Mobile Payments and the Self-Service Kiosk: Opportunities and Threats

Mobile payments are on the rise as American consumers increasingly rely on their smart phones to shop:

• Google already has a virtual wallet

• Amazon is poised to release the Fire

• Even Apple is getting into the mobile payment game with Apple Pay

It’s not difficult to understand why this shift is happening. Why carry cash or even plastic when your phone can make payments and do so much more? The very notion of a traditional leather wallet is becoming obsolete.

Not surprisingly, there are countless opportunities to take advantage of the mobile payment trend — especially as self-service kiosks become more commonplace at retail stores across the country. But mobile payments are not without their risks. The following explores both opportunities and threats that merchants need to weigh as they update their payment systems.

Let’s start with the opportunities first.

The Benefits of Mobile Payments and Self-Service Kiosks

The most obvious benefit is that you’re able to offer customers another way to shop. More payment options almost always lead to more sales. But there are other important advantages of mobile payments as well, including:

1. Faster shopping. With a wave of the phone, customers can purchase what they need, and move on. This means more transactions per unit of time.
2. Shorter lines. Similar to the above, mobile payments also create shorter lines. In a recent U.K. survey of shoppers, researchers discovered that nearly 60 percent of customers reported abandoning long lines out of frustration.
3. Better integration. If you operate an online store and retail outlet, smart phones can help you seamlessly integrate your payment options. For more on how this works, read how Amazon’s Fire could revolutionize the retail world.
4. Personalized shopping. With mobile payments, you can personalize the shopping experience with geo-targeted ads, customer rewards, coupons and other incentives. When customers walk into your store, you can instantly alert them of new promotions, exclusively through their mobile devices.
5. Higher savings. As a merchant, you can save money on credit card processing fees (mobile payment transaction costs are often cheaper). You can also save on employee expenses as you begin phasing out traditional cash registers with self-service kiosks.

Now, let’s look at some of the potential downsides of mobile payments.

The Disadvantages of Mobile Payments and Self-Service Kiosks

Although mobile payments offer the promise of long-term savings, updating your payment infrastructure carries upfront costs. There are hardware upgrades — both for the kiosks and the smart phone readers.

Troubleshooting (i.e. glitches) is another major concern — especially at self-service kiosks. Who among us hasn’t become frustrated when trying to buy food at the grocery store on our own? This is just a technology issue that will likely go away as self-service kiosks become more mainstream, but it’s still worth noting.

However, the biggest potential pitfall is security. With new PCI compliance rules, the mobile payment landscape is a bit complicated. For example, who is responsible for covering fraudulent losses?

• Is it the merchant?

• What about the customer?

• The kiosk manufacturer?

• The software developer?

• The smart phone manufacturer?