A Look Inside Mobile Payments in 2018—Part I

How Gift Cards are at the Crossroads of Mobile Payments and Innovation

Mobile payments represent a significant market opportunity to the tune of $930B. It’s an opportunity projected to skyrocket with a CAGR of 33.8% through 2023, hitting a market value of $4,574 in the next five years. Mobile payments have been growing rapidly as a more convenient and secure alternative to credit card payments at the point-of-sale (POS). Increased smartphone penetration, ecommerce growth, and changing consumer preferences and behaviors all contribute to the growth of mobile payments.

As mobile wallets and NFC technology continue to permeate the shopping experience, retailers have the chance to connect with consumers more than ever before. To best capitalize on this opportunity, merchants need to understand user adoption, the role of mobile wallets, the different payment models, and how gift cards and loyalty can make or break a mobile strategy.

The State of Mobile Payments & Consumer Adoption

In 2017, there were 252.8MM adults in the U.S. and a 195MM of them use smartphones—roughly 77% of the adult population. The number of smartphones that are mobile wallet-compatible is high and has been increasing over the past several years as mobile wallet adoption has continued to rise. In looking at some of the top mobile wallets, it’s clear that there is interest:

  • 29.4% of users with iPhones have set up Apple Pay and used it at least once in the past
  • 24.8% of users with iOS or Android phones have set up Walmart Pay and used it at least once in the past
  • 17.2% of users with a Samsung device have set up Samsung Pay and used it at least once in the past
  • 13.3% of users with an Android device have set up Google Pay and used it at least once in the past

While more than half (56%) report being very aware of mobile payments, less than one fifth are using them on a regular basis. Significant and more rapid adoption requires a perception shift in consumers, which, in turn, requires a change in the way retailers think about mobile payments. Merchants and the technology ecosystem that supports them need to find new and unique ways to add value to compel customers to change their current shopping behaviors. In its heyday, the idea of paying with a phone was novel and interesting, but as a long-term strategy, merchants need viable ways to persuade consumers to pay with smartphones.

Another roadblock hindering mass adoption is that of consistency and user experience. Consumer confidence surrounding mobile wallets is still shaky, which coincides with inconsistent investments on the part of merchants. Not all merchants accept mobile payments, leaving consumers wondering whether or not mobile payments are a viable payment method. Consumers are certain that credit cards are accepted almost anywhere, and that certainty prompts continued reliance on the payment card method. It’s entrenched in consumer behavior and will require significant movement and effort on the part of merchants.

It’s a catch-22. The hesitation on the part of merchants to invest and commit resources toward mobile payments makes consumers leery of this payment method, slowing adoption rates. On the other hand, these adoption rates are what many merchants are hinging these investments on, halting the entire cycle.

For mobile payments to truly become mainstream, consumers must have a seamless experience that lends itself to easy integration into everyday routines. This frictionless experience also must provide added bonus for the consumer to encourage habitual usage.

While mobile payments activity is on the rise, adoption will remain inconsistent so long as user experience is not prioritized. This inconsistency and lack of frequent use by consumers poses a problem to merchants that needs to be addressed. The priority should lie in finding ways to encourage frequent, habitual use of mobile payment options, which requires a focus on user experience. One solution is to offer additional payment functions, which can compel increased use among consumers. More options that cater to convenience and ease-of-use should increase frequency which, in turn, drives both consumer and retailer adoption. Adding user-friendly payment functions will ultimately have a domino effect: it will drive consumer adoption, prompting more retailers to implement mobile strategies, resulting in more consistent experiences and fueling continued consumer adoption.

Gift Cards as a Mobile Payments Strategy

Based on the data provided in the previous section, it’s clear that an omnichannel approach should be a top priority. Taking it a step further, mobile provides the bridge to an effective cross-channel strategy. In a similar vein, gift cards offer an opportunity to meet consumers at the intersection of their preferences and technology. It’s an overlooked strategy that many merchants have been slow to adopt, if they have entertained it at all.

To be truly omnichannel, there are several considerations for merchants. First, gift cards should be available for purchase in both physical and digital formats via all online channels, including mobile web and mobile apps. Second, merchants must offer and optimize an omnichannel experience, including gift card integration with mobile wallets. A seamless experience means enabling integration within a retailer’s own app along with third-party mobile wallet apps.

Gift card integration into mobile web sites and mobile apps tackles a number of adoption and usage rate issues. First and foremost, eGift cards work in the direction of consumer preferences by freeing up physical wallet space and enabling customers to pay with convenience. It goes a step further, however, by driving more value, interaction, and frequency. Offering eGift cards provides merchants with another touchpoint with the consumer, where they can offer balance reminders, send notifications of time-based promotions using geolocation, and implement tie-ins with loyalty programs.

There are vertical benefits in coupling eGift cards and omnichannel as well. Frequency brands like quick serve restaurants and ride sharing companies, can take advantage of auto-reload features, decreasing credit card fees for the merchant and promoting an ongoing cycle of consumer use. It’s a win-win where merchants are able to reduce transaction costs while providing a vehicle of frictionless payments for customers.


Incorporating digital gift cards into mobile payments strategies can yield significant benefits for merchants. Gift card ecommerce allows merchants to be creative and flexible in the perks they offer to consumers, which helps drive the preference change for digital over physical wallets. It also works in the merchants’ favor by driving down the cost of payment processing.

The key takeaway is that it’s not too late to get started. Innovation in mobile payments technology—and gifting—is constant. Working with a seasoned digital gifting technology partner can streamline omnichannel efforts, positively impact mobile app downloads, and drive incremental revenue for merchants that are ready to take the omnichannel experience to the next level.

About the Author

Gerry Gilbert, Head of Product
Gerry has twenty years experience in the payments and software industry and deep expertise leading product strategy, management and development for payment-related products. Prior to joining CashStar Gerry was a Group Manager at Intuit’s Payments Solution Division where he led teams building merchant focused self-service and CRM solutions. Before that Gerry held various product management positions at Electronic Clearing House, CyberSource and Chase Paymentech. Gerry graduated from Saint Anselm College.

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