The mobile wallet is suddenly every retailer's new dream. McDonald's just announced it is testing one in France. Starbucks established its alliance with Square a couple of weeks before that. Walmart, Target, 7-Eleven and Sunoco, among others announced they are collaborating to create one for their customers. The banks, phone companies and, most famously, Google, are also in the mix.
The impetus is that companies want to build loyalty with their customers, which they believe will lead to greater sales and profits since repeat customers are less expensive than new customers. They also want to capture customer purchase data without having to pay a third-party vendor for it so as to better target ads and promotions. And, of course, they believe there is money to be made in the financing of customer purchases. All of which is pretty compelling. But with so many disparate cards in the mix, aren't consumers going to get annoyed trying to remember which system to use where?
The strategy is that all of these players want to establish a presence in the electronic payment marketplace. Once they have done that, they can then negotiate with each other to establish what will probably end up being one or two or three major alliances, just like for credit cards, airlines and so forth. Unless you have a presence, you have nothing with which to negotiate - and, as a merchant, you will become a supplicant forced to pay higher fees with less control over the ultimate direction of the enterprise.
The businesses claim customers are clamoring for this in a mobile-obsessed society. And there is some truth to that. But abuses will soon emerge, inevitably, as people overspend while merchants over-promise - and probably over-charge. Heightened regulation is sure to follow, though there will be some internal tussles over who gets primacy: financial, telephonic, consumer - or some combination of them all.
The only imponderable now is how big this market will become. JL
Robin Sidel reports in the Wall Street Journal:
More than a dozen big merchants announced their plans to jointly develop a mobile-payments network that will battle similar services from Google Inc.and other companies.
Wal-Mart Stores Inc., Target Corp.,7-Eleven Inc. and Sunoco Inc. are among the companies hoping to elbow their way into the burgeoning market that turns smartphones into devices for making purchases.
The push by merchants, called Merchant Customer Exchange, or MCX, is at an early stage, and the companies haven't set a launch date or hired a chief executive. A CEO search is under way. It isn't clear how much money each participating merchant is contributing to the network's development.
Financial institutions and technology firms are pouring billions of dollars into the development of mobile-payment systems that operate as so-called digital wallets.
While few shoppers use their phones as mobile-payment devices, industry executives are convinced that consumers eventually will be just as comfortable buying with their phones as they now are when using credit cards and debit cards.
The technology relies on applications that a customer can download onto a smartphone and then make purchases in a store by tapping the phone against a reader placed by the cash register.
Mobile-payment transactions are expected to surge to an estimated $600 billion world-wide by 2016, up from $172 billion this year, according to market-research firm Gartner Inc. IT +0.16%A Federal Reserve report in March said 87% of Americans have a mobile phone. Nearly half of those are smartphones, cellphones with computer applications and Internet access.
Among people with a mobile phone and bank account, 11% used mobile payments in the previous year, the survey found.
The new mobile-payments efforts already is running behind rivals such as the Google effort, called Google Wallet, which began operating last year on the technology company's Android devices.
Isis, a collaboration of mobile carriers AT&T Inc., T -0.75%Deutsche Telekom AG's DTE.XE -0.58%T-Mobile USA Inc. unit and the Verizon Wireless joint venture between Verizon Communications VZ -0.82%and the U.K.'s Vodafone Group VOD +0.62%PLC, will start trials later this summer in Salt Lake City and Austin, Texas.
And in another sign of the growing interest in mobile payments, start-up Square Inc. said last week Starbucks Corp. SBUX -0.35%will invest $25 million in the company and use its technology to eventually process all credit and debit transactions at about 7,000 Starbucks outlets in the U.S.
The proliferation of mobile-payments systems might confuse consumers, skeptics say. But participants say the rival efforts reflect a predicament: Each industry needs the other to make mobile payments succeed, but each group wants to lead the way.
"We're open to all partners, but it has to be beneficial to member merchants in a way that improves the system and doesn't layer on additional costs," said Mike Cook, corporate vice president and assistant treasurer at Wal-Mart.
All the mobile-payments efforts now under way are aimed at satisfying growing demand from consumers, particularly younger ones, for payments that are less cumbersome and faster. Merchants believe that building such electronic systems will deepen customer loyalty.
By setting up their own system, the merchants in MCX also are counting on leveraging existing relationships with customers to get them accustomed to paying with a phone.
Google and telecom providers know far less about shoppers' buying habits than the merchants do, they say.
Companies in the latest effort have combined annual sales of about $1 trillion and serve nearly every smartphone user in the U.S., they say.
Like their rivals, the merchants plan to develop targeted offers and promotions for consumers that will be available through smartphones.
So far, 14 merchants have signed onto the retail-led venture, including Best Buy Co., BBY -11.62%CVS Caremark Corp., CVS +1.10%Lowe's Cos LOW -5.78%., Royal Dutch Shell RDSB.LN -0.43%PLC, Publix Super Markets Inc., Sears Holdings Corp., SHLD -3.65%gasoline marketer Alon Brands Inc., Darden Restaurants Inc., DRI -0.76%grocery chain Hy-Vee Inc. and the HMSHost unit of Autogrill AGL.MI +0.94%SpA.
"I do believe that retailers are uniquely qualified to address what we believe are consumer desires in this space," said Terry Scully, president of Target's financial and retail services.
Among the uphill challenges facing mobile payments, many consumers have expressed discomfort with loading personal financial information into a phone.
A recent survey of 2,000 consumers found that 60% of respondents were concerned that mobile payments could jeopardize their financial or personal security, according to Market Strategies International, a consulting firm in Livonia, Mich.
But while yet another mobile-payments system might rattle confuse customers who don't understand differences between various systems, the growing number of options could help the overall effort gain traction. Executives from Isis and Google have said that competition is important to propelling the nascent industry. Some of the merchants involved in the new group already are dabbling with mobile payments. Target customers can use a mobile phone to buy and send a Target gift card. The mobile payment card has a bar code that can be read at checkout line.
0 comments:
Post a Comment