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If his business didn't offer mobile payments, a handful of Chris Dressick's customers wouldn't even come in.
The Station, a café in San Francisco, allows customers to pay from their smartphones via the PayPal mobile application, which integrates with Revel Systems' point-of-sale (POS) system. Dressick, the managing partner, said that consumers use mobile payment methods for only 5% of credit card purchases. But, he said, providing payment options to customers is increasingly important.
"It's a convenience to my guests," Dressick said. "I'm going to take as many forms of payment as I can. You don't want to turn away business."
Led by Apple Pay, Google Wallet and others, mobile payment vendors aim to streamline and secure purchases by storing credit card information on mobile devices, masking the data so it's safe, and enabling the data to be read by terminals in stores to complete the sale. But consumer adoption has been slow due to lack of awareness and other factors.
Research from InfoScout revealed that only 9% of iPhone 6 or 6 Plus users -- a small portion of iPhone users and the only phones that are compatible with Apple Pay -- who shopped on Black Friday 2014 have used Apple Pay. Overall, it was used less than 5% on the busy shopping day. The main reasons for consumers' reluctance were that they didn't know the store accepted it, they simply forgot to use it, or they were still concerned about its security.
While traditional forms of payment are still ingrained in shopper behavior, companies are testing the waters to gain advantage when mobile payments gain traction.
"Companies are buying into it," said Sumit Mehra, CTO at mobile app developer Y Media Labs. "Certainly, there's a lot of initial skepticism, as with any new product. People see how easy it is to use, and it motivates companies to use it."
Beyond awareness and other factors holding mobile payments back, security remains the top concern among consumers.
Security concerns dictating consumer adoption
John LapeyrouseSmoothie King
Smoothie King, a restaurant chain with more than 700 locations in 32 states, is piloting a mobile payment option linked to its loyalty program, where members can pay via a mobile app or by entering a PIN number at the register. The company, which also uses Revel, doesn't incur an additional cost because the software, provided by Index, is integrated with its POS system.
By testing this capability with a small segment of its customers, Smoothie King aims to gauge its customers' comfort level with the technology. But vice president of IT John Lapeyrouse sees security as a key obstacle.
"Part of the adoption issue is [customers] feeling comfortable that their cards are secure in their phones," Lapeyrouse said. "That's the way most people will view it. Apple has a known, credible reputation, as does PayPal. The more of those companies [commit to it], the more adoption there will be."
"There aren't any standards," Lapeyrouse continued. "Lots of companies are making bets on this, and whatever the public decides [is the best option] is the only thing that's going to matter."
Security concerns have prevented customers from committing to mobile payments, says a 2015 report from 451 Research. In the report, which cites research from ChangeWave, 84% of respondents said the secure storage of their financial information is the most important aspect of using a mobile payment app. Of respondents who said that they are unlikely to make mobile payments, 47% cited security as the reason.
To address this issue, The Station emphasizes PayPal's reputation for security as its main selling point to customers wary about mobile payments. Dressick depends on that trump card to instill peace of mind in the customer.
"PayPal is the most secure processing company globally," Dressick said. "If I can say that to a client, what argument do they have? They have none."
The 451 Research report sees the security issue as a problem of perception. Even though mobile payments offer safeguards that physical credit and debit cards can't, customers are still distrustful of the technology.
But even in the wake of recent breaches at various retail chains, consumers' security concerns may be diminishing. According to the report, those who believe mobile payments are more secure than credit cards increased by 57%, and those who believe they are less secure decreased by 54% between March and December 2014. Those figures, however, still sit at a paltry 22% and 28% of respondents, respectively.
Analysts say that consumer adoption is more of a hurdle than getting businesses to buy in. The tokenization inherent to mobile payment technology is enough for companies to be sold on it.
"All of these stores are getting hacked because the retailer has the credit card information," said Chris Ciabarra, CTO and co-founder of Revel Systems. "Some companies are starting to wake up to the fact that they shouldn't be doing it this way."
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