Five Factors Driving Adoption of Mobile Payments

January 31, 2011 § 4 Comments

A couple of weeks ago, Starbucks rolled out a mobile payments app for iPhone, iPod Touch, and Blackberry that gives their customers the ability to pay, reload their Starbucks card, and check rewards all by simply scanning a bar code on the mobile device.  As a tech savvy consumer and someone who would rather skip the line, I’m eagerly awaiting the arrival of this technology in my mid-sized middle Georgia town.  Yet, I am keenly aware that I am not the average consumer and there are more people than not that see no problem for which this innovation solves.  In an insightful post on whether or not NFC (yes, NFC is a whole other exciting and more capable technology) will ignite mobile payments this year, Karen Webster points out that

“there are millions of contactless cards in circulation today that no one uses, because there’s no inherent benefit in tapping versus swiping.  The potential for NFC is having a really smart computer chip interacting with my really smart phone and a really smart merchant point-of-sale device that provides a better experience for me before, during and after my shopping experience.”

She is absolutely right – it is the customer experience that will drive the mainstream adoption of mobile payments.  But how and what does that mean?

Being a regular reader and fan of Scott Berkun’s blog , I recently finished reading in his book “The Myths of Innovation” how innovations gain adoption.  He cites the author Everett M. Rogers in “Diffusion of Innovations” as writing this:

“Many technologists think that advantageous innovations will sell themselves, that the obvious benefits of a new idea will be widely realized by potential adopters, and that the innovations will therefore diffuse rapidly.  Unfortunately, this is very seldom the case.  Most innovations in fact diffuse at a surprisingly slow rate.”

I think the point Scott is trying to drive home and the one in which I strongly agree, is that there is so much more to the mainstream adoption of something new and disruptive like mobile payments than “technical prowess”.  I’d like to point out that “diffuse” in the above quote is equivalent to widespread adoption.  In his book, Scott describes five factors that define how quickly innovations spread as first defined by Everett M. Rogers.  I hope you’ll bear with me (and Scott will forgive me) if I go just a little bit looser with these and try to apply them to mobile payments with an NFC enabled device.

The first one is Relative Advantage.  This is basically what the consumer perceives as the value of the new innovation and not what its makers perceive as the value.  It is “built on factors that include economics, prestige, convenience, fashion, and satisfaction”.  Simply put, how are mobile payments better than payments made with cash or plastic?  Going back to the Starbucks app, the ability to instantly check your Starbucks Rewards Stars and the other self-service capabilities of adding to your account via a linked credit account or a PayPal account makes mobile the clear winner.  We could also add fraud detection via location awareness using the GPS capabilities of a mobile device and mobile coupons to that list.  If the powers at play (Google, Apple, ISIS) can nail some usability, standardization, and security issues surrounding identity then we won’t be comparing plastic to mobile but rather leather to digital as our mobile devices aim to replace our wallets.

The second is Compatibility.  What does it cost the consumer to transition to using the new innovation, and is it compatible with the consumer’s culture (habits, beliefs, values, etc.)?  This seems to be one of the major hurdles facing the mainstream adoption of mobile payments in any form as it may require costly improvements to or replacement of point-of-sale terminals.  In addition to this added cost to the merchant, the consumer is required to have a smart phone.  However, all signs like this study from Nielsen point to smartphones overtaking feature phones (aka dumb phones) by the end of 2011.

The third is Complexity.  How much learning is required for someone to start using a smart phone to make a payment?  It would be very interesting to see research data from the Starbucks pilot launch.  While the Starbucks video advertisement of their new mobile payments app seems very simple to me, we still have to consider that over half of Americans don’t even own a smartphone yet, so there is not just one learning curve here in the quest for widespread adoption – there are at least two.  There is also training for merchants that must be considered.  I wish I could remember the author, but someone made the point of how the first snafu in this regard may be the unfortunate, overly technical naming of NFC / Near Field Communication.

The fourth is Trialability.  How easy is it to try out?  Well, from a consumer perspective and again using the Starbucks app as an example, it’s as easy as downloading the free app and going to a Starbucks with a scanner.  Looking forward to NFC, I think this may get a little more difficult to do.  However, you could look at PayPal’s Bump-To-Pay for P2P payments as a precursor to NFC P2P payments.  I’m curious if research supports consumers being more comfortable with trialing mobile payments applications for P2P payments over making payments in a retail or other scenario.  I would expect so.  It will be interesting to see how other NFC applications such as Google’s NFC enabled Hotpot sign will help usher in the era of mobile payments.

The fifth is Observability.  How visible are the benefits of the innovation, and how likely are these benefits to spread in social groups?  Given the hype and excitement around mobile computing and social networking, a successfully executed mobile payments application would probably be highly visible.  With the rise of social commerce and the sharing of everything using the very device with which we are paying, the opportunities for making a mobile payments app visible could go up exponentially by every user using the application.  Mobile payments and the mobile wallet have been discussed as well on most of the major news networks and magazines in the U.S.

While I am thrilled about the possibilities surrounding innovation in mobile payments – specifically using NFC – I am in agreement with experts like Karen Webster and Scott Loftesness that mainstream adoption will not happen during 2011, and a successful mobile payments application will have to nail the user experience and provide clear advantages over plastic to merchants and consumers.


Your wallet is like a blanket without sleeves

April 27, 2010 § 1 Comment

Remember the frustrated woman in the Snuggie commercial? She couldn’t get her arms out in time to answer the phone. Then she was fumbling about for the remote. Damn blanket! Then she got her Snuggie – the famous blanket with sleeves that comes in stylish prints and colors. The next scene shows her smiling, changing channels with ease and talking on the phone in comfort.

Shift this experience to the frustrated consumer standing in a long line with three small children in tow, all of which are screaming. Finally, it’s her turn to pay. She pulls out her wallet (which is gigantic because of all the different plastic cards – won’t even close) and those damn cards fall all over the floor. With crying baby on hip, the poor woman bends over and tries to pick up all the cards that just fell out of her over-stuffed wallet. She’s close to tears.

Next scene: With smart phone in hand (most likely an NFC enabled iPhone), the same woman, no longer harried, but patiently comforting her small children, pays for her goods quickly and securely.

The fact is, this technology is awesome and will transform the way we make payments. I could list scene after scene showing how this technology would make my life easier. Unlike the Snuggie, I don’t think it is a fad or a cultural phenomenon, and I don’t think cults will form in opposition.

In a recent article making the business case and strategies for using mobile money to close the gender gap, the author stated that the wide adoption of a mobile payments system must be targeted to women. I couldn’t agree more, both in the U.S. and abroad (however for different reasons).

There seems to be an article or blog post daily questioning whether consumers will adopt a mobile payments model. Going back to the Snuggie analogy… Before the Snuggie was available, most people thought only of improving upon the blanket in style, size, and material.  Snuggie sales have exceeded four million. I’m reminded of a famous quote from Henry Ford:

“If I’d asked people what they wanted, they would have asked for a better horse.”

Then there’s the famous line from Field of Dreams…

“If you build it, they will come.”

Where Am I?

You are currently browsing entries tagged with payments at @jenrboyd.