Target's Millennial Focus Gives It a Leg Up for Mobile Payments - eMarketer

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Target's Millennial Focus Gives It a Leg Up for Mobile Payments

Rollout of mobile payment app seen this year

January 26, 2017

Target plans to roll out a mobile payment system this year, which would make it the third big-box retailer with its own payment app.

US Smartphone Users Who Have Made In-Store Payments via Smartphone, 2014-2016 (% of respondents)

Target may not be the first to market with such an app—Kohl's and Walmart have already crossed that line—but Target has two built-in advantages that could drive rapid adoption.

The first advantage is its customer base. Target's shoppers are younger on average than those of Kohl's or Walmart. The second advantage is its Cartwheel App, which already has some 30 million users.

"If Target can build a payment system that makes redeeming offers and checkout easier, there's a good chance it will get serious adoption rates," said eMarketer analyst Yory Wurmser.

The timing of the rollout was reported by Recode earlier this week. (Reports that Target was working on a payment system had been circulating for more than a year.) Target's chief information and digital officer Michael McNamara told Recode that the company plans to introduce mobile payment features to one or more of its apps, though the service will at first only be offered to shoppers with a Target REDcard.

Target's focus on millennials gives it a strong base from which to develop mobile payment use. Millennials have been the quickest of any generation to adopt mobile payments. eMarketer estimates that more than a third of millennial smartphone users will use mobile payments this year. These millennial mobile payment users will account for more than half of total mobile payment users in the US.

While mobile payment adoption among US millennials is expected to see healthy growth, Gen Xer and baby boomer shoppers will also increase their usage of such services. eMarketer expects the number of mobile payment users to jump from 50.8 million to 76.0 million, or 24.3% to 33.1% of total smartphone users, between 2017 and 2020.

For all the growth, though, mobile payments still make up only a tiny portion of overall spending. eMarketer expects total mobile payment transaction value to more than double this year to reach $62.49 billion—a heady total, but a mere 1.2% of this year's projected $5 trillion in retail sales.

—Alison McCarthy

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