Winning with mobile wallets this holiday season
This holiday season, merchants will see at least one major change from last year: the prevalence of mobile wallets, and consumers eager to use them. The problem is, while many large merchants are prepared to accept mobile wallets, many smaller merchants are not.
Here’s a primer on the major mobile wallets, and what merchants need to know about each.
At a macro level, each of these in-store mobile wallet solutions relies on a technology called Near Field Communication (NFC), which enables secure, contactless payment transactions. They incorporate tokenization, which helps keep card data secure. They utilize the same type of card reader (though Samsung Pay offers an additional option for consumers – more on that below). Therefore, merchants need only one new piece of hardware – an NFC reader – in order to accept any or all of these mobile wallet types.
Apple Pay: The most established of the mobile wallets because of its age (in this sector, one year olds are considered mature), Apple Pay is available to anyone using an iPhone 6 or higher or an Apple Watch. Consumers can load multiple cards onto their phones, and when ready to pay simply open Passbook, choose a card, hold the phone near the merchant’s NFC reader, and use Touch ID (their fingerprint) to authorize the transaction. It’s quick and painless. Millions of merchant locations accept Apple Pay, including large chains such as McDonald’s, Whole Foods Market and CVS.
Android Pay: Android Pay functions similarly to Apple Pay, but for Android-based phones. The biggest difference between Apple Pay and Android Pay is that there may be different flavors of the latter, to accommodate different Android mobile devices. Google provides a Software Developers’ Kit (SDK) that enables third parties to build their own mobile wallets based on the Android Pay platform. As the technology evolves, this means there could be multiple flavors of Android wallets, for different device types, and merchants may want test each one in their labs for operational awareness.But the availability of the SDK also opens up some interesting possibilities. The Android OS isn’t used solely on smartphones, laptops and tablets – it’s also common on wearable devices. That means consumers may be able to use multiple wearable types, with Android Pay installed, to pay for things in stores or by interacting with various objects that contain NFC capability (i.e. advertisement boards). We’ll know more as the Android Pay SDK matures and developers consider new ways to leverage the platform.(By contrast, Apple tightly controls its device universe – iPhone, Apple Watch, iPad, etc. –so Apple Pay will only run on products and operating systems manufactured by Apple. This ensures payment functions exactly the same way on each device. There is no SDK, so no multiple flavors of Apple Pay and no need for merchants to test each device.)The Android OS is also a popular option in the emerging category of smart appliances. Imagine Android Pay integrated into a smart refrigerator that enables consumers to track their supplies and then order and pay for groceries right from their kitchen. A grocery store or a grocery delivery service such as Instacart would want to be able to accept and process those orders. In that regard, the possibilities for Android Pay are really limitless, for both consumers and merchants.
Samsung Pay: Samsung Pay is the newest mobile wallet in the US, having become available in late September, and operates on the latest models of Samsung phones. The major factor that sets Samsung Pay apart functionally is its ability to leverage an NFC card reader or a magnetic stripe reader.For the latter, Samsung Pay relies on LoopPay technology, which Samsung acquired in 2014. LoopPay allows the consumer to hold their device near a magnetic stripe card reader, and their card data is transmitted over the air just as if they had swiped a magnetic stripe card. So Samsung Pay can be used even if a merchant doesn’t yet support NFC transactions. This could provide access to a broad range of existing magstripe-only payment terminals in the short term, though in the coming months Ingenico Group expects to see wide deployment of NFC readers anyway as part of merchants’ migration to EMV.
CurrentC: Developed by a merchant consortium called MCX, CurrentC has backing from some big merchants, but in recent months several have broken ranks and announced that, while they will accept MCX, their relationship will not be exclusive. CurrentC news has slowed noticeably since the launches of Apple Pay and Android Pay, and its impact remains to be seen as it wraps up its early pilot in Ohio.
We are often asked by merchants, “Which mobile wallet types should we accept?” The answer is: all of them, ideally. We do not expect the mobile wallet landscape to shake out in a Blu-ray vs. HD DVD type scenario that’s winner take all. Instead, we think that several mobile wallets will co-exist. Will there be consolidation? Probably. But in the near term, merchants would be well advised to be flexible and accept as many wallet types as possible to ensure they are meeting customer needs.
Since every popular mobile wallet that is officially launched in the US relies on NFC technology, it is little trouble to add additional mobile wallets to the acceptance roster as part of a payment strategy. For merchants that have upgraded their equipment to accept EMV, a contactless reader should already be present; therefore, all that is typically needed is testing to make sure everything works smoothly. It is probably worth the effort in order to accommodate customers’ payment preferences. Why give customers an excuse to take their business elsewhere during the busy holiday season?
It’s not too late to get NFC capabilities in place before the holidays. Talk with your processor to see what’s involved. If you already have the hardware, it may just be a matter of flipping a switch to enable it. If you need equipment, there may be a modest fee (generally no more than a few hundred dollars) to acquire the hardware and software. It will be well worth it if the investment helps you capture extra business in November and December.
Greg Burch is vice president, Strategic Initiatives, North America forIngenico Group,the global leader in seamless payment, providing smart, trusted and secure solutions to empower commerce across all channels, in-store, online and mobile.