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GUEST OPINION Mobile payments: the benefits to retailers

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We all know that mobile should be the key tool in the marketing-retailing-payments chain, but still many retailers are unsure about what mobile payments actually are and what they can do. Here Keith Brown, MD paythru, gives us an overview of it all to help you develop your m-payments strategy

There’s no doubt about it, the demand for mobile retail is growing. The IAB reported that last year 51 per cent of British mobile owners used their phones to make payments, redeem coupons and research products and services. According to online auction giant, eBay, mobile shopping could be worth £13 billion to the British economy by 2021.

With the recent arrival of Quick Tap it’s clear that some High Street retailers have realised the benefits that mobile payments for purchases under £15 can bring them, but some of the nation’s biggest retailers are already using their mobile retail sites to reap much higher value rewards. Marks & Spencer, for example, has been recognised as having one of the best mobile retail sites on offer (one which has seen customers spend up to £3280 on one order).

But you don’t have to be a multi-national retailer to develop a successful mobile retail strategy. Ultimately, all you need is the ability to take mobile payments and to do so in a way that keeps your customers happy and hopefully keeps them coming back for more. So, what elements do successful mobile retail sites require?

No payment limits

Customer convenience must be at the heart of your mobile retail strategy. People have started to depend on their mobiles for more than just calls and texts. For many, the smart phone is the first thing they check in the morning and the last thing they check at night. The speed with which information and services are delivered via mobiles has also made mobile consumers expect to get what they want, when they want it and placing any barrier in their way is likely to cause frustration.

As the Marks & Spencer example shows, consumers are happy to make large payments via their mobile – some of our clients regularly take more than £1000 in a single mobile transaction – although this is somewhat put in the shade when you consider the staggering $350,000 Lamborghini and £150,000 yacht purchased through eBay’s auction app. I’m not suggesting that these massive purchases are typical, but shoppers don’t just want to buy £5 ringtones anymore, they shop via mobile for the convenience and expect to be able to spend the same amount as they can at their computers. The difference between a small payment over mobile and a large one is simply one of consumer confidence, both in the site and in the method of payment.

App or site?

Mobile apps remain an incredibly popular platform. A US report, published in 2010, predicted that the volume of business transacted in apps would grow by 600 per cent in 2011 and continue growing until at least 2015. When you consider the increasing popularity of Android phones and the booming tablet market the attraction of developing a retail app becomes obvious. Argos launched their retail app in May 2010 and had seen more than 1.3 million downloads by April 2011.

Apps need to be developed for different handsets and optimised for five or six different platforms to gain maximum exposure. Retailers also need to implement an in-app payment solution to avoid forcing the shopper to leave the app to pay, which can destroy the experience for the consumer. It’s also worth keeping in mind that app stores take commission for handling payments made via their stores. This can be up to 30 per cent of the transaction and seriously dent profitability.

Whereas mobile sites offer the advantage of being accessible from all Internet enabled mobiles, reducing development costs as the consumers’ handset is irrelevant to the process. It is also relatively easy to replicate the traditional Internet shopping payment process and allow people to pay via credit and debit cards.

Retailers have to adapt their offering to the generation of consumers that have been raised in a mobile world. This is the generation turning to mobile apps and social networks to communicate, organise their lives and buy what they want, when they want it. One hundred million consumers currently use Facebook for mobile, and they are twice as active as Internet users.

For the consumer, Facebook offers a way for people to shop and socialise online or on their mobiles at a time and place that suits them. For the retailer, it offers the chance to cross-promote offers, drive sales through mobile channels and promote topical and local offers to consumers. At the moment Facebook Credits are largely used for virtual game transactions, but retailers are cashing in already by signing up to the Facebook Deals scheme which allows participating retailers to offer location based deals to consumers. A High Street store may have a person handing out leaflets on nearby busy street corner to drum up trade; what Facebook offers is the chance for retailers to target local mobile users in a similar way, only they don’t have to be walking down that street to get the offer.

User experience

Whatever system you choose and however you decide to drive traffic to it, the factor which will ultimately win over customers is functionality. The two areas to focus on here are security and ease of use. A survey carried out by Populus in 2010 found that around 60 per cent of those surveyed said that concerns over payment security and hard to use mobile sites prevented them from shopping via mobile.

The fact is mobile payments should be as secure as those made over the Internet. Retailers should ensure that their site or app is PCI DSS Level 1 compliant. The Payment Card Industry Data Security Standard is evidence that a retailer – and mobile payment provider – complies with a set of rigorous security measures to ensure the safety of cardholder details and reduce the risk of fraud. It’s then up to the retailer in question to let the consumer know that they are buying from a secure site.

But before the shopper gets to the payment stage, they have to navigate through the site or app to find what they want to buy. Shoppers want a simple mobile site, which is easy to navigate and offers the same products that they can see online. A study by eDigital Research showed that shoppers want more detailed product pages which they can go to for further information prior to making a purchase. The study picked the Marks & Spencer’s site as the best example of good practice that it could find.

Other retailers have come up with ways to simplify the shopping process, such as Amazon’s 1-Click purchases, which is used over both their Internet and mobile sites – reducing the time the shopper has to spend on the admin side of their purchase, making the process as hassle free as possible.

For a mobile retail app or site to truly succeed it has to bring the security and functionality of the Internet site and enhance mobile user experience by providing quick site/app load times, user identification, pre-filled forms and easy navigation to make the customers purchase as quick as possible. People making a mobile purchase are often buying on impulse or because they’ve remembered an important occasion at the last minute and need to buy a gift right there and then. They want a service that’s easy, instant and secure.

Payment types

There are currently three main forms of mobile payment worth considering; the electronic wallet services such as PayPal Mobile, Near Field Communication (NFC) systems like the Quick Tap service recently launched by Orange and Barclays, and more familiar credit / debit card payments.

The electronic wallet system offers a great way for those with accounts to manage their mobile spending, but retailers that only accept this form of payment will effectively be blocking those without an account from becoming customers. Impulse shoppers – an important element in mobile – are highly unlikely to spend time creating an account when they could just shop elsewhere.

Those that do have an existing account may find themselves having to transfer funds to the wallet before they can make a larger purchase, which is fine if they have planned to make the purchase in advance, but rather spoils the experience if they get to the checkout and realise that they don’t have the funds for what they want.

Retailers need to keep in mind the transaction costs charged by the companies offering this service, and the fact that some of them withhold funds for up to 30 days. Both of which can have a negative impact on a retailer’s cash flow.

Near field communication (NFC) technology allows consumers to pass an NFC-enabled mobile phone over a payment pad and automatically charge the purchase to a registered credit or debit card, or mobile account. The first major NFC scheme has just been launched. Dubbed Quick Tap, it’s currently only possible for UK consumers to use this system if they have a Samsung Tocco Lite handset and sim card, under an Orange mobile contract with a Barclays bank account, which makes the system quite exclusive.

Nokia and Google have both announced that they intend to speedup development of NFC technology, so undoubtedly more schemes will be launched soon..

Most consumers like the idea of NFC payments – it represents the ultimate in convenience when you realise that you haven’t enough cash to pay for your coffee and you have a queue of frustrated customers behind you. But two issues that may impact the growth of NFC is the security of the transaction and the maximum £15 limit currently imposed by card issuers.

Allowing people to pay via credit or debit card when making mobile purchases would seem to be the best option currently available as it’s the most widely used payment method for online shopping and consumers are comfortable with it. But with some providers charging up to 30 per cent of the value of each purchase, it’s important for retailers to find the best deal for them. As with electronic wallets, the time that the money is held by the payment provider has a direct impact on the profitability of a retailer’s mobile commerce channel and therefore also needs to be closely monitored.

Other payment options that are becoming more popular include the previously mentioned Facebook Credits, applying the charges to the customer’s mobile bill and voucher cards.

A mobile retail site that allows users to access all of the retailer’s online product, while catering for the mobile demographic – making the process as quick, easy and secure as possible – can greatly benefit the retailer’s bottom line and enrich the consumers experience, making them more likely to be a repeat customer and to spread the word to their friends.

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