How to Generate Critical Mass for Mobile Payments

Mobile payments continue to receive widespread coverage in payments-related media, as various companies pilot and roll out mobile payment products targeted at both consumers and merchants.  In recent weeks:

While these launches are generating a good deal of hype in the industry, and mobile payments are the hot topic in 2012, it is worth noting that researchers assessing consumer and merchant interest in mobile payments are finding that consumer interest in mobile payments is lukewarm at present:

Most consumers are comfortable with established payments methods and feel that they do not have a compelling enough reason to change.  In addition, they have concerns regarding security and privacy.  In addition, most merchants have yet to embrace mobile payments.  The main reason for this is that there is a cost to equipping terminals for mobile payments acceptance, and merchants do not yet see the benefits outweighing costs.

However, with growing smartphone penetration, increased consumer use of mobile phones for shopping, and enhanced mobile payment and acceptance products coming on stream, most observers expect consumer and merchant attitudes to and usage of mobile payments to grow significantly in the coming years.

With this in mind, we have developed the following ten steps to overcome challenges and build a strong mobile payments franchise:

  1. Incorporate mobile payments into a digital wallet.  Although mobile payments on their own have a “buzz” factor as well as enhancing ease and convenience, these attributes on their own will not be enough to encourage widespread adoption of mobile payments.  Some mobile payment providers are looking to leverage power of the smartphone as well as social media apps to develop mobile wallets that will include targeted offer and loyalty program management functionality, in addition to mobile payments.
  2. Identify and target segments who are more willing to try new technologies and alternative payments.  In addition, develop strategies for other segments along the product-adoption curve.
  3. Conduct consumer and merchant research. Focus on identifying what these audiences would look for in a mobile wallet or in mobile acceptance tools, what offers and incentives would drive usage, as well as what factors reduce the likelihood to adopt mobile payments.
  4. Clearly articulate key selling points (over both existing payment methods and other mobile payments products), and incorporate these into all communications.
  5. Establish a partnership strategy that seeks to harmonize the different objectives and concerns of each stakeholder in a mobile payments consortium. (This is particularly important as there is widespread recognition that no one company can go it alone in the embryonic mobile payments space.)
  6. Develop local marketing plans, as mobile payments will tend to be rolled out initially in select markets rather than on a nationwide level.
  7. Conduct mobile payments pilots in select markets to assess and enhance the user experience, evaluate different offers and incentives, and test different media and messaging
  8. Create compelling incentives for consumers and merchants to trial mobile payments.
  9. Build referral programs to encourage initial mobile payments users to recruit friends and family.
  10. Once it has been launched, continually enhance your mobile payment solution to continue to meet changing customer needs, as well as to maintain a competitive advantage.
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