The future, according to more than one expert, belongs to mobile payment systems. In Germany, however, only a handful of people use their smartphones to make payments. According to BITKOM, this is due to a dearth of outlets that accept smart payments. Will that change with the launch of Apple Pay? And what will be the payoff for businesses?
Cash? Soon to be dead as a dodo. Almost one third of smartphone users in Germany – that's 13 million people – would like to use their mobile phones to pay, at least for things like bus or train tickets. That is the finding of a survey by the BITKOM German ICT industry association. More than half of respondents reported they could envisage paying with their smartphone when they go shopping. People in Germany seem to be ready for mobile payment, which is currently one of the hottest technology topics.
So far, however, this willingness has not yet translated into any actual day-to-day shopping. According to BITKOM, this is due to a lack of outlets which accept mobile payments. "Other countries, such as the U.S., UK and Japan, are much more advanced," says BITKOM's managing director Bernhard Rohleder. Maybe this will change when one of the world's most successful brands brings its mobile payment solution, Apple Pay, to the German market. The company has a long track record of kick-starting new trends. The Association of German Savings Banks has already announced it wants to collaborate with Apple Pay.
Last fall Apple Pay got off to a successful start in the United States. According to the Bank of America , 800,000 people now use it. However, the success of Apple Pay in Germany may falter over a few country-specific differences between Germans and Americans – and some hardware limitations as well. So far, Apple Pay can only be used with the latest generation of iPhones – iPhone 6. This limits the number of potential users, because iPhones are less prevalent in Germany than in the U.S. In addition, payment with Apple Pay is still settled via credit card. This aspect, too, also mitigates against nationwide success in Germany, because whereas most adults in the U.S. have multiple credit cards, many Germans remain skeptical about paying with plastic. On the other hand, paying by phone does not necessarily have to be linked to credit cards, as is evident in several African and Asian countries. There, millions of people do not even have bank accounts and transfer money instead using their smartphones.
Perhaps a mobile payment system in Germany would be more promising if, like Paypal, it were based on a bank account. PayPal is also developing its own online payment service and acquired the start-up Paydiant. Paydiant offers companies a white-label solution, allowing them to combine mobile payment features with customer loyalty schemes and digital receipts. The data remain completely in the hands of the respective business. This represents added value to companies compared with Apple Pay since, apart from the invoiced amount, no other data is transmitted.
The giant Starbucks coffee chain has clearly shown how to successfully combine mobile payment and loyalty programs. In 2013 in the United States, customers used their smartphones to pay for 90 percent of coffee bought there. Today the company is notching up seven million mobile transactions a week. The trump card Starbuck played was to create and offer an app for its customer loyalty program – customers get a free coffee if they consume a certain number of coffees. The Starbucks app keeps digital tabs on the number of coffees drunk, and this record doesn't have a tendency to get lost, unlike the paper cards used previously.
PayPal has not announced when or if Paydiant will be launched in Germany. So perhaps businesses ought to take a leaf out of the Starbucks book and combine their own apps with third-party solutions. Starbucks has released an update to its app that makes it compatible with Apple Pay – a tactic that promises to pay big dividends.
So far, no single provider has been able to corner the market. In the end, the most successful solutions might be those that allow easy integration with existing apps, because this approach gives customers and firms the greatest possible flexibility.
According to BITKOM expert Steffen von Blumröder, in the long term smartphones will not only make wallets redundant when it comes to paying, but they will also take over other wallet-based functions, such as storing driver licenses and ID cards. If you want to hear more on his predictions for the future of mobile payments, follow the "Mobile Payment/Mobile Wallet" panel discussion at CeBIT.