The following guest post is by Henry Helgeson, the CEO and co-founder of Merchant Warehouse, a recognized leader in payment processing technologies.
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2013 was a big year for the mobile commerce space, with major developments from ISIS, Google, Square and PayPal, plus some large-scale deployments at big-box retailers and plenty of experimentation on the SMB space.
But as monumental a year as 2013 was, 2014 promises even more. Here is a run-down of my predictions for the evolution of mobile commerce and payments in 2014.
1. Big Technology Companies Testing Mobile Payments
Big players are starting to work through the first iteration of mobile commerce solutions. PayPal, for example, launched its mobile wallet payment platform, while ISIS introduced its own mobile wallet nationwide in November 2013. Google announced its host card emulation (HCE) NFC workaround in November, too. In 2014, we can expect to see these companies ramp up and bring mobile commerce to the mainstream, while others scramble to catch up. One to watch: Merchant Customer Exchange, or MCX, created by a group of retailers and other companies, including Lowe’s, Target and Southwest Airlines, has declared it will deploy widely in 2014. Next year could well prove to be the year of MCX.
2. Big-Box Retailers Will Lead the Charge
When it comes to mobile commerce, a small number of big-box retailers will likely lead the charge. Toys”R”Us is a great example of a company that is testing mobile payments (using ISIS’s solutions) and scaling up. It makes sense: their target audience is fairly young, and very budget-conscious. People will do almost anything to save money on things like diapers and formula, and Toys“R”Us (parent company of Babies“R”Us) gets this. Additionally, as we’ve seen over the 2013 holiday season, brick-and-mortar retailers, even those considered “big-box” stores, are hyper-aware of showrooming and eager to find new ways to more effectively compete with e-tailers. This introduces the opportunity for the creation of experiential differentiation via mobile commerce — including targeted discounts — as a means to drive revenue.
3. SMB Deployment Will Grow
That said, SMBs are not far behind. In 2014, you can bet that deployment of mobile commerce solutions for SMBs will skyrocket. Most of these smaller merchants are open to trying new approaches, and because they are small-scale they generally have the necessary agility to follow through. There isn’t a bunch of red tape to cut through, and they can take more risks with their pilots since they have a smaller customer base to manage. There are more than 28 million small businesses in the U.S., and each has different needs. Keep your eye on this space, and remember that these are the early adopters who will serve as a bellwether for the future direction of payments and commerce.
4. POS Consumerization Continues
2013 saw many developments on the consumerized countertop front. In 2014, we will see more merchants embracing the trend of sleek, user-friendly countertop devices. Startups like Revel and Shopkeep will deploy more tablets, and traditional POS players will start expanding their product offerings with tablets, as well. And since many of the industry incumbents have built their technology on Microsoft’s platform, the availability of a new feature-rich Microsoft tablet (the Surface) will push this change forward.
5. The “Cash Wrap” Will Give Way to In-Aisle
The traditional countertop point of purchase is morphing. More stores are letting you purchase items without trekking over to the cash wrap. Apple led the way here, but retailers like Nordstrom and Saks are recognizing that it’s a great way to offer faster and more convenient service. We will continue to see retailers experimenting with in-aisle purchasing technology, and, while I expect to see this happen in fits and starts, more retailers will make the decision to scale back the traditional register in favor of the on-floor purchase option as successful pilots are covered in the press.
6. Overhyped Omni-channel Will Prove Itself
The concept of “omni-channel” is quickly reaching overhyped status. In any payments or retail article you pick up, you’re likely to catch the buzzword. Hype aside, merchants who understand the implications of omni-channel realize they have a very real opportunity in front of them. Macy’s is one example of a big-box store bringing a rich omni-channel experience to customers this year via its partnership with Shopkick (enabled by Apple’s NFC competitor iBeacon.) Merchants who can provide this kind of omni-channel experience by meeting customers where they are and giving them what they want will see great returns in 2014.
7. Merchants Will Cater to Millennials
When choosing a mobile commerce solution, it’s important to consider the behavior of a large, growing and influential group: millennials. People in their twenties right now are the first generation of true digital natives, and merchants must pay attention to their preferences. Social products, in general, tend to appeal to millennials, and this age group is heavily influenced by what their friends talk about online. Meanwhile, older consumer demographics prefer their discounts and offers be more discreet. In 2014, smart merchants will segment their customers by age and promote certain products and services based on their preferences.
8. Funding Will Be High for Series A, Then Drop Off
There are more than 190 different mobile commerce applications at varying stages of development or availability today, and more will emerge and secure a series A round of funding in 2014. Few of these companies, however, will be able to score a second round. You might be surprised to learn that the problem here is not a lack of consumer interest. Instead, the number-one reason these companies are struggling is because they aren’t getting access to merchants’ countertops. Their sales teams are failing to bring on new merchants fast enough. In a sign of an overripe industry, mobile payments will begin to really suffer from overinvestment in the space. Consequentially, many will find themselves unable to raise more money in 2014.
9. Acquisition Mode Will Be in Full Effect
In 2013, Heartland invested $20 million in tablet POS company Leaf. Other big payments providers are likely to follow suit and invest in or acquire mobile payments companies. Because there’s so much risk in mobile payments, some large companies will choose not to build from the ground up but instead buy companies that are showing signs of success. This limits both risk and time to market. Along with Heartland, First Data and Vantiv are already doing this, and others will soon follow suit by investing in companies that show promise for cutting through the clutter and offering a genuinely improved customer experience. There may be some challenges ahead as companies seek to add value through different startups’ offerings without angering current partners. The key here is to realize that this isn’t a winner-take-all game; playing nicely is the best way to get ahead.
10. Waiting to See Who Wins the Mobile Payment Wars? Don’t Hold Your Breath
A lot of people are sitting on the sidelines waiting to see which mobile commerce solution “wins” before getting involved. But there is unlikely to be any clarity anytime soon — and that’s not a bad thing. Yes, there are a lot of hare-brained mobile payments and commerce ideas out there, and it will take some time to separate the wheat from the chaff. But the key here is to realize that this isn’t a winner-take-all game; playing nicely is the best way to get ahead. A plurality of high-quality mobile commerce solutions is what will carry us to the point of ubiquity. Will 2014 be the year for that? My crystal ball says only time will tell.
What do you predict will happen in the mobile payments and commerce space in 2014?