Consumers and industries are slowly warming up to the concept of “cashless” transactions as goods and services can now be purchased online. Business are also adding near-field communication (NFC) payments as a mode of transaction. Mobile payment refers to payment transactions made from a mobile device. Mobile money, mobile money transfer, and mobile wallet are some forms of this cashless option. So apart from cash, check, and credit card payments, this gives consumers more choices when making their purchases. Why is Starbucks winning the race against tech giants Apple, Google, and Samsung?
In the US, the concept of mobile payment first came to light in 2008 when Apple created an app store and made it accessible to third-party application developers. Internet tech giants and a coffee company dominate the mobile payment app scene today. Based on the 2017 figures for mobile app users, Starbucks is leading the pack with 20.7 million users, followed by Apple Pay (19.9 million users), Google Pay (9.3 million users), and Samsung Pay (8.3 million users). The mobile payment app users of Starbucks is projected to reach 27 million by 2020.
Starbucks looks out of place in this list. But their success in integrating a mobile payment app in their overall customer experience was a perfect blend of delighting the customer and making the most out of mobile payment technology.
Starbucks’ Perfect Blend
Delighting the customer is at the core of Starbucks’ mobile payment app’s success. There’s nothing more lovely than being able to order your favorite coffee online, drop by the store to pick it up, and go about your day in a matter of minutes. Customers can also earn loyalty points, and get coupons and discounts by installing and using the app. This supports the coffee company’s overall strategy—customer loyalty. The aim is to extend their relationship with the customer beyond the cash register. Lastly, through this app, the company is able to gain insights into their customer behavior. That insight allows Starbucks to offer more timely and personalized perks. In this age of information, data are considered currency. Starbucks customers are able to get returns from the information they share with the company through freebies and incentives.
Other factors in play
There are other factors in play why this is the current landscape of mobile payment app in the US market. In a survey conducted by CivicSurvey, only 1% of the respondents use mobile payments, while the majority use debit (47%), cash (26%), and credit cards (23%). Millennials were the early adopters when it came to using mobile payment app. Twenty-three percent of the respondents, aged 18 to 34, confirmed that they have no concern using mobile payment apps. Incidentally, the younger generations are more inclined to frequent gourmet or artisan coffee shops. It’s easy to see how the puzzle pieces fit.
Moreover, Americans still has that predominant reluctance in embracing the “cashless” approach to doing business. Seventy-seven percent of Americans own a smartphone. However, only a meager 19.4% use mobile payment methods. Clearly, the US market still has a long way to go compared to China when it comes to mobile payment adoption. In 2016, China registered $9 trillion total of mobile payment transactions, dwarfing the US spending of $112 billion.
The financial sector has been investing heavily in technology and urging consumers to switch to mobile banking and payment options. Banks have been trying to address the consumers’ fears in embracing mobile banking. Unless financial institutions can address security concerns, privacy issues, and fear of complexity, the use of mobile banking and mobile payment options will be stifled.
Major players in the mobile payment app arena can learn a thing or two from Starbucks. They better do it fast or just settle with following the scent of coffee.