Four Factors to Consider When Crafting a Mobile Payment Strategy

Four Factors to Consider When Crafting a Mobile Payment Strategy
Mar 06, 2018


As the mobile payment landscape continues to evolve, it’s critical for merchants to establish how mobile payments fit within their businesses. It’s tempting to look at what other merchants are doing and copy and paste those tactics into your own business model. But the tricky thing about mobile payments is that they are not “one size fits all.” What works for one merchant and their customers, may not work for another. The most successful mobile commerce offerings are designed to fit a merchant’s and its customers’ unique challenges, needs and wants. With that in mind, there are several factors that merchants should consider when crafting their mobile payment strategy. Here are the top four.


Four Factors to Consider When Crafting Your Mobile Payment Strategy:

  1. Consumer Experience and adoption
  2. Data management
  3. Costs
  4. Technology

1. Customer Experience

A mobile payment solution should accomplish three objectives. It should solve a specific problem, support the commerce experience seamlessly and ultimately delight your customers. All three of these areas create a positive customer experience. To help you get a better idea of how a mobile payment would enhance your customer experience, consider the following:

  • First, define the type of experience you want to create for your customers. Do you want it to be convenient, personalized, inspiring, efficient, etc.? Everything about the mobile payment solution you select should complement the experience the you are trying to create.
  • Does the payment solution integrate with other customer experience features such as loyalty, offers and promotions, or customer profile databases? Furthermore, do those features solve a customer experience issue? For example, capabilities that support streamlining the redemption of loyalty, rewards or offers could improve the overall experience.
  • What’s the current use of the mobile payment method you’re considering among your customer and/or potential customer base? Understand who your audience is and what they like to use. The mobile payment solution should fit your customers’ preferences. In addition, consider what payment methods the mobile solution supports. Some third-party applications support only credit or debit card products. If support for closed loop gift cards, ACH or private label products is required, such solutions may not be a good fit.

2. Data Management

Merchants are on the front lines of data security. This includes preventing fraudulent provisioning of accounts and protecting sensitive cardholder data. For this reason, merchants need to understand how mobile payment solutions provisions, uses and stores consumer payment information. Specifically:

  • Where cardholder payment information is stored and whether transmitted data is secured adequately in accordance with data security standards.
  • Whether tokenization and encryption product solutions are available.
  • How the choice of technology and cardholder verification methods affect the processing environment, routing choice and authentication decisions, decline, liability and customer experience. For example, debit networks may not have business relationships in place that are able to process and route biometric information and on-device CVMs, resulting in potential declines.
  • Whether the data in the mobile app includes only cardholder information or other customer/product specific information as well.

3. Costs

There are some costs when you implement or accept mobile payments.

  • One-time set-up costs: This can include software development, software and hardware deployment, training and promotion.
  • Ongoing costs:These typically cover maintenance, hosting and licensing costs.
  • Transaction Fees for CNP Transactions:Many mobile payments other than contactless are classified by the payment networks as CNP (Card Not Present) transactions. The fees for these transactions can be higher than for standard card present transactions.
  • Fraud Liability:In a CNP transaction, the merchant is typically liable for any fraud. Mobile technology now has authentication tools and access points that can prevent fraud if used effectively. However, any fraud that does occur will predominately be passed on to the merchant in the form of chargebacks. There are fraud prevention tools and practices available for mobile pays, but they require merchants to incur additional investment costs and deal with ongoing risk considerations.
  • Mixed Credit & Debit Transactions:A merchant’s mix of credit and debit payments may be different for mobile pays with corresponding costs because credit and debit transaction fees are different.
  • Alternative Payment Methods:If a large percentage of your transactions come from alternative payments such as ACH, closed loop, or private label, consider if these transaction types are available in a mobile pay product. Switching from lower cost customer pay types may result in higher fees.
  • Cost Reduction Potential:Merchant costs could be reduced by a mobile solution. For example, eliminating ticketing and related paper production costs for industries such as transit or for paper gift certificates may increase the ROI of implementing a mobile payment solution.

4. Technology

One challenge with mobile pay solutions is that they are in a constant state of evolution. Merchants may struggle keeping up with the ever-changing trends, equipment and software. In addition, multiple technologies are available for in-store and e-commerce payments, each of which raises different hardware, operational and other business considerations. In light of these challenges, be sure to talk to your equipment provider to identify the best tools, tech and resources for your business’ needs and capabilities when considering implementing a mobile payment solution.

Mobile payments don’t have to be complicated. With these four critical factors in mind, your mobile payment strategy will be a success.