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Frictionless Payments
Written by Cyndie Martini
on March 15, 2016

Mobile payment platforms are quickly gaining popularity among consumers. According to data from eMarketer, mobile payments made in the U.S. in the coming year will grow 210 percent.

The key driver of this spike is the evolution and rapid adoption of mobile pay technology. Apple Pay, Samsung Pay and similar platforms have become more widely accepted, both among merchants, consumers and financial institutions. Meanwhile, many retailers have begun to roll out programs of their own, often tied to loyalty rewards that further entice customers to use the new payment method.

Starbucks sets the standard
Starbucks is a top example of this. The coffee chain's app allows customers to order and pay for their purchase using their phone. When they arrive at the store, the order is ready and waiting. The customer does not have to interact with anyone, and can skip the line altogether. Motley Fool writer Jay Jenkins explained that, since beginning to use this convenient method of pay, he exclusively buys his morning coffee from Starbucks, as opposed to the myriad shops he used to frequent. This is due primarily to the convenience factor, but also because of the rewards program, which brings him closer to free drinks, refills and sandwiches with every mobile purchase.

Jenkins is not the only one that has taken advantage of this service. Starbucks has noted that more than 6 million smartphone orders are placed every month, and the My Starbucks Rewards program grew nearly one-quarter in the last few months of 2015. The rewards program is designed specifically to draw more customers to the mobile payment platform.

Others follow suit
While Starbucks is certainly giving other retailers and entities a goal to strive for, there are plenty of businesses gaining traction in the mobile pay arena.

Wal-Mart has developed Walmart Pay, which is expected to be introduced nationwide later this year, according to Reuters. Taco Bell has also created a mobile payment app of its own, which even includes a location detection feature, which tells employees when a customer is within 500 feet of the store. This helps to ensure the order is created soon enough to be ready when he or she walks in, but not so early that the food is cold upon the customer's arrival.

Most recently, ExxonMobile announced it has created the Speedpass+ app, which gives customers of the many gas station locations the ability to quickly pay for their purchase without taking out their wallets. Receipts can be sent via email or collected at the pump. The gas station also announced it is now accepting Apple Pay.

Retailer benefits of mobile pay
There is good reason for retailers to adopt these forms of payment. The price to process credit and debit cards is high for businesses, and many try to offset the cost by imposing minimum fees on customers, or being a cash-only store. Consumerist pointed out that mobile payments, on the other hand, eliminate the need to keep large amounts of cash at the store, and also do away with processing fees.

Additionally, providing consumers with a more simplified way to pay and allowing them to skip long checkout lines gives them more incentive to do business with that location. Jenkins reported that mobile payment platforms have also increased ticket prices because customers are more willing to add extras to their order, as well as order for larger numbers of people at once.

Offering customer loyalty rewards also increases business. Starbucks' rewards program is a key example of how these programs can bring in more customers, and improve retention rates.

Finally, these payment platforms are also more secure, reducing the risk of fraud occurring at the store. This is enticing for many businesses because fraud can not only cost the organization large amounts of money, but it can also turn away customers.

Credit unions can take advantage of this growing trend by offering their business members the ability to create their own method of mobile pay to their customers. The financial institutions may, in turn, see an effect similar to that of Starbucks' own platform - a better consumer experience, and increased member loyalty.

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