The future of mobile payments

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Mobile Banking PaymentThe highly anticipated launch of Apple Pay and Android Pay here in Australia has once again opened the discussion on the importance of embracing today’s most modern payment process – mobile payments.

The system of paying for online and in-store purchases via a mobile device is not entirely new. This type of payment option has been available to us in the past through other facilities such as SMS, mobile internet/apps, and contactless terminals or NFC-enabled devices. However, these methods have failed to gain traction as business owners and many consumers are wary of mobile payment security.

Now that the consumers are increasingly becoming comfortable with shopping and paying for things using their mobile devices (e.g. smartphones and smartwatches), businesses are reconsidering their mobile payment options.

Changing attitudes about mobile payments 

In the US, Starbucks are amongst the many businesses which have invested in a mobile payment system to grow their business. They also combined it with other programs to ensure a seamless customer journey.

Last December, they introduced the “Mobile Order & Pay” program which allowed customers to place their order and pay using the Starbucks mobile app. By doing this, the customers can skip the queue when they arrive at the store, and just wait for their drink or other item to be ready.

Starbucks sweetened the deal even more by implementing a loyalty program which rewards customers with free drinks, food, and more depending on the number of loyalty points they’ve earned.

As expected, the results of this program was a huge win for the coffee giant. In a short time, the program expanded across their stores in the Pacific Northwest, Southern and Central U.S. Not only that, Starbucks’ shares hit an all-time high in the third quarter of fiscal year 2015. According to a report published by, the same-store sales of the coffee giant were up 8% globally, bolstered by a 9% increase in the U.S. as traffic dramatically increased. Mobile payments account for 20% of all their in-store transactions which is more than double the figure Starbucks reported two years ago.

Their loyalty program “My Starbucks Rewards”, now has 10.4 million active members, up 28% from a year ago. Those shoppers now account for about 30% of business in North America.

In a research note, Wells Fargo analyst Bonnie Herzog praised Starbucks’ innovative strategy. “Mobile order & pay continues to be one of Starbucks’ most exciting digital initiatives and is expanding nationwide by the holiday season this year.”

She said that despite Starbucks’ investments for this fiscal year, most notably to support the company’s “digital ecosystem,” she believes the coffee company was poised “to deliver strong results through innovation and its vast international opportunity, setting the stage for further incremental growth in FY16 and beyond.”

Starbucks’ projected revenue for the new fiscal year will increase about 10% to 13% bolstered by new store openings and growth as existing locations.

When it is likely to hit Australia  

Early this year, Visa released the results of the research they did in 2014 which highlighted the readiness of Australians to embrace new payment systems.

Based on their study, nearly half of Australians last year shopped online using a smartphone, compared with 15 per cent of Americans, 20 per cent of Canadians, 14 per cent of Britons and 35 per cent of Singaporeans.

Visa thinks that, in many ways, Australia is better prepared for mobile payments than many other countries judging on the nearly two thirds of all face-to-face Visa transactions using payWave, compared with just 14.7 per cent in Canada and 21.5 per cent in Singapore.

Stephen Karpin, Group Country Manager for Visa in Australia, New Zealand and South Pacific believes that if 2014 was the year tap-and-go took off in Australia, this year would be the “tipping point” for smartphone payments.

Meanwhile, the latest figures from eWay, an Australian-based payments gateway show that Australians are joining other countries and doing their online shopping during their daily commute. They also said that Aussies are on an online shopping frenzy, spending AU$9.3 billion online in the first six months of 2015, a 21.5 percent increase from 2014.

How should business prepare 

Although the road to Apple Pay and Android Pay may still be under construction, this temporary delay shouldn’t stop business owners from preparing for the future. Here are 4 ways you can prepare your business for mobile payments:

1. Start exploring your mobile payment options. As mentioned earlier, Apple Pay and Android Pay are just two of the mobile payment system a business can use. So start exploring other systems/platforms that can guarantee simple yet secure transactions for your customers. Keep in mind, however, that consumers don’t want to use multiple platforms to make a payment with their smartphone. They want to be able to tap their mobile screens once or twice to make a payment.

2. Invest in mobile advertising. Reach target customers through mobile social ads. It’s not wise to only depend on organic reach to get noticed by your target audience. Social advertisements are a necessity especially for small businesses or start-ups who want to get noticed online and reach more potential customers.

 3. Optimise your mobile content. Tell stories about your business through photos and videos using visual platforms such as Instagram and Vine. You can also increase your mobile content marketing budget to produce quality content that will appeal to your target market.

 4. Prioritise real-time marketing. The mobile market are always on the go. This is why your marketing needs to adapt. It makes sense that you invest in real-time marketing to reach your intended market with the right message at the right time.

The data doesn’t lie. Mobile payments are going to be the next big thing in the payment industry. On the other hand, before you jump on the bandwagon, do your research and learn from innovative companies such as Starbucks.