If you weren’t already aware, the way people pay for your products is about to change. Mobile payments, where consumers use their cellphones to pay for goods and services, are expected to total $60 billion by 2016, according to eMarketer.
Some of the biggest companies in the world are racing to create technologies that let people store and transfer funds from their phones. Google, Apple, four of the major credit card companies and the major wireless carriers are all developing various platforms that will enable consumers to essentially toss out their billfolds in favor of their cellphones.
So, what does this mean for you as a small business owner, and what do you need to do to prepare?
Depending on which “mobile wallet” technologies end up earning adoption, small businesses may stand to reap a lot of benefits. Financially, you could save on traditional credit card processing fees, as some of the wallet providers are proposing different fee structures that could be more beneficial to smaller operations.
There’s also the potential for your business to work with the mobile payment service providers to integrate your promotions into their technologies. For instance, a customer could discover your business through a mobile payment app, and then receive a coupon, pay for a transaction and sign up for your loyalty program or email/text list all within that single app.
But, there is a downside. Chances are this transition from traditional cash and credit card payments to mobile payments will require new (and possibly expensive) point-of-sale hardware. The two dominant technologies currently driving many mobile payment services are Near Field Communications, or NFC, and cloud-based technologies.
NFC, a technology that Google is betting on, involves the use of a chip on a cellphone that has the ability to communicate wirelessly with a terminal at checkout. Cloud-based mobile payment services, favored by companies like PayPal, consist of an app on a smartphone, which consumers would use to complete a transaction (for instance, by entering a PIN from a receipt to complete the transaction). Cloud-based systems typically involve much less hardware for business owners, but will likely bring extra costs in the form of software setup and system integration.
Most experts peg mass adoption of mobile payment systems as three to five years away. That means you don’t need to rush out to purchase an expensive point-of-sale system, such as a special bar code scanner or an NFC terminal. And while cloud-based systems and NFC technologies seem to be in the lead, we’re not yet at a point where you need to place all your chips on the side of any particular mobile wallet solution – most are just now beta testing their products.
Instead, look to what your own customers are doing today for direction. According to Nielsen, 39 percent of smartphone owners who were mobile shoppers during third quarter 2012 used mobile coupons on their devices; 45 percent read reviews before buying; and 61 percent researched items before a purchase.
Consider taking advantage of this real-time marketing opportunity by engaging them with mobile coupons and text marketing. It can help you cultivate and maintain a base of customers accustomed to interacting with your brand through their phones. And that interaction could facilitate a smoother transition for your business, and your customers, when critical mass hits and the majority of the population is paying for their purchases through their mobile devices.
Have questions about mobile payment systems, or how you can engage your customers through mobile? Let me know in the comments.
Brandon Carter is the marketing communications manager for Access Development, a Salt Lake City-based provider of merchant content for loyalty and rewards programs. Click here to learn more about Access.
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