Mobile payment apps, widely known as mobile wallets, hold digital information about credit and debit cards for making payments, store coupons and loyalty programs.
And they’re projected to become a $300 billion industry by 2022 in the US. Market research firm Park Associates estimates that proximity payment transactions, which require users to tap their phone at a point-of-sale station, generated more than $30 billion in the US last year alone.
The following are a few examples of companies properly utilizing their own mobile payments apps:
One player that stands out is global coffee chain Starbucks.
Currently 2X as many consumers use Starbuck’s mobile app as Apple Pay, according to Park Associates.
Other brands such as New York based Fresh & Co, a grab and go cafe chain, have been using mobile wallets since 2014 and currently has 30,000 customers paying for their sandwiches via the company’s own mobile app.
US drugstore chain CVS also operates a successful mobile payments app by incorporating its ExtraCare rewards program. Users don’t have to produce a rewards card to earn points at the cash register, they’re transferred directly to the app.
Users can also manage multiple prescriptions and medication refills on the app.
But not all mobile wallets are providing a good return. Walmart’s mobile payment app, Walmart Pay, can serve as a cautionary tale for retailers looking to launch digital wallets. The app is reportedly underperforming, due to the absence of a loyalty rewards scheme for users.
Overall, there is a quick and widespread adoption of mobile payments in the US and has largely attributed to the rise of ecommerce – currently 11% of retail sales in the country.
Looking east, brands and retailers in Southeast Asia can also leverage mobile wallets, especially as the adoption of the smartphone among the population grows. A problem arises when considering approximately 74% of Thai shoppers prefer to pay for online shopping via cash or bank transfers and is also the case in Indonesia and the Philippines. This is because only 27% of the entire region has a bank account let alone a credit card to pair with a mobile wallet, but there are a few ways around this.
Businesses can allow consumers to top-up their mobile wallets at the store counter using cash like Starbucks already offers as an option. Points collected in the app could also be used like a digital currency to purchase goods. All would nurture the adoption of digital payments in the developing region – a large obstacle in the growth of online retail.
Ecommerce giant Amazon is tackling the unbanked population in the US through its Amazon Cash initiative that allows users to top-up their Amazon cards with cash at selected brick and mortar stores, such as drug store CVS, across the country.
The appeal of mobile payment apps for consumers
Building a mobile payments app may be expensive, at least $20,000, but it will introduce customers to the built-in loyalty programs, which will incentivize them to return to collect more points through purchases in a positive feedback loop.
In some cases, it has been found that loyalty programs can work in tandem with increasing brand awareness i.e. if a consumer shares a product with 20 friends, they get 20% off their next purchase.
“Across the board, consumer satisfaction is about 80%for mobile wallets,” says Chris Tweedt, mobile-payments analyst at Parks Associates.
Marketing tactics like this would work in Southeast Asia as consumers are both mobile and social media driven.
In the US, merchants also see a 7-9% larger basket size when customers pay with a mobile wallet and businesses see an additional 9% spike in average sales when customers show up to redeem loyalty incentives. The added convenience makes on the whim-shopping much easier.
With a brand’s own payments wallet, they can dictate what payment types to accept, such as Alipay or Samsung Pay, but they need to be widespread and so far the region doesn’t have a dominant player yet, which becomes the greatest barrier to its adoption.
It’s also important to keep in mind that retailers using third party wallets such as Apple Pay or Alipay have to pay processing fees for each purchase, typically 2-3% for credit cards and less than 1% for debit cards according to Amittabh Malhotra, CMO of digital commerce platform OmnyPay.
Taking the next steps
Businesses in developing markets can start small as more payments players come onto the scene by opening a point program first to build engagement if a mobile wallet seems out of reach.
The long-awaited entry of China’s dominant payments platform Alipay in Southeast Asia through deals with Thailand’s TrueMoney and Indonesia’s Emtek, owner of Blackberry, should encourage the mobile wallet ecosystem as brands can then integrate more digital payment options into their platforms.
Another players to look out for is the Thai government’s online payment platform PromptPay that has signed millions so far and could be huge if advertised properly to the cautious Thai people.
Starbucks in Thailand is moving quickly in the game. The coffee chain already has a Starbucks Thailand app that allows users to scan and pay through collected loyalty rewards and locate the nearest branch. A mobile wallet is about convenience – it’s not only about payment – and only a few businesses are getting it right.
The $300 Billion Trend Your Company Needs to Get in on Now was originally published by Inc. Read the original article here.