2011.04 | NFC Mobile Payments

Image Source - Cult of Mac

The previous blog post on Starbucks 2D Barcode Mobile Payments drew questions from readers and colleagues around Near Field Communication (NFC) payments, specifically, why would Starbucks have implemented a 2d Mobile Payment solution when NFC is just around the corner?

The Starbucks solution with 2D payments is a perfect fit for the unique Starbucks situation and does not preclude them from accepting mobile NFC payments.  However, the 2d barcode payment is not one I would recommend for any other retailer unless they were have the same characteristics as Starbucks and their solution outlined in the previous post, and there are few if any retailers or consumer facing organizations in that position.

In order to provide NFC mobile payments, it is necessary to have the following elements: NFC at Point of Service, NFC enabled mobile devices, and most difficult of all, Credit Card Company and Credit Processor cooperation.

Point of Service Interface – Retailers that wish to accept mobile NFC payments require NFC enabled pinpads that already work with NFC credit cards.  The most common units in place so far in Canada are the Verifone vx810 and Ingenico i3070c.  These pinpads would provide the interface in stores for NFC ready mobile devices, and are, in fact, already widely installed by many tier 1 Canadian retailers as part of recent EMV efforts.

NFC Mobile Devices – According to rumour, both RIM (Dakota) and Apple (iPhone 5, iPad 2) have NFC ready devices coming out in 2011.  If that is the case, then we may indeed finally be looking at the long awaited electronic wallet, as we now have an encrypted and relatively secure electronic interface from mobile device to point of service device.   Apple and RIM’s massive base and marketing power, as well as their ongoing competition, certainly has the potential to drive massive traffic.  So the mobile devices might be coming, but this has been the expected for at least 4 years.  We’ll call mobile NFC devices a strong maybe.

Credit Card Company / Processor Cooperation – My thoughts on contactless payments are well documented on the blog under NFC if you want to pick it from the tag cloud. The problem isn’t the technology, it’s how the payments get processed and who gets paid to do it. See my posts here and here, as well as a recent article published on StoreFront Backtalk.  The credit card companies, and the various payment processors already get their slice of the payments pie, while all of the mobile carriers have been trying to figure a way to get theirs for years now. Both Canada (Enstream) and US (Isis) mobile carriers have established collective organizations to deliver on mobile payments.  It isn’t that all of these organizations don’t want mobile payments, it’s just very difficult to sort out, and there is really no extra potential revenue in it for them unless consumers or retailers will pay more for some reason.  Some may point to startups like Square and Twitpay, and they may take a bite out of mobile payment in the future, but it doesn’t look like it will happen in the immediate future.  Getting these organizations on board, extending a very successful and secure closed network to the uncertain security of millions of devices is a long short in the near future.

NFC mobile wallets can and should happen (you can already stick an NFC tag on your phone if you like), but sorting out who gets paid how, and how funds will stream through a secure system will take some time.  Nobody knows when that will be.

Why did Starbucks implement a 2d Barcode Payment System instead of NFC?  Only they can answer that, and much of it may be marketing, but in the end, they can drive an ROI.  With a 2D system implemented TODAY, Starbucks potentially gets more consumer card usage, drive more ‘deposits’ on their stored value card, and a quick tender.  Consumers get the convenience of paying with their phone, and the kind of bleeding edge fun many Starbucks customers enjoy.

Starbucks avoids the complex mess of processors, EMV, PCI, and dealing with the processors and credit card companies altogether by taking no the risk themselves.  They have made a good gamble on the fact that they can attract early adopters with relatively very little investment, and by the time mobile payments are mainstream, their system will have already provided a good ROI.

2010.29 | Small Town Retail Technology

I just returned from a family vacation to Quebec, New Brunswick and Prince Edward Island, which explains the dearth of posts over the past couple of weeks. The trip was relaxing as any vacation should be, and provided me with some new insights into how retail is conducted in less populous areas of Canada. While there were the big box stores you would expect anywhere else in the country in the larger centres, and even in many of the smaller ones there was a lot of smaller retail enterprises, and quite a number of seasonal ones.  I enjoyed seeing the small roadside stands with piles of bags of potatoes or firewood with a pricing sign, and a little can in which to put your payment or make change.  This sort of honour system was a big part of my youth, used quite often to sell sweet corn or for selling candy or drinks at the office.  I haven’t seen this system anywhere in many years.  It made me realize that self service has actually been with us for longer than I had considered – it just moved to a more sophisticated platform.

While I expected to see very little in the way of technology around retail, I was interested in the pervasiveness of retail technology.  It’s not that it was fancy or more sophisticated than what you would see elsewhere, but it was there and it just worked.  Three things in particular were interesting from my trip.

1.  Debit and credit was available from the smallest vendor imaginable, and almost all of them were EMV.  In retrospect, this makes a lot of sense.  Many of these vendors are smaller, and do not provide integrated debit, so EMV is essentially as easy as changing out their pinpad.  However, in past years when I’ve gone to vacation spots like these, I’ve required lots of cash on hand for all the little expenses; lunch at small roadside mom and pop operations or parking at an attraction, for example.  Even if debit or credit was available, the operators always seemed a bit nervous to use the units.  Not so any longer.  Every single place I visited had debit and credit, and the transactions were quick and easy – from the ice cream store to the parking lots.  I’m starting to wonder why we need cash at all.

2.  There are a lot of screens everywhere today, and I’ve become used to not seeing them when I go on vacations to cottage country.  I was surprised at the number of screens I encountered in small restaurants and hotels.  Even the smallest restaurants in Edmundston, Fredericton, and Charlottetown, were using digital signage to share their message with customers, identifying services, and I expect, driving a little more revenue.  While some of these were as simple as a digital picture frame, it’s indicative of the increasing availability and simplicity of obtaining and leveraging these technologies.

3.  Self Service saved me from a line – even in a place where I rarely encountered any lines.  I took the Confederation Bridge on the way home.  In other years, I’ve taken the ferry back and driven through Nova Scotia, but this year our plans took us back across the bridge.   I knew they had self service, but I hadn’t used it.  I can’t tell you how happy it made me to pass two lines of cars, pull up to the kiosk, put my card in and drive right through, given the hours I would be facing in the car.  The kiosk was simple straightforward and worked, and it got me on my way just a little more quickly.

2010.22 | Chip and Pin in the US

Retailers in Canada have been working for some time to get through the hardware and software hurdles required to get online for EMV prior to the dates liability passes from the card issuers to retailers in October 2010.  Given that EMV has been implemented in places like the UK, Mexico and many other countries, it has always seemed logical that at some point the US would embrace the same technology.  Now Wal-Mart is pushing for it in the US based on its international experience.  While there are certainly difficulties involved in getting it done, the US can’t let itself get behind the rest of the world on technologies like this.  The fact that a now international organization like Wal-Mart is trying to move this forward shows they see benefits from it. 

From my own experience it seems ridiculous that we still scribble a name on a slip of paper and expect it to be ‘security’ in today’s information age.  My own signature is completely worn off my card from use.  I am periodically asked for identification to validate my signature, but once again, how secure is this really?  A 15 year old squints at what I wrote on a slip of paper and compares it to my drivers license?  Even crazier is retailers having to keep many of these slips of paper for many weeks to maintain a paper trail in the event that someone contests a charge.  This is the digital age? 

It seems to me that some of this effort needs to fall to the card issuers, and they’ve made the effort in Canada.  It’s their system that is at risk here, and what an opportunity for the credit card companies to show some value to the retailers.  Given the sort of confrontational feeling in recent years between credit card issuers and retailers here in Canada, it is a strong move to add value to the relationship with retailers.  Working with the retailers to reduce fraud that ultimately comes out of the retailers pocket is a strong play.  While it means a short term cost, it results in a long term gain in the relationship.

2009.44 | e-Payments in Canada

The controversy around Visa debit in Canada continues.  Merchants say the new negative option process is unfair.  Visa says that the current Interac ‘monopoly’ stifles innovation.   The Retail Council of Canada says fees will go up.  

It’s hard to say who is right in this battle, but they both assume that Interac will not change itself in any way to deal with the entrance of Visa to the market, which is not likely the case.  Retailers and consumers alike can expect increasing complexity in the electronic payments area.  As a myriad of services come available, the current simplicity of debit and credit in Canada becomes increasingly complex with new players as well as the interfaces – tapping, dipping, and using debit online (which you can do now, by the way, contrary to Visa’s Mike Bradley’s comments).    It is now possible to pay with mobile numbers online as well, via Zong and Obopay.  More options will come as other posts have indicated. 

While the end game is hard to see at present, the organizations that can bring value to clients for a reasonable fee stand to gain a great deal given the size of the electronic payments market.  The challenge is that payment processors and banks hold the keys to the kingdom at present and will demand a piece of any fee charged – directly or indirectly.  This will restrict new players unless they can find a way to get around these behemoths, as consumers and retailers alike will resist additional fees without some tangible benefit.  Unless there is a real game changer, the most likely future scenario is a plethora of new players with niche solutions chipping away at the current players with small incremental gains.

2009.17 | Convenience | DVD Landscape | Mobile POS

Taking the Store to Customers – Convenience has ever been important to consumer facing businesses, and there are many new and different ways that these organizations are trying to make their products and services more convenient for consumers to obtain.

The primary inconvenience of purchasing food from a mobile vendor is the difficulty of knowing where they are. Kogi Korean BBQ, a taco truck in LA, lets their customers keep track of their location via Twitter – taking uncertainty out of the mix.

Starbucks is looking to place coffee vending machines across North America that leverage electronic payment – including contactless – avoiding the necessity for having coins or small bills at the ready.

Coinstar is already doing very well with Redbox DVD rental machines. They add additional convenience by providing a reloadable credit card solution – a gap filler for those who wish to rent and don’t have a credit card. This should sound familiar, as this solution is available on an NCR platform used by Readycredit. These would be well placed next to NCR SelfServ Entertainment units.

The Changing DVD Landscape – The DVD rental industry is becoming increasingly complicated, with ever changing players, formats and scenarios. While the cheap DVD rental is a boon for the consumer, there are complications, as it represents a paradigm change for studios and consumers alike. Whatever the issues, expect them to be resolved, and this business to continue its growth for the next few years at the very least.

Mobile POS – I’ve already expressed my admiration for the handheld POS units used in Apple Stores. Now it looks like they might be taking the expected step of moving from their current Windows Based platform to an iPhone based solution with the soon to be released iPhone 3.0 software which allows improved connectivity and interoperability for hardware add-ons. This is key, as swiping a card is much faster than typing in a number, and EMV will require dip card readers in many countries.

While this platform doesn’t suit every environment, look for mobile based payment systems to act as the small business POS of the future. You can already download some from the iPhone app store today.

2009.05 | Interac Chip

Interac Chip – Chip continues to move forward in Canada. After trials in Kitchener-Waterloo in late 2008, and the increasing use of Visa chip cards, Interac is starting to make noise about getting chip cards into the real world. This means changes to pinpads at POS and card readers on ATM units in the coming months and years. Check out the details.

Vending and Media Convergence – With the increasingly lower cost of technology, retail channels are converging ever faster. Look at where vending machines are now, and where they are going. The line between digital signage, POS, vending machines and media in the store is increasingly blurring.

Ralph Lauren Mobile Store - I talk about moving to the “store in the pocket” quite a lot with friends and clients, and Ralph Lauren is trying to move that way with their new mobile site. I don’t know if this is the right type of store for mobile, but may be more likely to fit the demographic than the one Sears put in place. I like the way they have integrated the 2d barcode into the site, and their links to a reader. It’s important to have the consistent customer experience as well as the link between sites, and they are making that effort.

Follow

Get every new post delivered to your Inbox.

Join 554 other followers

%d bloggers like this: