Despite much hype, electronic payment in the U.S. is still rolling along in first gear, compared to some other economies.
Today, more than 87% of U.S. consumers own a cell phone, and the use of smartphones continues to grow rapidly, according to a recent FDIC report. But there are two factors necessary for increasing the number of mobile payments: critical mass of smartphone owners and increased functionality that goes beyond simply making a payment.
From Apple Pay to Google Wallet, a number of mobile payment applications have been launched or announced, but “so far, mobile payments haven’t really taken off because they haven’t proven to be that much more convenient than other methods of payment,” said Robin Kaiserman, a financial services industry analyst for the research organization Mintel International Group.
Many industry observers are looking to Apple Pay to see how consumers will respond to that electronic offering.
“By Apples’ own numbers, Apple Pay technology is in 220,000 merchants but 9 million merchants take credit and debits cards,” said Kaiserman. “So they’re only in a fraction of merchants. Some of the biggest merchants, like Walmart and Best Buy, are not accepting Apple Pay, and it’s hard to imagine you can be successful if Walmart is not accepting you.”
PHONE ZONE
As Americans look for friendly payment means, they don’t have to look any further than their hand.
“Consumers are looking at smartphones to do more than just pay their bills,” Kaiserman said. “They are looking at them to tie into loyalty programs and send an alert when their card is being used. They want them to provide price comparisons so they can see where the best prices are. They want geographically-based functions, so that if they’re walking through Macy’s and they’ve shown through previous purchase activity that they’re interested in something that Macy’s offers, they’ll get a pop-up notice about a sale Macy’s is having, and they can take advantage of it. Everything is wrapped up in one function.”
This spring, Salt Lake City-based Sinclair Oil will roll out a free mobile payment app for Android and iPhone owners that offers that type of diversity. According to Russell Gibson, manager of marketing technical services for Sinclair, the app not only allows customers to pay for fuel and merchandise at branded Sinclair stores, it interfaces with Sinclair’s loyalty program, permitting offers to be delivered from inside the store.
It also tells shoppers where they can find Sinclair dealers and then gives more details, such as which dealers accept mobile payment or sell diesel fuel.
Consumers’ payment data won’t be stored on their phones, but on the secure server of a preferred Microsoft partner.
The technology is in tests at several locations, and everything is going as planned. “It will probably take about a year to roll it out to everyone,” Gibson said. “We’re hoping to have over 1,000 locations on board by the end of year. That would be all our bigger stores.”
“Not much excites me, but this is exciting,” he said of the mobile app. “It shows that this 100-year-old brand is still on the cutting edge.”