In the rapidly changing payments landscape, small businesses are often stuck in the middle of how to keep pace with the seismic shift seen across the payments and commerce ecosystems.
Balancing how and when to invest in new technologies is tricky, and sometimes means taking a leap of faith that the bang will be worth the buck. But luckily for small business owners, there are companies that are able to gather the necessary data to perhaps give them the faith that the leap toward new technologies should be made.
And, in particular, toward FinTech’s 2015 buzz phrase: mobile payments.
The latest data from CAN Capital shows why 2015’s trend should push merchants’ attention toward mobile payments as part of their overall business strategy.
What the results from its latest survey show is that mobile payments has passed eCommerce as the top trend that impacts consumer spending. Its data, which takes into account the results from over 160 payments and financial innovation professionals, shows that nearly half (47 percent) agreed mobile payments influence consumer spending habits. That same group projected to see an increase (35 percent) in eCommerce, followed by personalized marketing and advertisements (18 percent).
The most notable aspect about this data is the shift from 2014’s results, which listed eCommerce as being the largest driver of consumer spending.
So what’s driving that change?
Apple Pay, Samsung Pay, Android Pay and Chase Pay. It seems the year of the “Pay Players” is helping igniting a consumer behavior interest in the shift toward mobile, even if the transaction volume at the point of sale isn’t there quite yet to support it.
In an interview with PYMNTS, CAN Capital’s VP of Brand Marketing Jason Rockman explained that what the market is currently seeing is high interest from the industry to push mobile payments. Before consumer adoption can ignite, he noted, it takes long-term investments and a bet on a specific technology.
And as the adoption data has shown, that takes time. But taking time doesn’t mean that consumers aren’t influenced by shifting technologies in terms of how they choose where and how to spend their money and shop.
“The value of talking to executives within the payments industry versus consumers is how we look at the numbers. We know what there is a bit of a groundswell taking place, but you never know when or how that groundswell is going take shape until you have the executives in the industry talking about it and focusing on it,” Rockman said.
While 2014’s results listed mobile payments on the top, the FinTech bug has propelled it at the top in 2015.
“About 60 percent of executives in 2014 were primarily focused on eComm versus mobile payments. Now, nearly 50 percent were focused on mobile payments, with eComm dropping all the way to mid-to-low 30 percent,” Rockman said. “So that shift is starting to take place. Again, I make the assumption that a lot of this is being driven by customer behavior.”
Case in point? Starbucks and its mobile payments momentum.
As Rockman pointed out, Starbucks has a proven mobile model that shows consumers are driving mobile payments investments. In early 2015, its mobile transactions accounted for 16 percent of their sales; by October, that figure had jumped to 21 percent.
“Clearly you’re seeing a higher level of adoption across the board. Processors and people in the payments industry overall have to be paying attention. And clearly from the results in our survey, they are paying attention,” Rockman said.
Of course, with all the device shifts small businesses are already facing (EMV terminals, for one), it’s easy to understand why worrying about adopting mobile payment technology may fall to the bottom of the list. On the contrary, the data is hard to ignore. eMarketer’s research pegs the 2016 mobile transaction total spend to hit $27.05 billion, with users spending an average of $721.47 annually. That means mobile payment sales will rise faster than average spending per user in 2016 because of this tech push.
“These results show just how rapidly technology is changing the payments landscape for small businesses and consumers alike,” said Daniel DeMeo, CEO of CAN Capital, in a news release about the survey results. “Especially for small businesses, it can be costly to keep up with these technologies in order to offer consumers the choices they prefer when walking up to the cash register. At CAN Capital, our role is to work closely with our payments processing partners such as Worldpay to help small business merchants access the working capital they need to upgrade their systems and keep pace with the changing payments landscape.”
Interestingly enough, despite the respondents listing how important mobile payments are for influencing consumer spending, the data also show that most respondents (58 percent) still believe most in the security of credit/debit cards at the point of sale as being the most secure. When comparing that to online payments via processors like PayPal or Square, only 22 percent of respondents listed those as being the most secure. Mobile payments using a debit or credit card were listed by 20 percent.
Ironically, the major breaches that caught the industry’s attention (Target in 2013 and Home Depot in 2014) were because of physical cards. While EMV entered the market to address card-present fraud, that doesn’t account for online transactions. That’s where the mobile ecosystem is shifting the conversation.
“I think it’s really more of an education and familiarity issue [of mobile payments] versus what is secure and what is not secure,” Rockman said.
There remains one of the top challenges for small businesses. When asked what might be the biggest challenge in payments processing for small businesses, 49 percent cited transaction fees, which was a 10 percent increase from last year’s survey. The ability to comply with new payments security standards such as EMV was listed second (27 percent), followed closely by risk of data breaches (24 percent).
Speaking toward a small business perspective, Rockman understands the challenges of investing in new technology, but as CAN Capital’s mission is to help drive SMB growth, he also was able to provide a take on why small businesses should invest in staying relevant with trending payment technologies.
“Small business owners should have the same business mentality or same mindset that they are only as good, and they are only as successful as their customers are happy with the services or products they are providing,” Rockman said. “So the opportunity is really to understand how their customers want to interact with them. Small business owners should understand what they can do to make their customers’ lives easier. Based on the data we have, we see that mobile payments is growing.”
What that all comes down to for SMBs is understanding how to keep a competitive edge in the marketplace. This means staying relevant to a merchant’s core customer base, which at the end of the day means thinking about one core business concept: ROI.
“This may be one of those situations where you have to make one of those investments and think about what the return on investment could potentially be for you,” Rockman concluded.
For many SMBs today, that could mean mobile payments. At least, that’s what this latest batch of data shows.
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