Featured in Profit Guide Magazine: The Huge Opportunity of Mobile Payments
John Lanni wanted to keep his customers coming back. The co-founder of Currito, a Cincinnati-based burrito joint with 18 locations in the United States, was looking for a way to build a rewards program, but for a fraction of the cost that major companies usually incur. The solution? A virtual loyalty card that sits on customers’ smartphones. It was a huge hit: Currito signed up 200 customers at each location initially, and the program is still growing more than six months later. Customers are indeed coming back to Currito, too. A recent virtual coupon for a new smoothie saw a 23% redemption rate.
Lanni’s experience shows the advantages of mobile commerce, a technological development that’s been expected since the beginning of the smartphone era and may finally be set to go mainstream. In September, Apple launched a mobile payment system called Apple Pay, which combines payments with an existing app called Passbook that stores users’ loyalty cards, tickets and coupons. Given the company’s uncanny ability to establish trends, consumers could be using their smartphones to pay very soon. But the mobile wallet isn’t just about making shopping more convenient. It’s a way for businesses to form new kinds of loyalty programs and promotional opportunities, and to track their customers’ preferences.
When small- and medium-size businesses want to expand into mobile commerce, the preferred solution is to develop a custom app. But building one from scratch can be prohibitively expensive. Creating loyalty cards that reside in Passbook or the Google Wallet app is significantly cheaper, according to Bijan Shahrokhi, whose firm Virtual Next built Currito’s mobile solution. There’s another advantage. “If you have an app, you get 95% of people deleting your app within a month,” he says. “But if you have a digital card on iPhone Passbook and Google Wallet, only 2% delete it after a month.”
Shahrokhi says businesses, particularly small chains, should focus on getting their cards into mobile wallets because the payoff will come sooner to those who act the fastest. “Not many digital cards out there are supported by Passbook and Google Wallet, so early movers end up having a much better participation rate than companies that join later,” he says. “Now is the time to get into Passbook and Google Wallet, before it gets very crowded.”
Some consumers are agitating for mobile payment options already. “It’s really for busy, time-starved people who really love their devices and never leave them at home, and the convenience of paying for everyday items—buying your coffee, getting on the train, buying your lunch,” says Brenda Clark, vice-president of payments innovation and integration at CIBC.
“Brown believes about 30% of point-of-sale transactions in Canada will be completed on a mobile device by 2018”
Fortunately for Canadian businesses that want to start accepting mobile payments, many retailers already have near-field communication functionality, the technology used by Apple Pay and other mobile payment platforms, thanks to the widespread adoption of tap-to-pay systems. Business owners can also use their own smartphones to accept payments with add-ons like Payd Pro from Moneris Solutions, which turns any mobile device into an untethered credit- or debit-card machine. “At least a third of our new merchants every single month are on mobile,” says Moneris CEO Angela Brown. Although absolute numbers for Moneris are small today, Brown believes about 30% of point-of-sale transactions in Canada will be completed on a mobile device by 2018. She foresees a future where payments will be mobile-to-mobile, doing away with the hassle and cost of cash terminals and other hardware in favour of the smartphones consumers and vendors use every day.
Even that interaction might soon be unnecessary. Another Apple invention, EasyPay, lets customers pay for items using their Apple IDs, allowing them to leave a store without ever speaking to anyone. EasyPay is currently restricted to Apple retail locations, but a rollout to other chains looks possible.
The customization possibilities for mobile wallets are potentially endless. “A mobile wallet’s contents can be changed according to your location, purchasing habits or mood, and all that can have a significant impact on a business,” Shahrokhi says. Companies could offer special deals to shoppers with mobile loyalty cards when they walk past a store. Or a coffee shop could promote its newest creation just before a regular customer usually visits for a midday pick-me-up.
The nascent success of mobile commerce for businesses like Currito suggests the technology could be popular with shoppers. “I just had a customer write on our website yesterday, talking about how great and cool he thought it was that he could pay with his phone,” Lanni says. “People inherently want to feel like they’re part of this next wave of technology.”