5 Reasons Why Small Businesses Should Adopt Mobile Payment Technology
Mobile payments have gotten some good press. According to an October 2015 report from Accenture, more than half of consumers in North America are aware that they can use their mobile phone to make payments– up 40 percent from last year,1 and significantly higher than the 15 percent reported three years ago.2 And, market research firm Javelin Strategy & Research reports that mobile payment transactions could reach as high as $5.4 billion by 2018, a stark increase from the $1.6 billion forecasted to occur in 2015.3
Yet for all the promise mobile payments offer, it may not be enough to persuade small businesses to adopt the new technology just yet. Actual mobile payment usage data may provide a clue as to why. The number of consumers actively using mobile payments remains relatively flat, having grown only one percent in a year.1 This slow consumer adoption rate could be leading small businesses to wonder why they should consider adopting a payments technology many appear to have not yet embraced.
Despite curiosity about when consumer awareness of mobile payments will translate into actual usage by customers, all signs point to one conclusion: mobile payments are the future of payments. The reason merchants should plan on adopting mobile payment acceptance is simple; offering customers more ways to pay is smart business, and getting ahead of the curve is always a good thing. Mobile payments are the next installment in the natural progression of payments from cash, to check, to credit and debit card.
Here are the top five reasons why small businesses should adopt mobile payment technology:
1. Smartphones are here to stay
Smartphone adoption continues to rise, growing in the U.S. from just 19 percent in 2009, to 66 percent in 2014.4 Research firm IDC reports that by 2017, 1.5 billion smartphones will be in use globally.5 Beyond texting and calling, consumers are using mobile technology to help manage every aspect of their lives– including buying goods and services. The number of payment ready phones is increasing– 43 million phones currently support Android Pay, and 54 million Apple phones and watches support Apple Pay.6 Consumers’ increasing reliance on their mobile phones provides small businesses with new opportunities to connect and deliver value in a unique way. Today’s digital consumers are seeking easier, more secure payment options on their mobile devices. Ultimately, small businesses that provide seamless payment experiences, like those offered via a smartphone, will become more favored brands.
2. Customer convenience
“Tap-and-go” mobile payments speed up the checkout process, so merchants can help more customers in less time. According to some estimates, this method of payment can be 15 to 30 seconds faster than swiping a traditional card and signing the receipt or entering a PIN.7 Mobile payments also give consumers easy access to more accounts without the hassle of carrying multiple plastic cards in a physical wallet. Mobile payments are gaining ground in cafeterias and retail shops on large corporate campuses where employees may not always carry their wallets but almost always have their cell phones. Many consumers also appreciate the “green” factor of mobile payments with electronic receipts that save paper and save time waiting for printed versions.
3. Better security
Most mobile solutions are inherently more secure than standard credit card transactions because they reduce or eliminate card handling, and use tokenization and other technologies to help safeguard cardholder data throughout the transaction. Tokenization replaces sensitive payment data, so that merchants no longer need to store credit card numbers to complete payment transactions, simplifying their compliance approach and increasing their security. Because the token is not the real card number, it is useless to attackers. With Apple Pay, the customer’s 16-digit card number is replaced with a token that is stored in an iPhone chip called the Secure Element. The token is protected by passcode or Touch ID, Apple’s biometric fingerprint authentication technology. These three layers of security greatly reduce the likelihood of fraud. Google Wallet also uses tokenization, but uses Host Card Emulation (HCE) rather than a chip. Google’s cloud-based approach allows for compatibility with any NFC-equipped Android phone. In general, all mobile payment solutions are inherently more secure than traditional payment solutions that may not use tokenization or other technologies to protect cardholder data.
4. Competitive edge
As mobile payments continue to grow in popularity, small businesses that adopt a mobile platform will be in a better position to compete with their larger counterparts. With mobile payment technologies, merchants can know their customers by name and accept payments quickly for a more personalized shopping experience. Additionally, many mobile payment apps do more than accept payments. Some have built-in loyalty programs that allow for special offers, mobile gifting, and other business building features. Many mobile technologies allow a merchant to gather customer data and use it for targeted marketing and promotional efforts. A mobile wallet can store personal information, such as email address and contact information, eliminating the need for a sales associate to request it– and for the shopper to provide it – at every transaction. Location and time-based notifications is another mobile payment feature that can give a small business an edge over the competition. Consumers don’t have to carry coupons and loyalty cards, and instead receive special offers when they are in the vicinity of a favorite merchant, and reminders when promotions are expiring.
5. Chip card payments
Every new payment type, whether check, credit or debit card, has experienced some level of customer and merchant hesitancy when initially introduced. The transition to mobile payments faces similar uncertainty, but will likely take off more quickly because consumers have already wholly embraced the supporting technology– smartphones. Small businesses that implement mobile payment acceptance while consumers are still in the early stages of adoption can take advantage of the enhanced security and marketing benefits, and be prepared when smartphones dominate the marketplace and edge out the traditional card-filled wallet.On October 1, 2015, Visa, MasterCard, Discover and American Express shifted the liability to merchants for certain fraud related chargebacks involving a card-present chip card transaction. The EMV chargeback liability shift has prompted the migration of businesses to EMV chip card terminals. Small businesses that have upgraded to EMV may already have the equipment they need to process mobile payments, since many EMV terminals use the same NFC technology needed for mobile payments. For merchants who are reluctant to upgrade to EMV, the ability to accept mobile payments and chip cards using the same NFC technology can help justify the cost of the upgrade. Businesses that don’t have EMV can help reduce the occurrence of chargebacks by encouraging mobile payments since they also provide a higher level of security than traditional transactions.
2Western Union, http://payments.westernunion.com/blog/article/Awareness-of-mobile-payment-solutions-continues-to-rise, June 17, 2013.
3Javelin Strategy & Research, https://www.javelinstrategy.com, 2015 .
4Forrester Research Mobile And Smartphone Adoption Forecast, 2014 To 2019 (US).
6Joseph, Nikhil. Apple Pay At Six Months: A Medium-Term Outlook. 1st ed. Maynard: Mercator Advisory Group, 2015. Print.
7Mobile Payments: What’s in it for consumers? https://www.kansascityfed.org/publicat/econrev/pdf/12q1hayashi.pdf, 2012.
Article by Chris Allen, Director, Demand Generation at Mercury Payment Systems
Chris Allen joined Mercury in February 2014 tasked to create merchant demand for the channel. He has more than a decade of marketing leadership experience as an entrepreneur and an executive within the Point of Sale dealer and developer spaces. Prior to Mercury, Chris was Chief Operating Officer at POS Nation, which he helped transform into a national POS dealership focusing on SMB restaurant, retail, and service based businesses. Most recently Chris was the Chief Executive Officer at Bepoz America, which is an international enterprise point of sale software developer headquartered in Sydney, Australia. By leveraging his experience in the industry, as well as inbound digital marketing, he will help Mercury continue its industry impact while aiding partners in the growth of their businesses.
Mercury Payment Systems, a Vantiv company, (NYSE: VNTV), is simplifying business by partnering with software companies and technology services firms to embed payment processing in front and back office applications. Mercury’s commerce technology is integrated into a broad set of point of sale systems, reaching merchants through an extensive partner network of more than 3,000 point-of-sale software developers and value-added resellers. Mercury’s award-winning customer service and value-added solutions help merchants streamline their business and build revenue through simple to use commerce solutions. For more information, visit www.mercurypay.com or the company’s locations in Durango or Denver, Colorado.
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