In our last blog we raised the question of how to encourage merchant acceptance of mobile payments so that consumer demand for such payments might also be stimulated. We highlighted the conundrum that exists for physical card payments in many emerging markets, where, despite issuance and demand from consumers for these payments, the lack of merchant acceptance means that they are yet to take hold. The same problem exists today for mobile payments.

So, how should we incentivise merchant acceptance of mobile payments? What if they too had a reason to use them as well as accept them?

If corporations and their distributers were to start accepting mobile payments then merchants would also be encouraged to do so too. Whereas the direct benefit to merchants of acceptance may not be immediately obvious to the merchants themselves, it is surely obvious to those corporations, such as consumer goods companies, that have to engage in cash collection. The cost of cash collection, especially in less developed markets, can be as much as 20%, especially when the cost of transportation, securing and processing are considered. Even in developed markets this can approach 10%. And, in certain markets cash sales can comprise 75% or upwards of revenue, meaning that cash collection can be a massive overhead for many companies. Mobile can eliminate most of this cost.

If companies can save as much as 20% on the cost of collecting cash just by using mobile, then they have every reason to encourage mobile payments  -or mobile collections – through their distribution and supply chains. And what better way to incentivise your distributers and merchants to pay with mobile than to pass on some of those savings in the form of discounting for invoices paid by mobile?

For that to happen the merchant will need to be in possession of his/her own mobile wallet which can be funded either by topping up at a bank or an agent, or – more pertinently – by accepting mobile payments from consumers. Incentivisation of mobile payments through discounting could even extend to the consumer, thus adding a clear value proposition where there is uncertainty today. Of course this logic doesn’t just apply to consumer goods companies and can be extended to other industries, particularly where cash comprises a proportion of revenue collection.

This top-down, acceptance-led development of the mobile payment ecosystem runs contrary to much of the models in existence today, where it is assumed that demand will be driven upwards by the consumer. But it is every bit as important and could potentially be more successful if savings are passed through the supply chain.