Finding Mobile’s X Factor

Consumers have been slow to retire their plastic credit and debit cards in favor of paying with their smartphones. “The reality is there’s nothing broken about the card,” notes Ben Jackson, an analyst at the Mercator Advisory Group. “The mobile payment doesn’t solve a payments problem for the consumer.”

In fact, just one in five Americans who own a smartphone tapped or waved it to make a mobile proximity payment in the last six months, according to Nicole Perrin, an analyst at eMarketer. The firm estimates that not even a quarter of smartphone owners will use them to pay this year, and, by 2020, only a third will do it. “It’s still a fairly niche activity among smartphone owners,” she concludes.

If anything can make mobile wallets, mobile apps, and mobile payments inevitable, it’s loyalty rewards, offers, and discounts, observers agree. Those incentives could overcome the “friction” of having to open the phone, open an app, and deviate from the familiar practice of swiping a card or the relatively new necessity of dipping a card, multiple sources say. With the right rewards and discounts, presented in the right way, mobile wallets could take their rightful place among the continuum payments without
ever having to entirely replace cards, cash, or checks, they predict.

Moreover, every good loyalty scheme will eventually incorporate mobile capabilities, according to Ben Kaplan, president and CEO of CashStar, a prepaid and loyalty platform. “Consumers are inherently mobile, and mobile phones are both powerful and ubiquitous, so any loyalty program that wants to engage with their consumers needs to take into account those simple facts of today’s market,” he asserts.