It would have to take something big for consumers to flock to a mobile wallet en masse. Whether it meant to or not, California-based
Six days after the apartment-rental app RadPad launched a promotion waiving its usual 2.99% credit card payment fee for customers switching to Android Pay, the company's proportion of Android Pay users soared to 70% from a mere 5%, forcing RadPad to cut off the promotion Aug. 31, three months ahead of plan.
“Thousands of renters sign up in the last two weeks to pay their rent using Android Pay, equating to $5 million in rent,” said RadPad’s CEO Jonathan Eppers, who launched the company in 2014, in an Aug. 24
One of the takeaways appears to be that consumers are perfectly willing to change a long-established habit instantaneously—including adopting mobile payments—given the right incentive. In this case, analysts say it’s clear that the relatively rare opportunity to earn credit card rewards on a big-ticket, recurring purchase like was rent was the spark driving thousands of renters to immediately switch to Android Pay.
But consumers aren't the only ones swayed by costs and rewards. The downside is that RadPad was still on the hook for the transaction costs for these rent payments, and "within only a few weeks we’ve surpassed the budget for the entire year that was allocated to subsidize the credit card fee," Eppers wrote.
Since RadPad is in the business of facilitating rent payments, there really is no middle ground here. Since all rent payments are hundreds — if not thousands — of dollars, there was no option to limit the promotion per user or limit transaction size.
“What we see here is that some consumers want their rewards, and savvy consumers saw a great opportunity to do that here,” said Patricia Hewitt, CEO of PG Research & Advisory Services in Savannah, Ga.
But Hewitt said RadPad’s Android Pay experience is another clue to Google’s long-term strategy for mobile payments.
“RadPad’s promotion hooked a lot of people into making a recurring payment for a commodity purchase, which is what Google’s ultimate goal is with Android Pay,” Hewitt said.
The difference is that Google typically focuses on lower-cost items, limiting its exposure during promotions.
“Google has come up with a lot of Android Pay promotions through merchants giving discounts and rewards for people using the service to buy coffee and groceries, and these offers don’t emphasize the sexy technology of mobile payments as much as they go straight to the heart of what drives consumers’ payment habits—rewards,” she said.
By structuring Android Pay rewards programs around recurring payments for everyday purchases, Google is laying groundwork for expanding its financial services relationship with consumers, Hewitt suggests.
Promotions alone won’t be enough to get consumers to broadly adopt mobile payments, which continue to generate only a paltry amount of overall payments.
Plenty have already tried rewards for mobile payments without much success. Promotions have been a big part of the rollout strategy for
But Hewitt said the long game for mobile payments will be when convenience and rewards combine to the point where consumers see a good reason for making the switch for routine payments, and going mobile with rent is a big step in that direction.
“Apple and Google are battling it out to win over consumers, and it’s becoming easier to see that Google wants to be the one controlling not just consumers’ online lives, but their financial lives as well, and the way it’s using incentives to get consumers to trust their payment credentials to Android Pay is just one more piece of evidence of their goals,” Hewitt said.
RadPad, which earns fees for listing available apartments in Los Angeles and Chicago, has made mobile payments a central feature by acting as a payments gateway. Many of its customers are young adults who prefer making electronic and card payments, while many landlords still require renters to pay by check.
To streamline processes for all participants, RadPad accepts payments from renters through its app and delivers payment to landlords by mailing them a check; landlords also may accept payments from RadPad via ACH. In either case, landlords are freed from collecting renter’s checks or payment details, and RadPad also enables apartment dwellers to split the rent and sends them reminders.
RadPad accepts all card payments and added Apple Pay before it introduced Android Pay. Even without a promotion to waive credit card fees, Apple Pay accounted for 8% of all RadPad payments before the Android Pay promotion began, a RadPad spokesperson said.
When announcing the premature end of its promotion, RadPad started encouraging Android Pay users looking to avoid a fee to switch to ACH payments. Users also may link their debit card to the app for rental payments, which carries a flat fee of $4.95 per payment.
