It’s nice to get paid. When I was a kid I remember my pride at my first few earned pounds or pennies from various odd jobs. Now, of course, we handle cash less and less, electronic transactions reign supreme (in the UK anyway). When married with mobile technology, e-payments open up novel ways of interacting with customers and can even create new markets.
However, it is very early days and at this point in time no one system is dominating. This creates the challenge of confusion for consumers and business but also keeps open the chance for innovation and the opportunity to gain a strong early foothold in a new market.
The mobile payment system that gets most mentions is based around ‘NFC’ (Near Field Communication). Basically it uses radio technology for two devices to connect quickly and easily. Londoners have used this technology for years in their Oyster Cards and increasingly it is available on credit and debit cards and now smartphones. The big advantage for the merchant is that payment is made with a swipe, no fumbling with cash and no PINs to remember it is fast and convenient.
When connected with smartphone technology not only is the convenience retained but value can be added through the app systems on a phone. The payment can be linked with loyalty points and GPS technology to create timebound and geo-specific offers. There is also the potential to build up extremely detailed statistics on shoppers habits.
However there is one serious problem:
It is not available on the iPhone
NFC is still an early technology in market terms and without iPhone support a large proportion of the market of early adopters is locked out.
Although potentially exciting for real-time and real place transactions NFC and smartphones still lie some way off mainstream acceptance. Anyone thinking of using the payment system needs to be sure that they will have enough of a market to prove the cost. For the time being it is likely that NFC cards, like Oyster and not smartphones will remain dominate.
So what about using the phone itself for payment. Payment via phone has been around for years in two forms, SMS (text message) or through the telephone bill itself. However the big problem for the merchants is that the mobile telcos take big proportions of the payment, often over 40%. The convenience is great but the cost is high! Except for niche transactions (usually relating to the phone itself e.g. ring tones) this form of payment has never taken off and is rapidly being over taken by other forms.
With the availability of the Web on smartphones then it is possible for merchants to take payment via the Web for goods in real locations. Paypal is making the highest progress in this area but rather than using the Web it is tending to develop apps. There does seem to be a consumer reluctance to put in credit card details into mobile websites especially when on the go when Wifi connections are unlikely to be secure.
The Paypal switch towards mobile payment apps seems to be part of at least an intermediate trend in payment and real-time real place transactions. Starbucks have introduced an app which is linked to its loyalty scheme and is a prepay system and it already has over 7 million users. The app means no need for change and a quick scan at the counter and payment is made. Potentially the app can give detailed insights into customer habits and locations in the way cash or card payments never could.
So it is a confused world. At present the Starbucks approach makes a lot of sense. Although innovative it links into existing systems and adds values to the customer experience. Two crucial points for any mobile based payment system to work. It is also relatively platform independent since payments are made by scanning a bar code and now that most smartphones have higher resolution screens the solution can be made to fit most systems.
Perhaps most attractive for Starbucks it is a prepayment system. They already have the cash so it ensures that at some point they will have a customer.
It always comes back to the cash.