Everyone’s talking about mobile payments. Analyst firms continue to make milestone predictions. Forrester, for example, predicts that U.S. mobile payments will reach $90 billion by 2017, up from just $12.8 billion in 2012. And, new entries continue to flood the marketplace. While there’s a ton of potential opportunity in mobile payments for small and medium sized businesses (SMBs), there’s also some classification and analysis that should be completed in advance.
First, the classification. Mobile payments is a broad topic area and definitions seem to range as much as some of the growth projections. A great reference we’ve found is Forrester, who breaks mobile payments into three distinct categories: mobile proximity (in-store payments), mobile peer-to-peer (P2P) and remittances, and mobile remote commerce (mCommerce).
Now, the analysis. While SMBs can definitely benefit by adding one or multiple mobile payment elements to their business, the mix is also critically important, both in terms of new business and engagement opportunity (sales and customer support) as well as back-end logistics and expenses. Interestingly, existing and prospective customers play a key role in helping SMBs evaluate which mobile payment technologies, hardware and/or applications are right for their business. For example, middle-aged consumers may feel comfortable using PayPal in conjunction with a business or personal account, but they may simultaneously lack interest in acquiring a mobile device. For this group of customers, having a card reader or a terminal device with PayPal options enabled is ideal. Additionally, business owners need to keep abreast of the new payment technologies hitting the market, especially those in their local area.
Is Now the Right Time to Invest?
Even though most would agree that mobile payments are still in their infancy, there’s no denying that an accelerated adoption curve is right around the corner. The other important thing to remember is that mobile payments aren’t just about the payment. Sure, there are conveniences for both customers and SMBs when payments are made via a mobile device, regardless of whether its mobile payment acceptance or via the tap of an NFC-enabled phone in-store. But, the real value will be derived from the integrated marketing (loyalty, rewards, targeted offers) opportunities inherent to many of the mobile payment applications.
In terms of timing and making an investment, there are certainly a myriad of mobile payment solutions already in-market that will help SMBs expand their customer based and grow bottom line revenues. It’s just important to understand the flexibility and scalability of the solution as well as its long-term viability in terms of customer adoption and as a valid business model. Being the first business to try or use a new mobile payment application may be risky, but SMBs also don’t want to be late to the game, lagging behind the market and, more importantly, their savvy competitors.
For customers, more options provide an incredible amount of flexibility. Studies show that consumers are more likely to make a purchase if their preferred payment method is available. There is a significant correlation between the customer’s preferred payment method and the amount of revenue a business can expect from users of mobile devices. As these devices become increasingly popular, companies who use them can reasonably expect this overall purchasing trend to continue.
Business owners should think carefully about the potential for future revenues. By upgrading to accept mobile payments, the infrastructure for accessing these revenues will be in place as the trend continues. Although some initial costs may be necessary, the trajectory of growth creates a compelling case for making the necessary investments today.