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SMBs Must Get Mobile Payments or Get Left Behind

Apple Pay

As we head into black-cyber-small weekend my guess is that people will be standing in a lot of long checkout lines. Many people in those lines will wind up cursing under their collective breath for some faster way to pay.

It’s not unlike the ’70s coffee commercial: “If they can put a man on the moon why can’t they make a decent cup of coffee?” Consumers are starting to expect more efficiency and convenience, less incompetence, fewer delays and bottlenecks as they seek to buy things in stores.

The arrival of Apple Pay against the backdrop of many other developments is starting to reshape consumer expectations around mobile payments. Only a few weeks old, Apple Pay is already having an impact. According to one NY Times article, merchants accepting Apply Pay are already seeing real mobile transaction volumes:

Whole Foods, the high-end grocery chain, said it had processed more than 150,000 Apple Pay transactions. McDonald’s, which accepts Apple Pay at its 14,000 restaurants in the United States, said Apple Pay accounted for 50 percent of its tap-to-pay transactions. And Walgreens, the nationwide chain of drugstores, said its mobile wallet payments had doubled since Apple Pay came out.

Apple Pay is being resisted by some retailers, led by Walmart, which backs a rival system (MCX/CurrentC) that entirely avoids bank credit cards. Regardless, there’s no question that mobile payments are real now. The mistake many analysts and others make, however, in discussing this subject is to think of mobile payments as exclusively an in-store (NFC) phenomenon.

It’s not.

Mobile payments must be defined to include in-app payments for offline services. This would extend to any mobile, e-commerce transaction where fulfillment or rendering of services happens offline: hospitality, dining, transportation, parking and so on. In-app payments is probably the way that most consumers will initially use their phones to buy things (e.g., AirBnB, Lyft, OpenTable). But those traditional retailers, such as Whole Foods, that are actively embracing it will see competitive gains and help condition consumers to expect similar convenience elsewhere.

Newtek, a payroll products firm, released a report recently asserting that more than 80% of small business (SMB) owners don’t have POS terminals that can accommodate NFC payments. Apparently SMBs have limited interest in mobile payments or in investing in new technology to address the trend.

They will however be required to upgrade POS terminals next year as chip and PIN credit cards and new fraud rules kick in. That shift may drive adoption of NFC-capable POS terminals. Yet third parties like Square are also enabling Apple Pay acceptance through their POS, iPad-based systems.

Square also recently introduced Square Order, a sort of reincarnation of Square Wallet but in the form of a vertical restaurant and cafe online ordering and payment app. Users order ahead and then pick up the food upon arrival, already having paid in the app. Bluetooth helps notify the business when to start the order. There are numerous other payment apps in the same segment, such as TabbedOut, Dash, Cover and several others.

Individual stores/chains have their own payment apps: Starbucks, Eat24, Panera, Subway and numerous others.

While it has not been painful to swipe a card at the point of sale, it’s getting more so when compared with the convenience of Apple Pay or some of these other payment apps. I find that having to sign a register receipt (now unpredictably) has become more annoying. I want to pay and go with a minimum of effort.

I’m not a Millennial but I guarantee you that’s their attitude. Mobile payments (and related marketing and loyalty programs) will soon be all around us. Those businesses that fail to embrace them, either directly or indirectly through third parties, are going to cause increasing frustration for consumers.

This goes especially for conventional apparel or housewares retailers. More and more smartphone owners no longer want to stand in line; they no longer want to struggle with the conventional checkout process. Retailers that understand this and innovate to eliminate the line and make payments a “background” experience (like Uber) are going to find greater success, customer satisfaction and loyalty.

This also goes for small business owners. It doesn’t matter whether they think mobile payments are exotic or a hassle to accommodate or irrelevant to them. Those that “get it” will surge ahead. Those that don’t will fall behind and lose customers to more progressive competitors.

2 Responses to “SMBs Must Get Mobile Payments or Get Left Behind”

  1. SMBman says:

    Don’t get me wrong, I’m all for new technology and I want mobile payments to succeed. However having worked with SMBs in the digital space, small business adoption of new technology will be painfully slow in North America. The best shot for small businesses to adopt ApplePay would be when they’re forced to update their credit card processors to accept chip based cards. The other ray of hope is the slow but gradual adoption of mobile based pos systems (Revel, Square, Shopkeep) by SMBs. Otherwise, small businesses don’t have large budgets nor a dedicated staff to integrate new technology, so they don’t have the bandwidth to experiment.

    Will their customers demand mobile payments? Highly unlikely in my opinion. As you said, there’s nothing difficult about pulling out your credit card and swiping and signing. Even though mobile payments can beeasy and convenient, there are other variables at play – fear of technology, old habits, bad cell reception, “it aint broke so why should I fix it” mentality, etc.

  2. Greg Sterling says:

    I think most adoption with come via third party enablers and in apps rather than at the traditional, offline POS. Agree that SMBs don’t want to update POS and don’t see the need, unless/until compelled to do so re chip cards. Ultimately it will be a competitive disadvantage (add it to the list) for those SMBs that are not able to address mobile payments.

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