How mobile wallet-based payment options are changing the Retail Industry
The retail industry is being revolutionised by the growth of mobile payments and online transactions. Mobile wallets, such as Apple Pay, Google Pay, and Shopify's Shop Pay, are transforming the way consumers pay for goods and services, and retailers are adapting to meet this trend. In this article, we delve into the rise of mobile payments and their impact on the retail industry. We'll discuss the advantages and disadvantages of using mobile wallets, their built-in security features, and the role of open banking. Additionally, we'll examine the future of the mobile payments industry and retailers' efforts to stay ahead of the curve.
Storing payment information on a retailer's website can be a convenient solution for customers, as it streamlines the checkout process and eliminates the need to repeatedly enter payment information. However, this also means that retailers have access to sensitive customer data and must prioritise its protection. Data breaches or inadequate security measures can result in customer data being compromised.
Mobile wallets, such as Apple Pay, Google Pay, and Shop Pay, offer an alternative solution that provides added security through tokenisation and biometric authentication. This eliminates the need for customers to enter their payment information multiple times across different websites. However, customers must trust the payment wallet provider to keep their information secure and may also incur fees for using the service.
Both options have their advantages and disadvantages. Storing payment information on a retailer's website is convenient but carries the risk of data breaches. Mobile wallets provide added security but come with the cost of entrusting sensitive information to the provider. Customers must weigh these factors and choose the best solution for them.
Retail Industry Trend
In the retail industry, there is a trend of offering customers a variety of payment options, including both storing payment information on a retailer's website and using mobile wallets. This allows customers to choose their preferred payment method and provides retailers with the opportunity to cater to a wider customer base.
Mobile payments and online payments are distinct electronic transaction methods, each with unique user adoption and acceptance levels. Mobile payments, such as using a mobile wallet or QR code, offer convenience through quick and effortless transactions. On the other hand, online payments, which often require payment information to be entered on a website or app, can be less convenient and time-consuming.
In terms of security, mobile payments provide added protection through tokenisation and biometric authentication. Online payments, however, are more susceptible to data breaches and fraud due to sensitive information being stored on retailer servers.
User adoption and acceptance of mobile payments has seen a much faster growth rate compared to online payments. According to Juniper Research, mobile payments are projected to reach $3.5 trillion globally by 2023, with a 23% compound annual growth rate from 2018. The number of mobile wallet users is expected to reach 2.3 billion by 2023, up from 1.3 billion in 2018.
Open banking-based online and mobile payment methods are also gaining popularity, allowing customers to make payments directly from their bank account without using a credit card or other payment instrument, increasing security and reducing fraud risk. Accenture's survey showed that open banking is becoming increasingly popular among consumers, with a majority of consumers in the UK, US, and Australia willing to share financial data for payment purposes.
It is important to mention that the use of contactless payments and mobile payments are increasing as well, due to the Covid-19 pandemic, as people are avoiding physical contact and cash as much as possible.
Improving the Customer Experience
The retail industry is embracing the use of mobile payments to enhance the shopping experience for customers by providing faster checkout, convenient shopping, personalisation, and loyalty programs. These benefits have made shopping more efficient and personalised for customers, and incentivised them to use mobile wallets for purchases:
Mobile Wallets for Quick Checkout: By allowing customers to save payment information on their mobile wallets, retail industry players have made checkout faster and more convenient. This eliminates the need for repetitive data entry, saving customers time and frustration.
Seamless Online Payments: Retailers are leveraging mobile payments to create a more seamless shopping experience where customers can easily and quickly make purchases without repeatedly entering payment information. This increases the ease and convenience of shopping for customers.
Data-Driven Personalisation: With mobile payments, retailers can collect data on customer behaviour and preferences, and use it to personalise the shopping experience by offering targeted promotions and deals. This helps customers find products and deals that are most relevant to them.
Loyalty Rewards through Mobile Wallets: Some retailers are using mobile payments to offer loyalty programs, where customers earn rewards for purchases made through their mobile wallets. This incentivises customers to shop with the retailer and helps them save on future purchases. A report by Deloitte suggests that 56% of consumers are more likely to shop with a retailer that offers a loyalty program.
Influence of Governments and Regulators
One way that governments and regulators are influencing consume behaviour of storing payment details is by setting security standards for mobile payments. These standards help to ensure that customer's sensitive information is protected, regardless of whether they choose to store their payment details on a retailer's website or in a browser or payment wallet. For example, the Payment Card Industry Data Security Standards (PCI DSS) is a set of security standards that apply to all companies that accept credit and debit card payments, including mobile payments. These standards help to protect against fraud and data breaches by requiring companies to implement certain security measures, such as encryption and firewalls.
In addition to setting security standards, governments and regulators are also monitoring mobile payments to ensure that companies are complying with these standards and that consumers' information is being kept secure. This includes conducting regular audits and investigations to ensure that retailers and payment wallet providers are following the necessary security protocols.
Another way that governments and regulators are influencing consumer behaviour of storing payment details is by issuing guidelines and recommendations for consumers. For example, the Consumer Financial Protection Bureau (CFPB) in the United States has issued guidelines on how to protect oneself from mobile payments frauds and how to select a secure mobile wallet.
Furthermore, governments and regulators are also trying to create a framework that allows for inter-operability between different mobile payment systems, this will help to create a seamless experience for the customers and also increase competition among the different providers.
The future looks bright, the future looks mobile payments...
In summary, mobile payments have become an increasingly popular way for consumers to make electronic transactions and retailers have recognised the potential of this trend by implementing mobile payments as an option for their customers. Governments and regulators are also playing a critical role in ensuring the security of mobile payments by setting security standards, monitoring compliance and providing guidance for consumers.
As the industry continues to evolve, retailers should consider offering mobile payments as an option to their customers and adhere to the security standards set by the government and regulators. Additionally, it is important to keep an eye on the trends and developments in mobile payments, such as the growth of mobile wallets, QR code payments and contactless payment options. It will be interesting to see how mobile payments will shape the future of the retail industry.