2012.36 | CIBC Mobile Payment

CIBC recently released a mobile payment app. I was very interested to see the details released, and I encourage all of the other banks and credit card companies to follow their lead. I would love to try the app if I met the criteria but at present I’m not a CIBC card holder.

This solution is certainly a welcome step along the evolution of the mobile wallet, but it’s not going to convert everyone to using their mobile phone to pay everywhere.

I see two main challenges to the success of this particular solution as it exists today: Barriers to entry, and perceived benefit.

Barriers to entry will drive down usage. To use this payment infrastructure, potential users have to be: CIBC Visa cardholders, Rogers Mobile Subscribers, and Blackberry Mobile Device owners. This immediately limits the population of potential users. Potential users will also have to register for the Rogers SureTap service, obtain a special Rogers SIM card with NFC capabilities (through the mail or at a store) to be enabled with their mobile account , download the CIBC mobile payment app from Blackberry App World, and configure the app for use.

I personally have no problems with doing any of these things, and I might do it if I was a part of the targeted user group, but then I’m not representative of the general population when it comes to technology. The vast majority of the population either have no interest in doing some or all of these things, and/or will have no idea what I just wrote. It doesn’t sound like much, but it’s a HUGE barrier to entry. We just bored thousands of users out of doing this. There are too many services, too many steps, and too much explanation of all of the plumbing. If the mobile device doesn’t come with this thing ready to go, most people simply aren’t going to use it.

The perceived benefit of this solution is also uncertain. If I go to a store today, let’s consider the experience. First, users have to discern whether the store takes this form of mobile payment. If you ask a clerk at the store, they probably won’t know or will give clients an incorrect answer.

Assuming the consumer is savvy enough to look for the contactless logo in the provided video, what is the benefit of using one’s mobile to pay? If your average person is shopping, they usually have their wallet with them. Mainly because people still carry them, and they have things other than credit cards – drivers licenses, ID, health cards, and more. (Don’t believe that’s a problem? Check out the wired special on this very subject.)

In order to pay in the traditional way at the point of sale, the consumer pulls out their wallet and their card, inserts the card in the pinpad and enters their pin. If they have a contactless card, they just tap the pinpad with the card.

In order to pay with the new mobile solution at the point of sale, the consumer pulls out their mobile, unlocks it, goes to the CIBC mobile payment app, puts in their pin if they have one in the app, and then taps their mobile on the pinpad.

Q: How is this easier than using a card? A: It isn’t, and it doesn’t add anything to the experience.

The main benefit I see is not having to bring a wallet if no ID is needed (unusual), or using the mobile in a pinch.

This is the first iteration of the solution. I fully expect this solution to expand to other handsets – they already mention Windows Phone, and perhaps to other CIBC cards. I’m sure the solution will also evolve and be offered with brand new handsets when consumers purchase them.

Moving beyond the challenges of this app, I am one hundred percent behind it and what it’s trying to do. There is no mobile wallet today that is universal, that works with every card, that is built into every phone when you get it, that works with every platform, that works at every pinpad. That nirvana isn’t coming anytime soon.

What we do have today are organizations like CIBC, Visa, Rogers, RIM and others that are well-intentioned and forward thinking in trying to get a solution like this off the ground. This is a change that will take place over years. Steps like this and others will get us there. If you have access to this solution and can do it – try it out. If you are getting a new Blackberry and you have a CIBC Visa, why not get all this set up when you buy it? Others seeing this solution in use will drive familiarity. Usage begets usage if the benefit is there.

The only way for us to get to the solutions we want is to embrace the solutions that get us part way. This is not easy – just ask Google. Let’s all be part of the bleeding edge and pull mobile payment solutions along.

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.

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.

2009.20 | What Mobile Wallet?

I’ve been looking at using NFC solutions for some time now, and the recent announcement that Subway is going to install a Visa PayWave contactless solution reminded me of that fact. It’s solid technology, it works well, and I personally use it a couple of times per week where I can with my MasterCard Paypass credit card.

In Canada, we have infrastructure in place with most large retailers owning or deploying contactless infrastructure in some fashion – Subway, Second Cup, Rabba, McDonald’s, Canadian Tire, Petro Canada, Tim Horton’s, Cineplex, Loblaw and more moving to contactless support every day. I love it and think it’s a tremendous solution on cards.

We’ve also had a couple of trials in Canada on using NFC as a mobile wallet, with the credit card companies, the mobile carriers the and payment terminal companies all explaining the benefits, but what’s happening to take it to the next level?

Two big things hold back NFC as the mobile wallet (in Canada at least):

1. Acceptance – For 20 years and more, Canadians have been used to three options. Cash – no problem. Debit – swipe card, use pin. Credit – swipe card, sign receipt. Now we’ve added Chip and Pin to credit and debit. That’s confusing to the uninitiated. We also have contactless NFC cards and now dual interface NFC and Chip and Pin on the same card. There is word of Visa Debit competing with Interac.

Now, customers aren’t sure if they swipe, dip, tap, sign or don’t sign, or if there is a charge to use a service. Most of them will default to what they know. They are being asked to think about too much. In this case, it seems that competition is actually a bit of a problem.

2. Device Availability– I spoke to someone from a bank today that works with new solutions and when I asked about contactless, she said she was getting a ‘4 year old phone’ to use for a contactless trial. She uses a Blackberry and I use an iPhone. We represent a large proportion of the market for a mobile wallet in early days, and we can’t get a mobile wallet for our phones. Without NFC or some other secure way to pass information, the mobile wallet is just a mockup, and the fact is that you just can’t get an NFC phone in Canada. I’ve witnessed 1 mobile transaction in Canada and I was with my very knowledgeable Vivotech contact when we did it.

Why can’t we get NFC enabled mobile devices? Unless there is something in it for the mobile carriers, why would they give us a new feature like NFC mobile wallets on our phones? They can’t make more profit from it, and I think that is the greater concern with the trials than the functionality. The system works – it just doesn’t make money for the carriers. Impact: the mobile device makers won’t put something on the phone that carriers don’t want (like: tethering, Slingbox Player, VOIP, programming long distance card numbers etc.) so consumers don’t get them without delay and strategizing by the carriers.

There has also been a problem with hitting on a standard for NFC on mobile. Nokia is done with making their own NFC phones, and they are releasing a SIM card based NFC phone. But when will that happen, and who can really drive it? It may take a third party application to drive mobile NFC, but without a large presence to lend such an enterprise the necessary consumer confidence, this will prove a challenge.

Until payments are simplified and there is a universal (or at least accepted) NFC standard or a viable alternative method of getting data from phones to consumer facing touchpoints like POS/ATM/Kiosks, I don’t see mobile wallets going anywhere.

It’s a wonderful opportunity for anyone that can crack the code.

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