All signs point to mobile commerce as the future of business and finance — with one exception: Although the technology to conduct business and financial transactions using mobile devices is readily available, several reports show that merchants and consumers in mature markets aren't quite ready to make the leap. And the United States is lagging far behind.
In a global study conducted by business software maker SAP, researchers found that emerging markets, such as South Africa, Saudi Arabia and China, are adopting mobile commerce at a much higher rate than mature markets, such as the United States, United Kingdom and Japan.
According to the study, the United States reported the lowest consumer demand for mobile commerce, with just 53 percent of those surveyed expressing a desire to make a purchase via mobile; the results showed similarly low demand in the United Kingdom (57 percent) and Japan (59 percent).
Furthermore, although a majority of U.S. consumers believe that mobile will influence commerce moving forward, developing markets are showing greater enthusiasm, the study found. While 96 percent of respondents in emerging countries expressed an interest in using their mobile devices to buy goods or services, only 59 percent in mature markets did the same. By region, Asia Pacific (84 percent); Latin America (83 percent); and Europe, the Middle East and Africa (EMEA) (80 percent) said they are ready to buy more with their mobile devices, compared to 15 percent of North American respondents.
But this slow adoption of mobile commerce in mature markets doesn't result from a lack of interest in the technology. North American consumers, for instance, are looking for a much wider set of services. Rather than simply making payments, North American respondents indicated interest in using their mobile devices for "research" activities, such as checking the status of an order (21 percent) and finding information on products and prices (16 percent), the study found. [Read related article: 10 Reasons Mobile Payments Still Haven't Caught On]
"What became clear from our survey is that there needs to be a much wider view of mobile commerce taken. Consumers want to use their mobile devices for interacting with enterprises and brands, but not always for payments," said Diarmuid Mallon, lead of Global Marketing Solutions & Programs – Mobile at SAP.
Mallon talked to BusinessNewsDaily about the reasons the United States is behind in adopting mobile commerce and what businesses can do to lead the way.
BusinessNewsDaily: Generally, what are the contributing factors as to why the U.S. is running behind the rest of the world when it comes to mobile commerce?
Diarmuid Mallon: There are several barriers that the mobile commerce industry must overcome to encourage mainstream adoption. Concerns around safety (36 percent), the hassle factor of having to enter a lot of personal information (32 percent) and Internet access at the point of purchase (27 percent) inhibit consumers from diving into mobile commerce.
BND: Why do you think developing markets are showing greater enthusiasm for mobile payments than the U.S. is?
D.M.: Emerging markets clearly show a greater pace of change across the spectrum of mobile services. Seventy-five percent of respondents from emerging markets rely on their mobile phone to help manage their lifestyle, compared with 45 percent in mature markets. However, only in mature markets is there a link between smartphone sophistication and lifestyle influence. In emerging markets, basic mobile devices are likely to have the same influence on consumer lifestyles. To reach these future customers, banks and telecommunication companies need to highlight the utility of the services provided, rather than the technology. In the U.S., hype around the technology has created a complicated, disparate landscape of mobile commerce solutions, and has, in turn, failed to educate consumers about the benefits of mobile services and [has] slowed adoption.
Additional factors that underpin these regional trends include the local economy, i.e. GDP growth and relative consumer momentum, and the mobile infrastructure, as in some developing regions mobile network and Internet services outperform legacy telecom infrastructure.
BND: How can merchants, banks and other businesses increase this enthusiasm and encourage mobile-payments adoption here in the U.S.?
D.M.: Despite an increasing appetite for mobile commerce services, U.S. consumers remain reluctant to embrace mobile commerce. In order to encourage consumers to increase their mobile commerce engagement, marketers will need to concentrate their efforts on providing education about the personal benefits and security [of this technology].
Mobile represents a tremendous opportunity for enterprises. Survey respondents who have bought goods via mobile indicated that they would pay more by mobile if incentivized by brands and services. Retailers that provide their customers with incentives (in the form of coupons or specials) and an easy-to-use mobile interface can help encourage adoption. As retailers embrace mobile technologies, they must factor in their customers' desire for both convenience and personal security.
BND: According to the study, 29 percent of U.S. survey respondents said they will increase their mobile payment activity when they have more confidence in mobile security. What can merchants do to ensure customers that their transactions are safe and secure?
D.M.: The threat is the perception that mobile payments are less secure than cash or credit cards. Banks, retailers and all industry players can eradicate these misperceptions by 1) educating customers about the security of exchanging personal financial information over their mobile device and 2) working to develop industry best practices and foster collaboration and communication between mobile operators, financial institutions and enterprises to drive mass-market adoption of mobile payments.
BND: The study also revealed that one of the key barriers for mobile payments to overcome is the "hassle factor," yet convenience and ease of use are clear benefits of mobile payments. What is the cause of this disconnect, and what can merchants, banks and service providers do to fix it?
D.M.: We believe that the disconnect lies in the potential of mobile payments versus their current, practical use, at least in the United States. Ease of use and convenience may benefit those mobile users in the developing world (where mobile commerce penetration rates are high), but the "hassle factor" is one of the leading obstacles to mobile commerce growth in the developed world.
As we mentioned earlier, there is less of a need for mobile payments in the U.S. because the existing financial infrastructure works. Consumers can easily and safely collect and distribute cash and make credit card payments. As of now, mobile payment platforms have not been fully developed to function at their potential, and those systems that are in place are not as easy to navigate, or take multiple steps, which makes the process more complicated for the customer.
BND: Is there any merchant reluctance that is preventing the U.S. from moving forward with mobile payments and mobile commerce? What concerns do U.S. merchants have when it comes to adopting these services?
D.M.: Merchants in the U.S. generally recognize the opportunities that mobile affords, in terms of gaining insight into their customer base and building loyalty. However, the siloed, complex mobile commerce landscape has been a deterrent, to date, that prevents many merchants from moving forward. The benefits to merchants need to be made clearer so that they will see the value and choose to invest in mobile services and point-of-sale technologies.
Merchants must appreciate that mobile is a very personal experience for their customers. Customers will become more engaged with a brand's mobile platform if they're able to opt-in to various mobile experiences (coupons, deal alerts, etc.). Delivering a solution that makes it easier for the customer to engage in the relationship with the brand will increase their level of participation, but also lengthen the time of their engagement.
For the customer, the benefits of mobile commerce will be realized when consumers are using devices while they are in the store, at the point of decision. For retailers, an effective mobile commerce approach helps retailers improve their customer loyalty, increase sales and compete with online retailers. Retailers can also use the data that they have uncovered from their opt-in customer base to provide more targeted and customized marketing messages.
BND: What advice do you have for merchants who are considering or have adopted mobile payments and mobile commerce solutions?
D.M.: In order for retailers and merchants to be successful at driving mobile-payments adoption, they will need to work together to create a better experience for the customer along the path to purchase. Creating a better experience starts at the "point of decision." The point of decision can be while a consumer is reading a product review on their smart phone, when they come across a relevant offer online or after spending time in the store. By staying attuned to consumers' behaviors as they make their purchase decision across channels, and investing in point of sale technologies, merchants can build loyalty for mobile payments amongst their customer base.
BND: How can small businesses, which have limited funds and resources, adopt and effectively use mobile payments and mobile commerce?
D.M.: The mobile channel is gaining traction with small businesses. Mobile enables companies to expand control of the customer relationship through the third screen, which is rapidly becoming the most valuable channel to both attract new customers and build loyalty with existing customers.
For small businesses looking to get into the mobile game, here are a few tips:
- Start small and grow incrementally. Find a technology partner that offers a full range of services, so the company can customize the offerings for its particular business.
- Find a partner that supports both cloud-based and on-premise–based solutions. Cloud-based solutions with a pay-as-you-go model are cost effective, and small businesses will then have the option to take the solution on-premise.
- Enhance what the company already does and integrate with existing channels. Small businesses should tie mobile into their existing strategy to maintain loyalty. If a company already does email promotions, it should add mobile as a new channel for these marketing efforts.
- Start collecting mobile phone numbers and opt-in agreements, even if the company hasn't launched a mobile service yet. Collecting this data in advance will give the program a fast start once implemented.
BND: Where do you see the future of mobile payments and mobile commerce going?
D.M.: We live in an … increasingly mobile-centric world, with the consumer leading in many cases. Take mobile banking. In the past, a consumer would either physically go to a branch or online banking portal to interact with a bank. Today, we are already seeing consumers going to the App Store first, expecting to find an app for that.
In the survey, 71 percent agreed that mobile phones will be more important as a payment method in the future. They also suggested that they would vote-with-their-feet, with roughly half saying they would switch to a different service provider if they could interact with them better on their mobile phone.
This is not to say all other channels are going away, but rather consumers will be expecting mobile to be part of the mix. In the survey for EMEA, when we looked at appetite for services, "Checking the status of an order" (39 percent), and "Researching products, prices or tariffs" (36 percent) and "Communicating with a customer service department" (32 percent) were the first-, third- and fifth-rated services that consumers wanted.
Those are both pre- and post-sales interactions. What we'll see is consumers expecting there to be an omnichannel [more universal and streamlined] world, and retailers and brands need to be ready for that.