Google Wallet, Dwolla, Lemon, Square, Venmo, the list goes on. There is no shortage of mobile payment solutions in the market. A new start-up or “major announcement” seems to appear in news feeds almost daily. With so much activity, why are we still pulling out credit cards and cash? In large part, we are still waiting for a ‘total solution’: one that will free us from our wallet, our bank, our cash machine, and god forbid our checkbook.
It is clear from consumer payment behavior that we don’t yet feel there is a provider out there that has satisfied our needs enough to give up conventional payment practices. Consumers are simply not yet making the transition from traditional payment methods to mobile alternatives. In an April 2014 survey of US consumers, IDC Financial Insights reported sustained usage in online bill payment methods while noting slowing adoption in mobile payment solutions. The majority of respondents (70%) reported use of electronic bill payment, either through their bank’s site or directly through a biller’s site. The same survey reported slower growth in mobile payment adoption when compared to past surveys. Approximately one-third (37.2%) of respondents indicated their use of a mobile payment solution of some kind – PayPal being the most popular among those surveyed. These results aren’t exactly good news if you’ve been betting the farm on the success of mobile payment.
In fairness, certain regions of the world have experienced widespread and sustained mobile payment adoption. In some countries, adoption has seen staggering growth and in certain cases it could be argued that it is now integral to society. Kenya is the leading example of this, where over $10B flows annually through m-Pesa, the nation’s leading mobile money solution. M-Pesa has made it possible for a large portion of Kenya’s population to easily exchange money in a country that has challenges with its banking infrastructure. In this case, M-Pesa’s success is attributed to it solving a problem and meeting a real need.
In countries like the United States and the UK, the challenges to mobile payment adoption are very different. In these markets, a solution needs to come far closer to a total payment solution. It needs to add real value to the average consumer’s payment experience.
What is real value in mobile payments?
In developed markets, real value goes beyond solving a singular problem. It means solving for a few (arguably smaller) consumer problems and wrapping it into one, seamless, beautiful experience. Real value in mobile payments means, at a very minimum, three things: (1) enabling money transfer to any person or merchant, (2) delivering real-time and relevant offers to the user, and (3) providing a frictionless payment experience. No current provider in the market has been able to deliver a solution that optimizes all three elements. This is a difficult challenge particularly given the many forces in industry currently attempting to drive change. Consumers will wait to adopt en mass until a provider can offer a mobile payment solution that is rooted in these elements. For better or worse, mobile payment ubiquity will remain elusive until then.
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