Evaluating Mobile Payments for CPA & Bookkeeping Clients
If you count retail businesses among your accounting services’ client base, big changes are coming in the systems businesses use to handle payments and other point of sale activities.
The “mobile payment” revolution has been heralded for some time, but as close observers know, those big promises have not yet produced major changes in how consumers pay for most retail goods.
Certainly, no serious analyst would deny the impact of eCommerce, mobility and other technologies on the retail sector. On-the-go consumers now expect anywhere, anytime connectivity – and show a clear preference for retailers who can deliver a satisfying buying experience across time and locations, and on any user device. Before they leap into the mobile payment landscape, which may require extensive and costly in-store equipment upgrades, retailers must understand the true bottom-line potential of these new systems.
That’s where the CPA and accountant can help. As a trusted advisor, tax and financial specialists may not drill down into the technical aspects of mobile wallet technologies. Yet, because mobile payments can and will affect how retailers accept and process transactions, astute accounting professionals, at the very least, should understand the basics of this emerging capability.
To do that, you first need to bring yourself up to speed on the status of mobile payments.
Cutting Through the Confusion
There continues to be significant confusion around the topic of mobile payments, so it may help to review briefly our basic definitions and assumptions.
With mobile payment, instead of paying with a credit card, cash or check, consumers are now using their mobile phones to pay for a wide range of goods and services.
Sometimes called mobile money or the mobile wallet, mobile payment systems obviously require fairly sophisticated mobile applications and extensive new back-end systems for transaction support. While there has been a great deal of hype around mobile payments for some time, those systems were only recently matured and widely deployed.
Mobile payment might sound cutting edge, but consumers still find credit cards familiar and really easy to use. In fact, consumer concern about the security of mobile payment technologies and the high cost of installing the necessary equipment at retail stores may be the two biggest obstacles to the mobile wallet revolution.
Mobile Wallet Hurdles
What would it take to drive the shift to mobile payments?
It would require one of three things: a top-down government mandate; a true 100% control of a system, much like a government mandate; or an “order of magnitude” shift such as a 10-fold improvement in revenue potential, cost reductions or consumer satisfaction.
Despite the continuing hype, it seems unlikely that mobile wallets will clear those hurdles anytime soon. If anything, consumer confusion and resistance seems more likely.
A Harris Interactive 2012 survey found that fully 63% of consumers are still uncomfortable using a mobile application that stores their credit card information. That same Harris poll found that just 7% of Americans age 18-34 have used a scanner on their phones to make in-person purchases. Forty percent of smartphone owners have never scanned their phones to make a payment, and 45% of Americans don’t even own a phone capable of scanning an in-person purchase.
Certainly, the mobile payments industry is trying to address the concerns of mobile consumers. A number of companies are working to make it easier and more secure to enter a credit card on a mobile device.
In 2011, the Google Wallet mobile payment system was launched on the Sprint cellular network, with claims that pay-by-smartphone technology would replace debit and credit transactions at points of sale everywhere. A trio of telecom giants – Verizon Wireless, AT&T and T-Mobile – introduced the Isis Mobile Wallet.
Zong, acquired by eBay’s PayPal in 2011, lets consumers make Internet micropayments from a postpaid mobile phone. Formerly known as Billing Revolution, the Buck mobile payment company launched a single-click credit card checkout that lets shoppers pay without an account or password. Affirm is yet another recent mobile payment entry, launched by a PayPal co-founder as the answer to eCommerce shoppers who fill up their carts, then abandon the transaction.
The payment industry has also been heralding Near Field Communications (NFC) touchless payments, saying NFC uptake will surge in the next few years. In fact, the Mobile World Congress issued more such predictions not long ago.
But, one has to wonder: compared to a simple credit card swipe, is it really that much easier for a consumer to pull out a mobile phone, find the right app and the preferred payment type, then tap the phone to an NFC reader? For merchants, the high cost of installing systems to accept NFC payments definitely poses a challenge.
Those and many other efforts by big fish and small fry, may eventually succeed, but many consumers – myself included – still find entering a credit card via a mobile device to be difficult, annoying and less-than-secure. The simple fact is, plastic is simpler to use and accepted by many more merchants.
There are two notable exceptions to slowness in mobile wallet uptake, each of which clears one or more of our mobile wallet “hurdles.”
The Starbucks mobile card is by many measures the fastest “new” form of payment to ever reach the $100 million transaction mark. How did Starbucks do it? First, Starbucks owned 100% of the POS environment and has a well-established culture of reloadable gift cards. The brand also enjoys a particularly close relationship with many consumers, and leveraged its version of the mobile wallet to offer those frequent customers even more cachet and convenience.
The second exception is a world away, both geographically and socioeconomically. The M-Pesa mobile payment system in Kenya has enjoyed great success; almost half of the country’s population has an account. M-Pesa meets two of our hurdles: the telecom carrier has a nearly 100% market share, and almost no Kenyans have a traditional bank or credit card account.
Point of Sale Possibilities
The transition to mobile payments may take off more quickly at the retail POS. Think about it: hotels, airlines and the occasional restaurant POS station are the three places where consumers might still catch a glimpse of a 1980’s era green screen monitor.
As a replacement of an in-store POS system at a small brick-and-mortar location, mobile payment may indeed deliver the required “order of magnitude” improvement – in lower infrastructure costs, easier setup, and a more convenient and satisfying consumer experience.
Technology from San Francisco-based Square allows merchants in North America to accept debit and credit card payments on an iOS, Android smartphone or tablet computer. GoPayment from the accounting giant Intuit allows merchants to swipe credit card payments through a free reader that attaches directly to their smartphone, thus eliminating the need for other POS systems.
The ShopKeep POS system allows merchants to ring up sales, print receipts, and do many other retail activities directly from an iPad. Technologies from CrossView, GlobalBay and others increasingly allow merchants to extend their existing POS systems to mobile devices carried by in-store personnel. These systems allow a mobile tablet to function as a cash till anywhere in the store.
Winners and Losers
There will, of course, be winners and losers, no matter how the mobile payment competition shakes out. Here’s a rundown on some current thinking on the topic.
Near Field Communication is available on more and more smartphones, including top-selling Android, Windows phones and (rumor has it) upcoming releases of the iPhone. Gartner estimates that by 2015 half of all smartphones will be NFC-capable. A move toward cloud-based storage of credentials may help alleviate some consumer worries about the security of mobile wallets.
Of all the players mentioned thus far, savvy industry observers say the winners may be those who give consumers, retailers and other affected businesses the most options. That may mean solutions that include NFC and non-NFC capabilities, or retail systems that incorporate mobile payments and traditional loyalty cards and coupons. Banks may leverage mobile payments to differentiate their brands and open new revenue streams.
As mobile payments move from the realm of speculation to real-world application, retailers face challenges and opportunities – from eCommerce and transaction models, to POS systems that may reshape the shopping experience.
By bringing themselves up the learning curve, accountants can help their retail clients master not only the technology associated with mobile payments, but how this technology and related processes affects other parts of the business.