Who Will Win the Mobile Payment Showdown?
The concept of mobile payments is not new. In fact, the topic has dominated technology and retail media for the last few years. But despite this frothiness, mobile payments are still struggling to gain traction. Adoption lags at convenience stores as consumers work to understand the technology and whether or not the behavior change is worth it for them. What makes paying with a smartphone better than paying with credit, debit or cash?
For convenience store owners, the sheer number of new mobile payment options raises questions: Is it really worth the investment? Will mobile payments ever catch on? Which payment technology will emerge victorious: near-field communication (NFC) or quick response (QR) codes?
Let's take a closer look at both technologies.
NFC enables a two-way radio connection from one device to another. This two-way communication presents an interesting and unique opportunity for businesses and consumers. Not only does it enable a secure connection for sharing sensitive information and data, but it also enables coupons, discounts and other loyalty/reward programs to be shared directly with the consumer.
NFC can help businesses turn a simple transaction into a richer customer interaction. For convenience store owners, this enhanced interaction is especially important and could help increase loyalty, both from current customers and future customers.
Google Wallet and Isis are two examples of NFC being used to power payments. However, neither option has gained a significant foothold with mainstream consumers quite yet, with only one in 10 consumers reporting that they use an NFC-enabled phone. A significant portion (28 percent) don’t even know whether their phones are NFC-enabled, highlighting the confusion and lag in adoption of this technology.
The pros of NFC technology are:
- Ease of use
- Powerful technology
- Richer customer interactions
The cons of this technology are:
- Not all smartphones feature NFC (including iPhones)
- Slow mainstream adoption
Originally used to track products in warehouses, QR codes have evolved to become a vital tool for marketing and commerce. Consumers tend to more readily recognize QR codes since they closely resemble traditional bar codes, making it relatively easy to both implement and adopt. Additionally, the technology required on devices is not as complex as NFC. Any smartphone, regardless of its operating system, can recognize a QR code.
LevelUp and PayPal are some examples of QR codes being used successfully in payments today.
When determining whether to use QR code-based mobile payment technology, it’s important for c-store owners to think about how easy consumer adoption is, and part of this has to do with basic recognition of technologies. However, while most recognize them, only about 9 percent reported actually using a QR code in 2013. And while implementation of mobile payment apps is definitely on the rise, actual consumer usage is declining, most likely because of the numerous steps required for consumers to use the technology.
The pros of QR codes are:
- Consumer recognition
- Near-universal smartphone compatibility
- Increase in QR-based apps
The cons of QR codes are:
- Declining user base
- Multi-step process can be slow
And the Winner Is...
So, which technology will win? Or will both these solutions be eclipsed by a for-merchant, by-merchant solution such as Merchant Customer Exchange (MCX) or something else entirely new?
There is no cut-and-dry answer since the right choice ultimately depends on both business owners and consumers. Consumers have the power to decide which digital wallets, mobile commerce applications and form factors (such as NFC or QR codes) they prefer to use. But business acceptance will play a big role as well, since having QR code readers or an NFC-enabled acceptance points will certainly dictate what type of mobile payment solution consumers can use.
It’s important to remember that there is no "one size fits all" solution here, and no single solution will win out. Instead, we expect to see a plurality of mobile payment solutions that leverage the most ubiquitous and user-friendly technologies, with both technology providers and c-store owners working to deliver the best customer experience they can. NFC and QR codes are both at the forefront now and are well worth keeping an eye on.
At the end of the day, the biggest driver for both c-store and consumer adoption will be the value a payment technology can add to the commerce experience. Whether it’s a simple and integrated loyalty program, targeted discounts and offers, or simply the time saved paying via smartphone, the ultimate mobile payment winners will be determined by the value they bring to the table.
Editor's note: The opinions expressed in this column are the author's and may not necessarily reflect the views of Convenience Store News.