M-Commerce: Mobile Shopping Is Cool, But …

Peter Lucas

Consumer frustration with checkout threatens to dampen the mobile-payments boom. Technology to the rescue?

When it comes to shopping, mobile devices have untethered online consumers from the constraints of desktop and laptop computers.

New York-based market-research firm eMarketer Inc. projects that this year alone sales initiated by mobile devices will represent 15% of online retailer sales, up from 11% in 2012. By 2017, eMarketer is forecasting that percentage to reach 25%.

But mobile shopping hasn’t been an unqualified success. For consumers, one of the biggest pain points is what they have to do once they’ve selected the products they want to buy. It’s called checkout, and the process on a tiny screen is so frustrating that many shoppers simply walk away.

Indeed, while 30% of e-commerce sessions take place on mobile devices, conversion rates fall by about 75% when a mobile device is used, according Chicago-based online processor Braintree Payment Solutions LLC.

Consumers’ complaints about mobile checkout are legion, but they revolve around the same problems—clunky page designs that require entering their name, address, credit card number, and shipping and billing addresses using a tiny virtual keyboard on a small screen. It’s a mix that makes data-entry errors common, even if the shopper has nimble fingers.

“Even though mobile users are hooked on their devices, many feel frustration with the amount of data to be entered at checkout. The more barriers to seamlessly completing checkout that are eliminated, the more mobile transactions will increase,” says Damon Hougland, director of identity for San Jose, Calif.-based PayPal Inc. “Boosting conversions through mobile devices comes down to the user experience.”

Candid Camera

Payment-services providers are working to streamline the checkout process by reducing the amount of data consumers need to enter.

One method is to program a merchant’s mobile application to launch the device’s camera at checkout to scan the customer’s credit card. Palo Alto, Calif.-based Jumio Inc. has created a software development kit that makes such integration between a merchant’s app and the mobile device’s camera possible.

Known as Netswipe, Jumio’s code can be integrated by merchants in their apps in about 30 minutes. Once Netswipe is integrated, consumers are offered an option at checkout to scan their credit card or manually enter their account information.

After clicking the scan button, the mobile device’s camera is activated and the shopper is instructed to frame the front of the card within the camera’s viewfinder. The camera captures an image of the card and sends an encrypted version of that image to Jumio for validation.

Among the distinguishing characteristics Netswipe examines on the card are positioning of the account numbers, cardholder’s name, and the card’s hologram.

Upon validation of the image, the account data are auto-filled on the checkout page. The entire process can be performed in as few as five seconds, compared to about 60 seconds on average for manual data entry. No image of the card is stored in the merchant’s app or on Jumio’s network.

“Many checkout pages in the mobile world still reflect the world of e-commerce and require a lot of data entry,” says Mark Barach, chief marketing officer for Jumio. “By capturing an image of the credit card we can validate its unique elements and automatically transfer the necessary account information to the checkout page.”

Merchants using Jumio’s solution can boost conversion rates by up to 20%, while at the same time reducing their risk of fraud, according to Barach.

“Criminals typically have credit card numbers, not the actual card, in their possession,” he explains. “If required to scan a card, a criminal will abandon the shopping cart because doing so will leave a paper trail that increases detection of fraud.”

The fraud-prevention feature is potent enough that Barach foresees some merchants only providing the option to scan a credit card at checkout. Currently, 50% of mobile shoppers given the option to scan their card by merchants using Netswipe do so.

“One client is already looking at making card scans the only option at checkout,” he says. “Reducing friction at checkout boosts conversion.”

Open Protocols

While scanning a credit card can speed checkout and prevent data-entry errors, it does not eliminate the need for mobile shoppers to re-scan their credit card for each purchase. Ultimately, payment experts see merchants moving toward solutions that securely remember customer billing and shipping information, and auto-fill that data at checkout.

PayPal recently moved in that direction with development of Log In with PayPal, a payments-identity technology specifically for mobile devices that allows a consumer to carry her payments identity from retailer to retailer on the Web.

Consumers with a PayPal account can register with a merchant using that account, which includes all their payment, shipping, and billing information, as well as their purchase history. Shoppers need only log in with their PayPal credentials, whether it is a user name and password or mobile phone number and PIN. Once logged in, Log In with PayPal securely passes the account information to the merchant.

For mobile shoppers, Log In With PayPal streamlines the checkout process by eliminating numerous data fields required to be filled out to complete a purchase.

The service is essentially a rebranded version of the online service PayPal Access, which launched in 2011, except that it is tailored to mobile devices. PayPal currently has more than 128 million account holders and processed $14 billion in mobile volume last year, $4 billion more than it predicted. The eBay Inc. subsidiary is shooting for $20 billion this year.

PayPal expects its new service will prevent mobile shoppers from abandoning a retailer’s Web site when they are asked to create an account. Studies show that nearly one out of four consumers abandoned their shopping carts when asked to create an account and nearly half left a site when they couldn’t remember their password, PayPal’s Hougland wrote in a blog post announcing Log In with PayPal.

Log In with PayPal uses open protocols, such as the OAuth 2.0 protocol Facebook Inc. uses to authenticate users, making it easier for merchants and software developers to integrate it with their checkout pages. PayPal does not see the service as a competitor to Facebook’s Face Connect, which enables consumers to register with Web sites using their FaceBook credentials, or Google Inc.’s Google+ Sign In.

“There are a lot of ways to tackle simplifying mobile checkout and we feel that if consumers are willing to, and feel safe, sharing data their through registration services such as Log In with PayPal, a lot of the data-entry problems associated with mobile checkout will go away,” says Hougland. “To get there, consumers need to trust the hardware and software they are using to share their data.”

For merchants, the payoff from Log In with PayPal is that it can help increase conversions, reduce abandonment at checkout, and establish customer accounts to deliver more personalized shopping experiences, according to Hougland.

Setting the Bar

PayPal isn’t the only mobile-payments provider betting that portability of customer-account data across Web sites and apps will help them gain favor with merchants. After several months of testing earlier this year, Braintree rolled out Venmo Touch, a mobile wallet that stores consumer payment information in the cloud and downloads it across mobile apps within Braintree’s merchant network.

Once consumers register their payment information in Venmo Touch, the data are automatically made available to all other merchant apps in the Braintree network at checkout. To complete payment, consumers press the Venmo Touch button at checkout and their payment information is auto-filled.

A consumer can register multiple payment cards within the Venmo Touch wallet, which designates each card by brand. An icon for each brand shows up on the Venmo Touch button at checkout. Consumers can designate a preferred card to appear at checkout, as well as select other cards in their wallet for use at checkout. 

Merchant apps on Braintree’s network include San Francisco-based merchant aggregators Uber, whose mobile application connects consumers with operators of black car and taxi services, and Airbnb, which connects consumers with owners of rental properties around the world online.

“Companies that do well in mobile payments reduce the friction of entering payment data, and one-click checkout gets consumers to that point,” says Ankur Arya, general manager of mobile for Braintree. About $2 billion of Braintree’s $8 billion in annual transaction volume comes from mobile devices, he adds.

“When consumers find a great mobile-checkout experience, that’s what sets the bar for their expectations with other merchants,” continues Arya. “Merchants that do well in mobile commerce offer compelling online experiences, and that includes checkout.”

Getting to One Click

Not to be overlooked in the race to streamline mobile checkout is the role of digital wallets stored on a secure server—in the cloud, in tech lingo—which can auto-fill payment information on the checkout page.

“Digital wallets are a way to get consumers to a simpler version of checkout on m-commerce sites, but the challenge is consumer acceptance of mobile wallets,” says Mike Keresman, chief executive of Mentor, Ohio-based online processor Cardinal Commerce.

Indeed, slow consumer adoption of mobile wallets, which by some counts number more than 100, has cast a pall over their future. Some have received plenty of publicity, such as Google’s Google Wallet and the Isis wallet, which is backed by carriers Verizon Wireless, AT&T Mobility, and T-Mobile USA and uses near-field communication (NFC) technology. But the knock on them is that they put the physical wallet in a different form factor, as opposed to creating a new value proposition for consumers.

Sridhar Ramaswamy, Google’s senior vice president of ads and commerce who also manages search advertising and shopping services, heads up the mobile-wallet program. It’s unclear what Ramaswamy’s long-term plans are for Wallet, though the company already has made several minor changes.

For example, Google Wallet now offers a person-to-person payments service that works with Gmail, Google’s e-mail application; a new application programming interface (API) that works with apps on Google’s Android mobile-operating system and allows online sellers of physical goods to take a payment from Wallet users in as few as two clicks; and an API that lets Wallet users more easily sign up for and use companies’ loyalty programs.

With mobile commerce evolving at a breakneck pace, merchants can’t afford to neglect the importance checkout plays in converting browsers into buyers.

“Consumers make purchases on mobile devices, but they are less inclined to do so if they have to fight through the checkout process,” says Braintree’s Arya. “Solutions are coming to market that allow for one-click checkout on mobile devices, but the challenge is getting merchants to buy into deploying the technology. Once merchants buy into the technology, abandonment rates should drop and conversions rise.”