In the latest major development in mobile retailing, Spanish department store group El Corte Inglés is rolling out contactless terminals across its stores, enabling customers to make payments with a tap of their card or mobile phone. By the end of 2014, around 12,000 terminals should have the new contactless technology.The market for mobile retail payments is expected to exceed $600 billion by 2016, so retailers and payment providers are working hard on ways to seize these opportunities. With ever increasing use of mobile devices and tablets for browsing and purchasing, merchants are assessing the best approach.
Some retailers are focused on how to provide the speed and convenience of mobile payments for their own operations. By contrast, others such as Wal-Mart, Gap, Dunkin' Donuts and ExxonMobil in the Merchant Customer Exchange (MCX) consortium are looking to offer a new cloud-based mobile wallet supporting the mass market, competing with existing payment providers.
While there is no "one size fits all" solution, retailers are engaging with a range of mobility options to provide the best fit for their customers, operating in an omni-channel world. From mobile optimised websites and in-app payments to mobile in-store guides and in-aisle checkout capability to combat "show-rooming" and the wide-ranging opportunities to extend loyalty programmes and couponing via mobile devices, retailers are now looking for the best mobile commerce and mobile payments solution.
In addressing these opportunities, retailers should think about a number of key factors, including:
- Mobile app development: given the inevitable pressure on getting mobile apps to market quickly, do the advantages of agile development methodologies outweigh the potential risks, when compared with traditional development procedures? In either case, the development agreement should clarify how the work will be controlled effectively, recognising the features of the chosen methodology.
- IPR ownership/licences: if the app is not fully owned, does the licence give sufficiently wide scope (eg for newly acquired subsidiaries and other changes in the retailer's group structure), combined with appropriate warranties and indemnities about any third party apps or open source products included in it?
- MPOS costs: when innovative MPOS systems are proposed, often with attractive price models, how far do these models work effectively with varying potential business outcomes?
- Third party managed services: where an m-payments solution depends on services outsourced to a third party, or a cloud-based solution, are the service level agreements appropriate to protect the retailer, and do they offer sufficient flexibility to respond to fast changing market developments?
- Security: with increasing concerns about network security and the growing level of enforcement by privacy regulators, retailers are understandably concerned about how their own and third party payment networks are kept secure against the ever-present risk of attacks. And if a security breach occurs, how will the incident be managed and contained?
- Data analytics/Data protection compliance: in addition, where retailers are looking to achieve a closer engagement with the customer by mining the data about customers' behaviours and preferences, they will need to ensure that the data is processed and any loyalty campaigns (and their social media strategy) are handled in a compliant fashion. Recent experience has highlighted the risks of operating without effective controls in place and the reputational damage and cost which can result.
- Payments regulation: a mobile payment solution may require an electronic money licence, unless it can operate effectively within one of the designated regulatory exemptions. These include payment for digital services over mobile devices and the so-called "limited network" exemption for a defined range of stores. Both these exemptions are likely to become more restricted under the new European payments regime. So merchants currently using these exemptions may need to revisit their approach.
- Payment assurance: retailers will want clarity on how any risk of unauthorised payments or clawbacks are dealt with by a payment service provider and how this risk can be minimised.
As the mobile commerce landscape evolves, merchants who engage with these pointers successfully will enhance their prospects of staying ahead of the competition and reduce the risk of tripping up over unexpected roadblocks.
The Fieldfisher team advises clients in the retail and other sectors on their activities in the mobile commerce arena.
Fieldfisher is recognised by independent commentators as "prominent in mobile banking and payments" (Chambers 2013). John Worthy won Dealmaker of the Year 2013 award from Finance Monthly.
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