technologies currently on the market.

Type

Initiation Method

POS Needs

Processing Method

EMV

Standard for chip cards and acceptance of cards at the POS, including terminals for authenticating credit and debit card transactions.

POS terminal capable of reading EMV-specified RFID signal.

Consumer inserts chip- or EMV-capable contactless card into the POS reader.

Process flows as normal credit or debit card transaction with a deeper level of security and authentication than mag stripe.

NFC or Contactless

Short-range wireless RFID technology using secure authentication and credentials on the mobile device to transmit card information to the POS.

POS terminal capable of reading RFID and software capable of processing the NFC transaction in the POS or credit card terminal.

NFC as it exists today is a “tap-and-go” process. Once read, the transaction processes as a regular credit or debit card.

Image-Based, Barcode, or Cloud-Based

Consumers utilize a mobile wallet or application on the mobile device to securely access their account data.

Once authenticated, a barcode or other image is presented on the mobile device, which the merchant uses to process the transaction. In a Cloud example, the necessary info to process is conveyed over the air to the POS.

Optical image scanner capable of reading 2-D barcodes, depending on the wallet being accepted. For Cloud-based, a POS system capable of securely being connected to the Internet.

POS system is enabled to scan the barcode as a tender type. Transaction settlement is typically between the wallet provider and the merchant. For Cloudbased, the POS accepts the card info and processes it through its existing connections.

Carrier Billing

The ability to purchase goods and services and have them charged directly to a user’s mobile bill or account.

New hardware is not required, but a relationship with a carrier billing provider is necessary.

Process is between the carrier billing system and the merchant’s host environment. Today, this is not used in retail nor for physical goods.

Transaction trends | November 2013 21

tomers and allow them to pay with their preferred method and funding mechanism while easily controlling all of their loyalty and reward points in a single place.

3. Flexibility at the register—Mobile technologies allow consumers to make purchases utilizing their devices anytime, anywhere. Merchants can enable consumers to shop utilizing mobile browsers or apps while at home or in the store. When ready to complete the purchase, the consumer simply executes the transaction.

The merchant’s systems receive notification and the goods are ready for pickup at the customer service counter. This also can be coupled with a mobile checkout or tablet-based POS system that allows the merchant to interact with the consumer and complete the sale on the show floor.

4. Faster checkout—If a merchant participates in a daily deal program or offers specials via coupons, these can be automatically administered by the consumer utilizing his or her mobile device. Scanning a QR code for a payment tied to an offer can be significantly quicker than keying the offer into a computer then processing the payment.

5. Enhanced security—Mobile devices provide more security than standard mag stripe credit cards.

Phones can be locked with a password, all mobile payment applications can be set to require a password, and phones can be configured to have all of their data wiped remotely.

Smartphones, Apps, and Your Business One crucial factor to the success of mobile payments in the U.S. is a critical mass of smartphones in the marketplace. Smartphones are now the dominant phone type and it will only be a matter of time before consumers start incorporating these devices into their shopping experiences.

Smartphone Ownership in U.S., 2009-2012 (Base=All respondants)

%

33

24% wth,

17%

28%

21%

Gro

2009

42%

2010

2011

2012

Source: Mercator Advisory Group

Mobile payments must do more than just provide a new way to initiate a payment at the register, online, or through an app. They need to provide a richer shopping experience and allow both the merchant and consumer to interact more intelligently. The chart below, published by Flurry Analytics, highlights the types of shopping services U.S. consumers are accessing from their mobile devices.

Growth in Time Spent per Shopping App Category in U.S., 2011-2012

525% All Shopping Apps 274%

For more on mobile commerce, download the full ETA whitepaper, “Beyond the Hype: Mobile Payments for Merchants,” at http://bit.ly/1a6pvmx.

247%

All Apps 132%

126% Retailer Apps

n = 1,863 apps

22 November 2013 | Transaction trends

228%

Price Comparison

Purchase Assistant

Online Marketplace

178% Daily Deals