Consumer Behavior: Has American Express Given Up On Mobile Payments?

Our smartphones have become an extension of our hand. Look around next time you are lined up waiting anywhere and just note how many people have their heads buried in their phones while they wait. They are the quintessential equipment that all of us need and check in with on a regular basis from the line at the market to the ride in the cab. But will we start to use it for mobile replacement and replace cash and the credit card?

Despite our reliance and constant interface with the phone, however, it is clear customers are reluctant to change. This has been a conundrum for developers that have touted mobile payment as the wave of the future. The wave still hasn’t broken, and the anticipation that investors and developers have built is getting sunburn on the beach of business innovation.

The fact that mobile payment is not catching on the way some thought it would was clear when American Express announced a new way to pay for cabs that didn’t include a smartphone.  The program uses a cardholders awards points to redeem for cabs. The card holder simply swipes the card and then American Express will first determine if they have enough points, convert them to a cash value and then send the confirmation back to the cab driver. The program is simply for cabs in New York for the time being.

It appears as if American Express is tired of waiting for the mobile payment craze to kick off and is taking matter into it’s own cards, and in this case awards points. In fact, one of Amex’s points is that the program is a seamless integration that does nothing to change the way you currently pay for a cab.

First of all, I would like to applaud American Express for reading the desires of their customers so well. Customers want to use their reward points that normally gather dusk in their account for months if not years. Swiping a credit card is easy and as easy as paying for a ride by using a phone. Using awards points is a change they can really get behind. This program reflects the actions of a company that is focused on their customers. We use American Express as a good example on our Customer Experience Management training.

Second of all, I want to explore why customers don’t want to change the way they pay for cabs.  I was in San Francisco the other week delivering a key note speech and a guy advised I used Uber Taxi to call a car to pick me up from my phone. I have to say it was outstanding. The app logged your location, you can see all the cars around you and how long they would take to get to you. With one click you could monitor the car driving to you. It tells you who the drive is and previous Customer satisfaction rating. At my destination I get out, my credit card, on file, is billed and a tip is included. A receipt is emailed to me with all the journey details on. It was outstanding. It’s a very easy app with a great consumer interface. The service is expanding to many cities. Demonstrating mobile payment in a different way.

But apparently, paying with smart phones isn’t catching on quite the way that these type of integrated methods are. In my view this will take time. People have buying habits, and methods of payment that they are comfortable with, and it takes time to change them.  The consumer may not even be aware of why they don’t want to change since it is likely a subconscious response.

The issue of trust is an important one in consumer transactions, as discussed in my post “Earning, Demonstrating & Maintaining Trust: Using the Wedge Effectively”. Earning it and keeping it takes time. But once you have it, you have an emotional bank account with your customer that makes it easier to coax a different behavior or encourage a change. Plus, it gives you a little credit if the change creates problems in your relationship.

Trust is a key issue in the adoption of mobile payments. In a study published in the journal “Communications of the Association for Information Systems”, a group of researchers identified it as a key obstacle to widespread adoption of the practice. They also identified some key factors in gaining the trust of consumers that included “perceived trust in the mobile provider” and “perceived environmental risk” in mobile technology. Clearly these perceptions are subconscious, deeply rooted, and likely to take time to change.

Ginger Schmeltzer, Vice President of Fiserv thinks that the issue is also that mobile payments don’t really offer us anything more. There is nothing about paying with a mobile phone that is better than paying with a credit card. So the perceived risk of security is certainly not worth it in the eyes of most consumers. The fact that the risk of fraud is extremely low for those making payments (rational information) makes no difference either.

People will use their mobile phone for payments in time. In a different field I personally have witnessed numbers of them using it as a boarding pass to get on planes. But even that has taken time.  Changing consumer behavior is not for the feint-hearted. But with perseverance and coaxing and a whole lot of trust, you can facilitate change.