Technology giants, start-ups and retailers like Google, PayPal, Starbucks, Square, and Stripe have moved on from just threatening and competing against the traditional banks to dominating the mobile payments arena.
Starbucks is the new model of success in mobile payments with an impressive comeback after the unsuccessful partnership with Square in 2014. The Seattle-based coffee giant has made mobile payment strategy a top priority and continued to invest in its own in-house mobile payment systems. The result is remarkable: over 8 million mobile transactions per week, 16 million active users of its mobile app, which translates into nearly 19% of all mobile transactions in US stores.
The brilliant idea behind Starbucks’ “Mobile Order & Pay” system combines the convenience of a simple payment tool, which works on the majority of smartphones, with the benefit of a well-thought loyalty program. The app’s success is not only driven by the ease of payment (“shake to pay” and give a digital tip to the barista) but also by the remarkable set of supplementary features (loyalty program, manage Starbucks card, send Starbucks gifts to friends etc.).
There is yet no confirmation about a possible white-labelling solution of the mobile payment app. However, ‘Mobile order& pay’ will surely trigger a wave of similar solutions either brought up by tech giants or by other consumer companies willing to pay the price for a bespoke solution. Either way, given the rapid acceleration in mobile device purchases and millennials’ hunger for convenient mobile payment solutions like digital wallets, credit card companies and banks are vulnerable to lose a substantial number of mobile customers.
At MyPrivateBanking we believe that customers will choose a non-bank mobile app over a bank’s mobile solution if it offers more convenience and interesting add-on features. It is not enough for banks to launch their own mobile wallets. To gain market share and penetration banks need to think hard about the smart add-ons for their payment solutions: Loyalty programs, preferential treatment when ordering or buying things in high-profile store chains, and many other innovative features will require banks to think like FMCGs (fast moving consumer good companies) rather than old fashioned retail banks. This will be the hardest challenge.