The Fight for Control of Mobile Payments

Retailers Seek to Cash in on Mobile-Payment Trend (Los Angeles Times)

Mobile Payments Market

When most people hear about new developments in retailing they usually assume it has to do with new products, a new advertising campaign, new store design and such. Yet, possibly the hottest trend has little to do with any of these. Instead, the newest thing in retailing is how customers can pay for purchases.

As we note in our Setting Price: Part 2 tutorial, a decision facing most marketers is deciding how to accept payments from customers. Until the advent of mobile technology, the options were pretty basic – cash, check or credit card payment. But, that is no longer the case. Payment by mobile device, such as smartphones and even tablet computers, is surging.

As a rapid growth market, mobile payments have drawn the attention of Google, with their Wallet payment systems, and a number of small start-up companies, including Square, which recently cut a deal with Starbucks. These companies have built this market by developing specialized applications (apps) that enable customers to wave their smartphone to make a payment. Even more interesting are newer technologies where customers need only to have their smartphone with them (e.g., in their pocket) and a participating retailer can automatically recognize it and bill their account.

But, as discussed in this story, retailers are really not enthralled with the current mobile payment options and are seeking their own solution. Leading U.S. retailers, including Wal-Mart, Target, and CVS, have joined forces with several others to support development of their own mobile payment system. The stakes in this market are potentially huge with a key issue resting with who has control of critical information when customers make purchases. Many of retailers have gotten to where they are by staying close to their customers, and they fear, without control of mobile payments, they may lose access to valuable information.

With about half of U.S. consumers owning smartphones, mobile payments, though still in their infancy, are quickly catching on. The transactions are expected to increase 62% this year, according to research firm Gartner Inc. By 2016, mobile payments are expected to reach $617 billion worldwide, a nearly sixfold increase from last year’s $105 billion, the firm said. By then smartphones are expected to account for close to two-thirds of all U.S. cellphones.

What are the key information issues leading these retailers to join forces?

Image by Sergio Uceda