When word came out last month that Target was preparing its own mobile wallet app called TargetPay, which followed Walmart’s confirmed Walmartpay, which itself followed the announcement of ChasePay, it started to feel as though the payments world was de-evolving into an earlier era.
In the days before Visa and MasterCard came to dominance, almost every major retailer had their own payment card (the Macy’s card, the Bloomingdale’s card). From a customer experience perspective, it became clear that allowing shoppers to pay for everything with just one or two cards would much more effectively encourage plastic purchases.
Fast-forward now to mobile payments in 2016. We are now seeing two distinct camps: the one-for-all-and-all-for-one camp featuring Google Pay, Apple Pay, PayPal and potentially even MCX’s CurrentC; and the one-for-one group with WalmartPay, TargetPay and Starbucks. (To be precise, Starbucks is a footnote here, given its use of ApplePay.)
This is a critical battle for PFs to watch closely, as these two camps will create two vastly different payment environments, with very different levels of hospitality for PFs. Whether payments are merchant-oriented or shopper-oriented–and both are viable in their own way–will dictate the kinds of PF payments services that are needed.
There are, of course, many sides to mobile payments, including the back-end processing, the business element of interchange and whatnot and the front-end that shoppers use. If you ignore the shopper-interface element of it—which is what MCX initially did and that is one of many things causing their almost-definite imminent demise—the retailer-specific mobile payment mechanisms make a lot of sense. (Gosh darn those shoppers, always mucking up perfectly good profitable payments efforts.)
Tim Sloane, the VP for payments innovation at the Mercator Advisory Group, makes a good case for the back-end attractiveness of the single-merchant mobile payments approach. He argues that the industry forces that gave Visa/MasterCard that early push are very different today.
“Those old cards were primarily designed to provide trusted customers liquidity. As the market grew and the merchant had to deal with an ever increasing number of customers, the credit business got harder and was no longer considered a core competency of the merchant. So they moved it over to banks and eventually Visa/MasterCard were born,” Sloane said. “The mobile wallets today are not about liquidity because consumers have many places today that they can get money.”
Instead, Sloane said, these mobile apps today have two very distinct purposes: reduce the cost of sales; and “engage the customer so they won’t go shop elsewhere.”
That would suggest, Sloane said, that “liquidity is no longer what the merchant is worried about. I think an argument can be made that merchants now perceive consumer liquidity as so high that they no longer feel they should have to pay the interchange fee that enables that consumer liquidity. I’d suggest, however, that where many merchants once only accepted cash, most today have buckled under and accept cards, even if only debit cards. So this suggests that liquidity in the form of cash in the pocket remains a merchant problem, but a problem that merchants think they can solve using mobile wallets tied to ACH.”
A few counter-thoughts to Sloane’s insights. Quite a few people in this industry fail to give Zero Liability programs their due respect. Beyond making consumers comfortable shopping online (if you’ll recall back to around ’95, that was considered a potentially huge hurdle), it has made shopper reactions to fraud little more than a yawn. A direct attack on a shopper’s credit card (not debit, but credit) is met with a quick temporary credit and quite often a new card number. The shopper exposure is limited to that painless almost-sterile interaction.
Contrast that with a similar attack on a debit card, with the ability to empty a shopper’s bank account, cause all checks to bounce and provide no cash to cover those rubberized checks. That is what is awaiting shoppers in an ACH mobile payment realm. To merchants who long for that lower-cost environment, I say “Be careful what you wish for.”
My other nitpick to Sloane’s wise words—and I agree with almost all of them—is that it gives far too consideration to shopper perceptions and likely actions. Think this through to its logical next step. What happens when shoppers’ phones are filled with apps from Walmart, Walgreens, Home Depot, FootLocker, Macy’s and 20 others? Suddenly, loyalty points are split among all favored merchants. Slight differences in interfaces will prove maddening.
Instead of proving to be a viable alternative to the Apple Pays and PayPals of the payments world, it is going to make them appear far more attractive and hassle-free.
Technology can help a little with this problem, but only a little. If the mobile app could automatically detect the existence of that retailer’s Wi-Fi—or perhaps recognize a beacon or be alerted when geolocation coordinates are associated with a store address—it could automatically pop that up upon entering the store. That might be true if the phone is on and if airplane mode is off and if (for many beacons) Bluetooth is activated and if the shopper has selected the correct privacy settings.
And even if all of that was the case and the app did pop up automatically, the interface differences and the splitting of loyalty points would still be an obstacle.
I’m old school when it comes to these choices. Given that almost all retail revenue comes from the whims of shoppers, let’s cater to them and give them the most hassle-free customer-centric payment method possible. The customer may not always be right, but assuming that the customer is lazy is.