Why mobile commerce isn't yet ready for prime-time

For all the hype being generated by mobile commerce, vendor claims that we’re on the verge of a smartphone-driven retail revolution ring a little hollow.

While figures released recently by PayPal and Ipsos conclude mobile commerce is growing twice as fast as online conventional electronic commerce, the consumer migration to mobile may still be a long way off.

The PayPal research suggests mobile commerce is rapidly taking over the retail landscape as consumers leave e-commerce-based PCs at home and load conventional credit and debit card information into increasingly capable mobile apps.

From 2013 through 2016, the research says m-commerce will grow at a 34 per cent compound average annual growth rate compared to 14 per cent for e-commerce as a whole. Smartphone-toting Canadian shoppers spent C$3.45 billion in 2013, and are expected to spend 142 per cent more next year.

A drop in the bucket

All of this sounds tremendously exciting, but in an overall retail market that Statistics Canada topped at $480 billion in 2013, we’re a long way from m-commerce being the dominant method of payment in retail. StatsCan figures show Canadian businesses sold over $136 billion in goods and services online in 2013, up from $122 billion, or 11.5 per cent, in 2012. In that same period, 20 per cent of Canadians between 18 and 34-years-old reported having made a purchase from a mobile device.

StatsCan reports e-commerce sales by retailers rose to $7.7 billion in 2012 from $6.6 billion the previous year. While the 16.3 per cent increase was five times the 2.9 per cent growth rate in overall retail trade, only 1.5 per cent of sales in 2012 were e-commerce-related, up marginally from 1.4 per cent in 2011. M-commerce figures for those years, the most recent available, would be a fraction of that already-tiny baseline.

Alexander Peh, head of mobile and market development at PayPal Canada, says mobile-savvy consumers are increasingly demanding simple buying solutions, and they aren’t hitting the checkout button because they’re not always getting them.

“There’s still a steep gap between browsing and buying on mobile,” Peh said. “Too many obstacles still stand between consumers and retailers trying to connect via mobile devices. Lots of online sites from Canadian retailers are still not optimized for mobile, and require people to fill out credit card, shipping and billing information before they can checkout.”

The knowledge gap

Still, most consumers haven’t made the jump to pulling out their smartphones before their wallets, which could explain why it’s often difficult to find mobile-supported payment options and employees who are trained to use them.

I recently tried to use tap-to-pay at a national chain grocery store. My phone was equipped with a near field communication (NFC) chip and had the latest version of the store’s app. According to the websites of my bank, my payment processor and the grocery chain’s loyalty card program, I had everything I needed to successfully use my smartphone to pay at the cash.

Everything except a properly trained employee, or supervisor, who could push the right buttons on the point-of-sale terminal to complete the transaction, despite the brightly coloured pay-with-your-phone sticker slapped on the side of the cash register.

Connecting the patchwork, securely

Employee training is only one of m-commerce’s obstacles to more widespread adoption. Phones must have the proper secure wireless circuitry, like NFC, as well as end-to-end encryption. Banks and payment processors must release apps that support retail transactions. Retailers may need to upgrade their hardware to ensure compatibility.Because m-commerce is still in its nascent stages of evolution, however, industry standards remain in a state of flux.

Peh says consumers are not willing to manually input data on their phones, and instead expect a simple buying experience that only digital wallets can provide. Looking ahead, Peh is confident robust market growth will be driven by innovation.

“Changing consumer behaviour and the explosion of mobile devices are key drivers for mobile commerce growth,” he said. “Mobile technology advancements, enhanced mobile security and low-cost mobile devices with larger screen sizes are contributing to the growth of mobile commerce.”

Until these advancements take root and standards are sorted out, though, risk-averse retailers will be hesitant to dive in, as no one wants to invest big in technology that may be obsolete tomorrow. The anticipated Canadian arrival of Apple Pay later this year is expected to raise retailers’ comfort levels and drive adoption, but the industry must still overcome consumer concerns over security and data stewardship.

A Symantec study released in November suggests mobile devices are unnecessarily vulnerable. While fears of hackers, identity theft and data breaches haven’t stopped Canadian consumers from using PC and mobile technology to purchase goods both in-store and online, mainstream adoption won’t happen until those fears are, if not completely eliminated, at least addressed.