ETA Expert Insights: Mobile Payment Acceptance – Perspectives from Leading Merchant Acquirers

By: Derek Webster, Founder & CEO of CardFlight, Chair of the ETA Mobile Payments Council

As smartphones and tablets have become ubiquitous among consumers and businesses, merchants have looked to use their existing mobile devices to quickly and easily take credit card payments. When mobile POS technology emerged earlier this decade, hundreds of solution providers rushed to enter the space. Many retreated just as fast, leading to a myth that mobile POS was just a passing fad. In reality, mobile payment acceptance remains one of the fastest growing segments of payments. 451 Research projects that the number of mobile point of sale solutions deployed will grow 4x from 2015 to 2019, reaching 54 million units in 2019.

Since its founding just 8 years ago, Square has grown from zero to being a publicly traded company with a market capitalization of over $10 billion, serving millions of merchants. Much of their growth has come at the expense of traditional merchant acquirers accustomed to selling proprietary, purpose-built payment terminals with limited functionality.

We interviewed product experts from two leading merchant acquirers to get their take on emerging trends and what the acquiring community needs to know about mobile payment acceptance. Harry Hargens is Vice President of Business Development at Cayan and Ryan Schneider is Vice President of Product Strategy and Innovation at Integrity Payment Systems. Both Harry and Ryan represent leading merchant acquirers and ETA member companies, and are members of the ETA Mobile Payments Council. We asked them for their insights on the mobile payments acceptance opportunity and where they see the market headed from here.

What types of merchants are the best fit for mobile payment acceptance solutions?

HARRY HARGENS: The primary driver is how the merchant normally operates. Home repair, delivery, people who sell at flea markets and fairs, etc. all need mobile acceptance solutions. In addition, mobile may mean in-store, for instance pay at the table. We try to take a consultative approach to selling solutions, and provide the merchant what they need, rather than just selling everyone the same thing.

RYAN SCHNEIDER: Mobile payments are all about bringing a positive payment experience to your customer. The most obvious fit has been replacing cash and check transactions. But mobile has a fit wherever checkout friction is a factor, and a better experience translates into new and repeat business.

What are the key things a merchant acquirer should look for in choosing a mobile payments solution?

HARRY HARGENS: The solution needs to fit the target market. For instance, we offer both standalone and integrated solutions. Some are built in-house, some acquired by vendors. For the latter, vendor stability and pricing are important. And of course, any solution has to be secure and meet all current standards.

RYAN SCHNEIDER: Flexibility in terms of growth. The general consensus is that mobile payments will constitute a significant percentage of payments in the future. The question is when and along what dimensions. The communication standards may change (NFC, QR codes, etc.) Dominant payment methods will evolve, whether that involves the use of general wallets like ApplePay or AmazonPay, in-app payments like Starbucks or Uber, or the growth of virtual currencies and ACH. The Android and Apple devices themselves certainly change on an annual basis. As we go through this period of growth and discovery, we need to meet the current needs of mobile users with the ability to quickly adapt without changing systems. How quickly can your solution accommodate new mobile devices? How about new payment types? A more specific example: How disruptive was Apple’s decision to remove the headphone jack from the iPhone7? If you weren’t able to respond effectively to that type of change, it’s going to be a bumpy ride.

What emerging technologies do you think will have the greatest impact on mobile payment acceptance?

HARRY HARGENS: NFC/Contactless will change a lot of behaviors. And it will help enable more seamless implementation of loyalty, reward, and offers functionality at the point of payment, which will make those features more important.

RYAN SCHNEIDER: I’m not sure if we’re waiting on an emerging technology as much as figuring out how to connect the dots. I feel good about the range of options for physical communication with mobile devices, whether that’s QR, NFC, BLE, or MST. The developer community supplies proficient API and SDK packages. From a user security standpoint, biometrics is no longer the hurdle. But without a clear market winner or adopted standards, it’s difficult to broadly connect point-of-sale acceptance with a user’s preferred payment modes. In the in-store environment, it looked like NFC was the hurdle for mobile payments, specifically supporting the device-led mobile wallets. This must now be weighed against the impact of EMVCo’s recent announcement of a standardized QR code.

What are the keys to serving mobile merchants profitably?

HARRY HARGENS: It’s no different than traditional non-mobile (brick and mortar) merchants. Product, price and service all have to be right to get and keep merchant business.

RYAN SCHNEIDER: Understand the merchant’s needs. If the merchant is looking to use a mobile device to accept payments in traditional cash-only environments, there are powerful standalone solutions available. Adding a mobile acceptance channel to a merchant’s existing point-of-sale experience is a different offering. Identifying the need and providing the right solution is key to serving the merchant community.

Where do you think mobile payment acceptance will be 5 years from now?

HARRY HARGENS: Where mobile means doing business outside a traditional store, I think the market is already pretty advanced, with appropriate solutions for most merchants. For mobile in-store, I think we’re still in early days. Merchants say that they want to sell in the aisle, line bust, and accept pay at the table, but many are just beginning to figure out how to integrate that behavior into their store operations. And very few POS systems support mobile devices for pay at the table. That will evolve a lot over the next 5 years, pay at the table may become ubiquitous in table service restaurants.

RYAN SCHNEIDER: We’re currently seeing significant growth and adoption of mobile payments and the associated technologies in international markets. However, we need to balance that excitement against the fact that the US market resisted adoption of mature EMV and contactless card technology for about 10 years when compared to European and Canadian markets. That being said, I don’t think it will take 10 years for the US to see signification mobile payments adoption. While value proposition for the consumer moving from traditional payments to mobile payments isn’t evident in the US today, that move will happen much more quickly than EMV, where the tradeoff was security in exchange for point-of-sale friction.

What is your company doing to drive mobile payments?

HARRY HARGENS: Recommend it whenever it seems like the best solution for the merchant!

RYAN SCHNEIDER: Communication and education. While mobile is a small portion of the current market, we recognize its growth potential. We train our sales channels and our user base on existing mobile capabilities with a focus on awareness, and solicit feedback on merchant needs. We share this feedback with our developer community and mobile partners to improve solutions. The goal is to grow the space as well as our expertise within it.

With thanks to Harry Hargens (Cayan) and Ryan Schneider (Integrity Payment Systems) for their contributions to this article.

 The ETA Mobile Payments Council works to facilitate the growth of mobile payments technology and expand the opportunities for that technology to transform the future of commerce and enrich every consumer. The council deliberates on ways to enhance business relationships and network interoperability among merchants, card brands, networks, equipment manufacturers and financial institutions to further the growth and utility of mobile payments. ETA members can join the council here.