Anything For You All: You won't believe what's creating a huge opportunity for payments companies

Rabu, 03 Agustus 2016

You won't believe what's creating a huge opportunity for payments companies

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August 03, 2016

Pokémon Go is creating a huge opportunity for payments companies

John Heggestuen | August 03, 2016

Pokémon Go is an augmented reality (AR) game in which players travel around cities and towns in a smartphone-based quest to capture digital creatures. The phenomenal success the game has seen since its launch on July 6 is creating an opportunity for payments companies.

Pokémon Go's success. Within five hours of its US launch, Pokémon Go became the most popular app in the App Store, according to data by Sensor Tower cited by Venture Beat. Two days later, it was installed on 5.16% of Android devices, according to Similar Web. That's more than dating app Tinder's daily active users and nearing that of Twitter's.

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Pokémon Go and other AR games will become merchant aggregators. The obvious revenue opportunities for game makers are in advertising and mobile commerce. In the case of Pokémon Go, sponsored locations are part of the plan to monetize the app. Players are already going into stores to catch these highly coveted digital creatures, so it's not hard to imagine merchants paying to have them placed in stores to incentivize customer visits. Enabling users to order and purchase goods through the app before arriving at a store could increase the chances of that footfall converting to revenue. An app with this capability would aggregate purchase volume from merchants that utilize the order-ahead feature.

Pokemon Go Retail Store

The payments opportunity in merchant aggregators. Payments companies able to strike partnerships with AR game makers have a payment processing and marketing opportunity similar to what we've seen in ride-hailing app Uber, food-ordering app GrubHub/Seamless, and other apps that aggregate payment volume from other merchants. Just to give an idea of the processing opportunity, GrubHub/Seamless processed 271,100 orders a day in the second quarter of 2016. That's about $8 million in daily food sales. For US quick-service restaurants (QSRs), we forecast that mobile order-ahead payments will grow at a five-year CAGR of 57% to reach $38 billion in 2020. That's nearly 11% of total QSR sales.

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Order-ahead capability provides customer value and is already successful. The concept of ordering and paying before you enter a store makes sense, particularly for QSR customers. The value to customers is that their order can be ready and paid for before they enter the store so they can avoid lines and the checkout process. Order-ahead has proven successful for these use cases:

Usage: Starbucks' Mobile Order & Pay now represents 5% of its total US transactions. This means that mobile order-ahead accounts for roughly 20% of Starbucks' mobile transactions. The capability was officially launched in September 2015.
Higher order value: Average order values of transactions made through Taco Bell's order-ahead app were 30% higher than in-store transactions, according to the company's Q4 2015 earnings call. We think this is because customers using the app don't have the pressure of making an on-the-spot decision and are more likely to add extra toppings and side orders as a result.
Growing adoption: 80% of the top 25 QSRs in the US now offer or are testing a mobile ordering platform, including Chipotle, Dunkin' Donuts, and Domino's.

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It's an opportunity for other merchant aggregators as well. An AR treasure hunt naturally entails movement, which might require transport or transport of goods to the final destination. Apps like Uber and Lyft could benefit by advertising rides through these games. And GrubHub/Seamless might offer food delivery to a destination in the game so that players can continue to play the game without waiting around for food. While there is a transaction revenue opportunity there, it's unclear whether that revenue would go to the processor partnered with the game maker or if players would check out through the platform of the merchant aggregator. It could work in either scenario.