Within the next 4 weeks, the entire contactless payments ecosystem is going to change.
The big 3 – Apple Pay, Android Pay, and Samsung Pay – will all officially be available in the U.S. by the end of September. Android Pay (a revised Google Wallet and Tap and Pay experience) could arrive late August or early September. No one is quite sure after Subway and McDonalds confirmed the date August 26th, only to be wrong. But we do know many of the Android Pay partners have begun promoting it and putting out Android Pay stickers. Samsung Pay is officially arriving September 28th. Since Apple Pay has been the major contactless payment provider available for quite some time, this marks a big change for the entire contactless payment and mobile wallet industry. And it’s a change that should be good for everyone.
Under normal circumstances, this much competition would be viewed as a bad thing for these companies, but instead, it’s the opposite. The biggest complaint from people using a form of contactless payment is not that it is hard to use or that it’s inconvenient, but instead, it’s that there are not enough places that accept contactless payments. Lucky for them, that problem could soon go away.
Contactless Payment adoption is simple and difficult at the same time
The major problem with contactless payment adoption is that it is a never-ending circle. Retailers are waiting for consumers to adopt contactless payments while consumers are waiting for more retailers to adopt contactless payments. This is slowing adoption rates and isn’t helping anybody. But now that every major smartphone OS (you could consider Samsung’s UI almost an OS with all the bloatware they add on) has a contactless payment feature, retailers will be more likely to upgrade to NFC terminals and accept contactless payments. Which will give consumers a better reason to try the technology. Because while it may seem simple, getting retailers to change to NFC terminals so far has not been easy, even though Apple themselves changed their tune on NFC and added it to the latest iPhone and Apple Watch.
Why has contactless payment adoption taken this long?
This is a question a lot of people ask. If contactless payments are the best way to pay, then why has it taken so long for consumers and retailers to adopt the technology? This question has two answers. First, not everyone has an NFC enabled device. Only the newest models of phones are being built with NFC chips – only the latest iPhone has it. This is making contactless payments less of an option for many smartphone users/companies – especially in less developed countries where cheaper phones run rampant: India, Africa, and even parts of Asia. But we will see this change within the next year.
Especially with the new Galaxy line up having NFC enabled for Samsung Pay and the new iPhone (6s or 7) and it’s NFC capabilities causing people to upgrade. What’s more, the Android One project is helping to deliver smart-ish phones to less developed countries, helping them access the Internet as well as features like NFC. While payments might not be for high-priced items in these types of countries, micro-transactions via NFC and contactless payments could turn the tide of global adoption – and help more retailers and shops see the value of adding the service to their store. Which is arguably going to cause a rise in adoption for contactless payments among consumers as well.
The second answer to this question is one I mentioned above. And that’s retailer adoption. Retailers will play the largest role in contactless payment adoption. The more retailers that accept contactless payments the more consumers will be prompted to try it. Driving much higher adoption rates for both consumers and retailers.
What’s more, major retailers that originally invested in CurrentC – the contactless payment competitor – have now jumped ship and started accepting contactless payments. Rite Aid and Best Buy being the largest. This is a trend we are going to see become more popular as 2015 comes to a close. So while we have seen a lot of retailers make the switch and adopt contactless payments, the main driving force will now come from consumers. But that’s not all.
You can win the battle but lose the war on contactless payments
Sometimes your biggest competitors can actually become your biggest allies. While Apple, Samsung, and Android would all like to become the major provider of contactless payments, they also understand that they need each other to succeed. And of course, it all comes back to the retailers.
It will take all three major companies to drive major acceptance of contactless payments throughout all retailers, big and small alike. Without having millions of consumers ready to try contactless payments, retailers will say it is not important and delay acceptance of contactless payments. So in order for the big 3 to succeed, they first need contactless payments to succeed. This is why, for the time being, the big 3 need to be allies. Lose the war, to help win the battle.
The main competition will come later, and it will be over the mobile wallet as a whole. Rather than competing on whose mobile payment system is accepted at the most places, the big 3 will compete on whose mobile wallet provides the best customer experience through digital loyalty and reward card integration, as well as other things such as boarding passes and train tickets. And it will help the entire industry grow. Healthy competition in the market place helps bread better brands – Economics 101: Monopolies are bad.
But for the time being, the main focus of the big 3 will be on driving contactless payment adoption. It will not be till a little later that we see the true capability of contactless payments with apps like Apple Wallet. And that is when we could see allies turn to enemies.
How does all this contactless payment action effect you and your business?
There is no need to pick sides if you’re a business wanting to accept mobile payments or build digital loyalty cards. Right now your job is to make sure that you’re in the game. As more major retailers start to accept contactless payments, adoption rates will rise and consumers will start expecting to be able to use contactless payments wherever they go. But it isn’t all about just giving your customers the ability to use contactless payments. It’s also about making more money.
Mobile payments have already led to an increase in tips at restaurants and analysts are predicting that it will cause a rise in spending just as credit cards did. And that isn’t the only thing that will help your business make more money through contactless payments. You can also move your loyalty and rewards programs into the mobile wallet. Research shows that 57% of US online adult smartphone users are interested in having access to loyalty program points and rewards within a mobile wallet. And Marketingland has also reported that mobile wallet coupons lead to a 64-percent higher conversion rate over static mobile web coupons. So far it seems that consumers are simply responding better when their buying experience is intertwined with their mobile phone. Time will tell the full effect that contactless payments will have on consumer behavior, but as the big 3 force retailers to adopt, it doesn’t appear that contactless payments are going away anytime soon.
Here’s an interesting thought- Will The Apple Watch Drive Apple Pay Adoption?
