February 17, 2016
With the rise of mobile, digital experience has become a crucial factor in customers’ brand perception. Mobile phones are often the primary touchpoint with the companies, which is why mobile experience is an extremely important focus area for them. E-commerce is one of the industries that can get affected the most as mobile payments rates have seen a significant boost in the last years.
Why touch payments and sales boost are not always good?
Touch payments are leveraging impulsive purchasing behavior. The smaller the gap between a consumer’s desire to buy something and his ability to check it out right away, the higher are the chances the purchase will be completed. Frictionless payments opportunity has a significant impact on the outcome. The complicated process of typing in personal and financial data is a big turn-off for customers.
However, it is not all sunshine with frictionless payments for impulsive shoppers. More mobile commerce and impulse purchases may mean that merchants will need to be prepared for unpredicted boosts in sales. In case the merchant has a wide range of established channels through which touch pay is implemented, there are even higher risks that will not be able to cope with sales.
Third-party touch payments mean that merchants will not have control over customers’ data. It will cause loss of insights on the customer base and a lack of opportunity to adjust offerings based on customer behavior.
Types of touch-based mobile payments services
There are two types of touch-based mobile payments services. One of them is embedded into the device’s operating system and another one is linked to an existing payments service provider.
With the first one, payments can be authenticated by a fingerprint as all information about the customer and his cards is already saved on the device. With the second type, a user needs to have opened an account with the payment provider and elected to stay logged in for future purchases. Once enabled, the feature allows customers to just press buy and confirm buttons.
How will touch payments grow?
Global mobile payment transaction volume in 2015 was 450 billion US dollars and is expected to reach $620 billion in 2016 and surpass 1 trillion US dollars in 2019.
According to BI, smartphone owners spend 59% of the online shopping time on mobile and 41% on desktops. However, in terms of money spent, only 15% of the online shopping expenses are made through mobile. Even though the number is still significantly lower than the same for desktops, it is important that there is more time spent on e-commerce websites on mobile devices than on desktops. It provides an opportunity for the companies to improve the digital experience so that they can boost the sales on smartphones.
The recent report published by Deloitte on third-party mobile online checkout suggests that in 2016, the number of individuals who use a third-party touch-based payment service to make a purchase on their mobile devices should increase 150% to reach 50 million regular users.
Touch commerce enables a customer to make a secure payment on any website or app without having to provide registration or login details to any of the involved parties. Only a fingerprint is required to authorize a payment. What is most important here is that touch commerce significantly reduces the friction during a shopping experience.
For e-commerce businesses, touch commerce is a goldmine as it allows to leverage increasing mobile use for online shopping. Simplified and frictionless checkout is the most important factor that can have a catalytic effect on sales. While mobile commerce is on the rise, the cart abandonment rates across industries are still extremely high. According to the January 2016 research data provided by IBM, Forrester and others, the average e-commerce shopping cart abandonment rate is 68.63%. This is a sign that further improvements are necessary for a seamless mobile checkout experience.
As Deloitte found out, as of mid-2015, about a third of respondents in developed markets browse shopping websites/apps on a weekly basis, but only 9% actually make a purchase. A first-time visitor to a mobile website or app may need to type in his/her name, address, email, phone number, and sometimes purchase preferences, security details (passwords, security questions) and finally payment details to complete a transaction. The wide scope of information required—coupled with the difficulty of entering it on a touchscreen—most likely contributes to the abandonment of baskets.
The highest rate of online purchases was reached in Singapore (close to 20%) and Italy (close to 10%-11%). It is no wonder the checkout rate is significantly lower than browsing via mobile because the necessity to submit personal data becomes quite tiring.
Enabled by a third-party service, touch commerce can remove much of the grit from mobile transactions and shrink the whole "typing" part into a couple of taps on the screen
As the sales of smartphones hit the ceiling, merchants are forced to look for ways to include themselves in customers’ daily phone routines. While it is proven that customers spend a significant amount of time browsing on mobile devices, there is room for growth in sales and an improvement in checkout experiences.