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Closing the Loop: Mobile Payments Redefined

by Tim Spenny , 11.06.2014

Arguably, one of the biggest challenges facing adoption of mobile payments can be summed up in two words: awareness and incentives. Incentives will drive brand awareness.

A 2012 study by Accenture found that 41% of North American smart phone users were unaware that their phones could make payments. I checked my phone and guess what, I can make payments. Thanks Accenture! Another 37% have not made mobile payments because of the convenience of the current payment method. Hmmm, I wonder if they mean swiping a debit or credit card because they’re right, it really isn’t that much trouble to swipe a card or better yet, have the cashier swipe it for you.

Enter the carrot…..

If marketers know when you’re shopping and where you’re shopping, Best Buy vs. Whole Foods for example, they can offer discounts or rewards at the point of sale and consumers can theoretically reap the benefits via their cell phone. While micro geographical tracking is not perfect, it is will be a reality very soon. Micro geography will allow retailers to know where you are in their store within inches. This technology, coupled with geo-fencing, allow marketers to know which smart phones are in their stores and where those smart phones are in real-time.

This real time, one to one, paradigm shift creates a marketing opportunity that consumers, especially millennials, have grown to expect from their retailers and it could be the technological catalyst that motivates consumers to turn mobile payments into a habit that pays off. Think of it as Tinder for coupons, open an app and browse through the available offers based on your micro location.

There is nothing like a little nudge if you’re on the fence about making a purchase, especially if it is a large purchase. Furthermore, consumers that have a discount at the point of purchase are much more likely to be pushed to the ‘buy side’ of the fence since they feel like they are getting an exclusive deal. This is where it gets good; consumers can redeem their exclusive coupon and pay for their purchase, yes, using their cell phone. Whammo, the loop is closed! Marketers can now calculate ROI in a way that was never before possible, at the point of sale. They can also improve the accuracy of their marketing through this newly refined messaging. In addition, by closing the loop, mobile rewards become relevant and loyalty increases due to the improved shopping experience.

You know who wants to do this so badly that they restarted their mobile wallet product after closing down shop? Google. And they happen to be my personal pick to successfully close the loop on a large scale.

You know who is already doing this and doing it well? Yep, Starbucks. They were pioneers in closing the loop on their niche market of caffeinated, smart phone carrying, early adopters. Ten million users processing five million mobile payments weekly certainly sounds like success. And what is the carrot that is motivating all of this heavenly usage, coupons of course with a side order of rewards.

Until we can offer a motivating incentive for consumers to use mobile payments, you will continue to see the effort flounder. Closing the loop and making micro location offers a reality may be the way that mobile becomes relevant to the average consumer. Hopefully someday somebody will get this right and we can all reap the benefits.

For more information, contact Tim Spenny, Vice President of GfK Financial Services, at tim.spenny@gfk.com.