Retailers in mobile payment dilemma

Apple Pay and Samsung Pay are well-established as mobile payment methods in the marketplace. However, since their introduction there has only been a slow rise in their use by the average consumer. As useful and easy as these payment options are, something is firmly standing in their way, preventing them from becoming a popular global payment method.

Raising consumer awareness

Almost everyone knows about Apple Pay, the wholly mobile payment option for iPhone users. Anyone with an iPhone or iPad and Apple account can use it for making online or in-store payments. Maybe it is because there are many people who do not use iPhones. But Samsung Pay is available for the Samsung users, and it works in much the same way. And with the two together, that is a massive chunk of the consumer market covered. Therefore, we can safely say that the consumer is aware of the products. So there must be another reason that consumers have continued to reach for that old faithful, the credit card, instead of using mobile payment.

Merchants have to pay additional fees

As with all new payment systems, mobile payments are not given free. Merchants need to pay for the point-of-sale (POS) terminals. And many merchants have yet to upgrade to POS terminals for chip-enabled cards due to cost. What more to upgrade again to a terminal for mobile payments, when there is no incentive for them to do so. With digital payments, the interchange fee of the tokenized mobile transaction is a little on the higher end for small to medium sized merchants.

Encouraging merchants to play the game

Undoubtedly, the mobile payment solution will take off eventually. Just like the credit card in its initial stages. But for the meantime, until they are forced through no choice, merchants need some encouragement to participate in accepting mobile payments. It can be universally agreed that the customer cares very little what payment method is used or accepted, as long as they are able to complete their purchase. And they are often more interested in the available discounts and added benefits.

Most customers believe that  merchants are making loads of profit and can afford to upgrade. And banks, on the other hand, say that they are giving the best solutions and services to enable the merchants to accept all the payment forms at the most competitive rates in the market. And that they can provide their merchant customers with facilities and finance to upgrade their business. So what is the real solution here?

Incentives to attract merchants

Since it is unlikely that the service fee will be reduced for the merchants, as it contribute to the revenue for the issuing banks, other solutions must be considered. In the US, Dwolla, a US-only payment system for ecommerce, is pushing for a complete switch of all ecommerce payment systems to their own online and mobile payment system network. But that is a very bold move, and would take too long to catch on globally.

Another, more practical, alternative would be to give the merchants an incentive to use the mobile payment system. Giving them additional, proactive services on top of the payment solution would be a useful incentive. If the transactions can be used as raw data for the generation of sales reports on the optimum products proposed by the banks to the merchants. This would take the role of the banks from necessary evil to understanding business partner with their best interests in mind. Not only would it improve the merchant-bank relationship, it would also prove to be good business for the bank, having the data to use in decisions about lending and business finance.

However, the downside is that the solution would need to be tailored to each individual merchant, and would need to manage many complex parameters. A lot of work for what could be very little real profitable use.

This brings us back to the fact that there may be no easy solution to reduce the cost of the merchant fee, or to make it more inviting to use. Perhaps, with all these obstacles in the way of voluntary progress to the newest technology, the “no choice” option will be the one that will usher in the future of merchant payment options.

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