The mobile payments landscape has been a confusing one for banks, retailers and hospitality companies. Myriad start-ups and global giants have asked business leaders to put their faith in mobile payments.
These mobile payment companies have dished out over-zealous press releases making extravagant claims that have incorporated questionable statistics massaged for their own purposes. Barring the likes of the Starbucks’ mobile payments app in the U.S., there have been few genuine success stories to shout about to give the wider market confidence to invest.
In fact, there is a graveyard of failed mobile payment services such as Google Wallet, Isis Mobile Wallet and SimPay. For most, mobile payments have been an annoying distraction. A proposition that fails to justify its own existence in an increasingly competitive market where every technology investment must have a clear RoI.
As a result the majority of companies have given the new technology a wide berth. At best they have run a pilot or two. But things look set to change.
The Apple Effect
The market place is starting to mature. Apple Pay in particular has helped to catalyse adoption.
The number of banks supporting Apple Pay has jumped to more than 100. Apple says the number of retail locations has surpassed 700,000. And in November 2014, barely a month after launch, retailers reported a spike in mobile payment use. McDonald's said Apple Pay accounted for 50 per cent of its tap-to-pay transactions in one month.
The other success story is Starbucks. Starbucks already has a staggering 13 million active mobile users attracted by the ability to order and pay from their mobile phone, saving crucial queue time during busy periods. The secret of its success? Loyalty. My Starbucks Rewards (MSR) has 9 million-plus users who can instantly accrue and redeem offers using their mobile phone.
Starbucks CEO, Howard Shultz crystallised this point when he said: “The relationships that we have built with our customers through mobile payment, through MSR, through gold members, and now, through mobile pay and delivery is a significant driver — in not only elevating the relationship we have with our customers, but significantly lowering our traditional cost of customer acquisition.”
Restaurants lead the way
The big step-change is viewing mobile payments as a path to better customer engagement, rather than just another way to pay. The real driver for mobile payments is getting a better understanding of the customer and with it the ability to drive loyalty. For this reason cafes, bars and restaurants in the hospitality sector have been mobile payment pioneers.
Historically restaurant loyalty programs have been pretty generic. They typically involve the mass issuance of coupons or other offers designed to entice customers to visit a restaurant during quiet times. This tended to inspire mercenary behaviour, where consumers would simply take up a good deal, rather than loyal behaviour. Furthermore, traditional promotion based marketing offer a percentage off a meal severely impacted margins.
Mobile technology allows customers to check-in, pay securely, split the bill and leave without waiting for the waiter – as well as receive relevant offers and information – all from their smart device.
Yes, the experience is great for the customer, especially not having to wait around for the bill which people detest. The real value, as ever, is in the data. For the first time restaurants are able to understand customer behaviour. Up until now the relationship has been anonymous. A single customer could go into three different Prezzo’s in one day and the restaurant would have no idea that she is a loyal customer. Now restaurants have a way of identifying customers, and through loyalty schemes, are able to drive footfall with personalised promotions and innovate stretch-spend offerings and retention programmes.
Busaba Eathai’s embrace of mobile payments has seen a major impact on its customer base. 40 per cent of its mobile payment app users are repeat visitors, contributing to 70 per cent of the company’s daily app transactions. With visibility of customer transactions, preferences, and return rates, Busaba was able to trial campaigns and track results intelligently in order to nurture loyal behaviour.
Look beyond the payment
Mobile payments only delivers the hard business benefits if firms capitalise on its capabilities beyond the transaction. Providing customers with a new way to pay is often regarded as a novelty. Understanding that they are a loyal customer, learning what they like and don’t like, and rewarding them for their customer is the real value. It is in loyalty that firms can reduce churn and waste (do we really need those loyalty cards anymore?), increase average spend and top-line revenues without incurring significant capital costs.
Mobile payments is not a decision to be made and to then leave the solution alone. There has to be ongoing investment in harnessing the data it provides to build the loyalty that will benefit the business.
The technology is there. The proof points are beginning to emerge. Now it is about educating the market on its potential beyond the payment.
Gil Hazan, Managing Director for Europe, MyCheck
Image source: Shutterstock/Robert Kneschke