Time, Money and Convenience Play Critical Roles in Mobile-Payments Adoption

If consumer adoption of mobile payments is going to break past its current low rate, purveyors of the services will have to find new ways of making m-payments faster and more convenient to use, and attractive for merchants to accept.

That’s the assessment from Derek Francom, director of PayPal Holdings Inc.’s branded payments strategy, operations and go-to-market. PayPal on Wednesday unveiled a new in-store payments strategy involving its Venmo person-to-person payments service.

“For mobile payments to take off, we must find ways to save consumers time, money and make the payments convenient,” Francom told attendees at the Western States Acquirers Association annual conference Thursday in Las Vegas. That is especially important as the payments industry looks to wean consumers off of cash and traditional magnetic-stripe cards, he added.

One recent study estimated that only 14% of households with a general-purpose credit or debit card had adopted Apple Inc.’s Apple Pay, the best known of the new mobile-payment services.

Offering the ability to order and pay ahead is one way to save consumers time when they use mobile payments, Francom said. Incorporating automatic offer presentation and redemption can save them money, while merchant acquirers working to increase merchant acceptance of mobile payments will make the technology more convenient to use, he said.

The real differentiator for mobile payments is the value-added services, according to Francom. “We must move beyond the tap of the payment,” he said. “Value-added services are driving volume, at least at PayPal.” (PayPal processed $16.7 billion in mobile payments in the third quarter, up 20% from a year earlier.)

Such services might involve data on consumer purchasing behavior, marketing incentives and loyalty programs. These are closely connected to why merchants care about mobile payments, according to Francom.

The formula for mobile payments involves securing them, making them of value to consumers, merchants and the payments ecosystem, and making them easy to deploy and integrate, Francom said. With that in mind, mobile payments will not arrive in huge numbers overnight.

“Despite all of the innovation, 85% of transactions are still done via cash globally,” he said.

By his calculations, investors have put $5 billion into payments technology. Much of that money has gone into various tests involving mobile devices and PINs, payment codes, photo check-in and other technologies, with varying degrees of success. “Some of it crashed and burned,” Francom said. “Some was pretty good.”

Quick Response codes and near-field communication (NFC) weathered these tests and appear poised the technology the payments industry favors, he said.

PayPal, with its mobile-payments approach involving its Paydiant subsidiary and its app-development expertise, too, maintains that ultimately no single mobile-payments backer will reign supreme. “It’s not a winner-take-all revolution,” Francom said.