Mobile pay’s diverse options have fueled its failure

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While P2P, in-app and online payments continue to flourish, mobile payments at the point of sale (POS) have quite honestly stagnated, at least for now.

Mobile payments still make up less than 1 percent of in-store U.S. transaction volume, and 451 Research suggests the likelihood of using digital wallets has plateaued since the launch of Apple Pay. Auriemma Consulting Group actually found a 5 percent dip in usage.

Rather than continue to feed into the buzz and play up the potential for a technology that remains nascent in the grand scheme of payments, it would probably be more valuable to take a look in the rear-view mirror and identify a few lessons about what might have gone wrong or been overlooked during the fruitless POS mobile payments frenzy of the past half-decade.
That will hopefully help us better understand how the hype cycle was fueled, what obstacles could still be addressed to bring us closer to the mobile payment-powered future that we were looking for, and how we can avoid similar disappointment from future technology initiatives.

As with many mobile apps and services, I think we underestimated the fragmentation issue. That conclusion applies to consumers preferring different operating ecosystems (iOS versus Android) but also the hindrances that different versions of Android or different device generations of iPhone hardware presented in providing mobile payment options that were available to and functioned for a critical mass of consumers.

Even still, adoption lags in part due to fragmentation of NFC-based mobile payment options (like Apple Pay) versus MST-based options (like Samsung Pay) versus entirely dissimilar options like those that leverage QR codes.

Each one of those technologies works on different devices and leads to a completely distinct user experience, leaving the consumer befuddled and undermining their confidence in mobile payments. Had we fostered more homogeneity across mobile payment solutions and standardized from the start, all boats might have risen.

Sometimes a solution is divined to a problem that doesn’t really exist. Were Americans disgruntled about having no alternative to cash? Certainly not — debit and credit cards have been ubiquitous for some time. Were we indignant about having to carry a wallet or swipe a card? Not as far as I can tell. Were in-store transactions down? Sure, but that was a symptom of the growing dominance of the overall e-commerce experience, not something broken with POS payments. So was there really a consumer pain point or catalyst at all?

I’d actually argue that the original premise or assumption surrounding mobile payments was simply that so many other aspects of everyday life were moving toward mobile — communication, work, news, music, etc. — that payments should too. That flimsy hypothesis sparked a battle for control and revenue, with opportunistic stakeholders gunning for a piece of the pie rather than working together to solve an actual consumer need.

Speaking of those opportunistic stakeholders, the long and wayward grind toward POS mobile payments has proven once again that collaboration is the linchpin for the success or failure of an industrywide innovation initiative. Almost every major device maker, mobile network operator and other players like search giants poured resources into and forwarded their own flavor of mobile wallet, many of which are now defunct.

Beyond the fact that none of those mobile payment options were the least bit interoperable with each other, those walleteers also forgot about the crucial other half of the equation: banks and retailers. Banks were understandably uneasy about forking over a percentage of their transaction take and handing their customer data to mobile wallet providers, meaning that it took a while for them to come around, promote it as a payment method and enroll their loyal customers.

And if retailers weren’t fully bought in (and a great many still aren’t), where were consumers going to use all of these wonderfully flashy new payment options? When the rubber met the road, the low volume and density of POS mobile payment retail acceptance locations kept the overall payment method from becoming top of mind or habitual.

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