By Randy Smith, Mobile Wallet Media
Monday, August 27th, 2012
This is week 5 of a 7-Week Series: The 7 S's Required for Success in Mobile Payments
Let The Games Begin!
Time is money in business and retail and possibly even more so with Mobile Wallets. The wallets that will make the biggest impact will be the one's with the most transaction SPEED at Point of Sale and most easily and seamlessly integrated with POS.
During and since the London Olympics, a fast and furious slate of news about Mobile Wallets strolled across our screens seemingly every other day. With all the pomp and positioning on par with the actual Olympics, I believe the 'Opening Ceremony for the Mobile Wallet Olympics' has officially taken place. But rather than just two weeks of competition, the 'Mobile Wallet Olympics' will play out over the next 2-4 years.
The race for victory in mobile payments is much like the actual Olympics. In the actual Olympics there are a multitude of athletes, events and countries with clear-cut favorites and the underdogs, of which we love to see both win medals. With the Mobile Wallet Olympics, rather than people and countries competing for medals, there are products and companies competing for market share vs. medals. The top 3 companies that end up on the medal stand will garner most of the money and market share, but like those that make it to the finals in the actual Olympics, there will be victory and rewards to share in as well. And of course there will be many companies partnered to support and give their marque product, their Mobile Wallet, the best chance for success.
In replacing our good old friend the 'Mag-Stripe Card,' mobile payments cannot be slower. At POS the NFC Tap and the 2D bar code scan appear to be the clear front runners. Either of these mobile payment methods seem to be just as fast as cards or cash.
For Mobile Wallets to succeed they need SPEED of adoption and integration. The more simple, more options and more reasons merchants have to adopt technology, the more likely they will do so. Be it Usain Bolt or Michael Phelps in recent Olympics or Dale Earnhardt Jr. of Nascar on the race track, less drag and better mechanics are two key differentiators that set them apart from the rest. Of course a high level of talent must serve as the foundation for success to redeem these benefits. A merchant without a 2D bar code reader rigged for coupons or payments will soon be requirements to compete in market that is getting ever faster and efficient.
For readers not akin to sports analogies, please forgive me as I am a avid sports fan and ex-athlete (football, basketball, volleyball, hockey and baseball). Hopefully it still helps with perspective and vision.
For a POS mobile payment method to become a standard, the easier and more quickly it is for merchants to integrate, may make all the difference. Right now is seems that 'NFC is the turtle and the 2D bar code is the hare' in the race for standardization, but this race will tighten as more reasons are added for merchants to adopt new NFC or 2D bar code equipped terminals.
I found a good summary article, describing 'Future-Proofing' payment terminals. This article by MerchantAccountGuide.com, quotes Mike Duffy, president of Chase Paymentech: "As emerging payment options gain adoption in the U.S., merchants are looking to make the customer check-out process as easy and safe as possible. The Future Proof terminal is a one-stop solution for merchants to keep accepting today's forms of payment and prepare for new consumer payment preferences on the horizon."
While Chase and Verifone lead the market in showcasing of 'Future-Proofed' terminals, Merchant Account Guide describes Merchant Wherehouse's terminals as follows:
"The company introduced its "agnostic" Genius platform, which can be integrated into any POS system, regardless of device or operating system. Like Verifone and Chase, Merchant Warehouse has also been throwing around the "future proof" label. And it claims that Genius can "integrate every conceivable transaction technology, payment and type and customer engagement program" -- including NFC, EMV, QR codes and mobile payments, as well as loyalty, gift and reward programs."
In my opinion the 'Four Horseman' of the Future-Proofed terminal must include the following types of readers: 1) EMV, 2) NFC, 3) 2D bar code and 4) mag-stripe. Of course 2D bar code readers are an investment ($150 - $300 each) some retail merchants have already made. It's my strong bet that many more of the Mobile Wallet apps will use, like Starbucks and LevelUp, the display of a 2D barcode to enable mobile payments. If the payment terminal has a 2D scanner, it will be able to capture the card credentials, actual or tokenized, and process the transaction with any POS system, without integration.
A 5th horse in the race for alternative payments may very well be Pay-Pal's 'In-Store Checkout's Mobile Number + PIN' solution. I know I said in my last article this solution, "as is," is not secure enough to scale without massive potential for fraud, but I think they will soon rectify this problem. When they do, this will be a very convenient and secure product.
Most POS software allows for configuration of their software to scan 2D bar codes for the purpose of payment. This is already being done with gift cards. However, is there enough value for the merchant to buy and configure their software to do as such if they have not already done so? Well, with Square and LevelUp already processing their mobile transactions as such, I think there might be. An additional question that must also be asked is:"Will there be added difficulties to connect closed loop with open loop or the proprietary Mobile Wallet platform? I believe that the 2D bar code will become a standard for processing mobile payments and that all Mobile Wallets must have a 2D bar code display option to process payments.
Future of Mobile POS
I believe 2013 is going to be a huge year of adoption of mobile POS solutions. This is due to the perfect storm of mass adoption of smartphones, payment apps and ipad mobile POS solutions that increase speed, convenience of checkout for merchants and consumers alike. Plus mobile POS checkout can also enhance margins for merchants and discounts for consumers. All the momentum in the media with major retailers like JCPenny and Starbucks making moves to fully embrace mobile POS and payments, will readily move the adoption meter to include Tier 2 and 3 stores. Don't be surprised if you see signs at the mall this Fall featuring mobile payments during our first 'Mobile Christmas.' It is prime time to be in the retail POS industry!
Merchant service providers or resellers need to provide case studies or paint the picture how employee costs may be cut by improved SPEED of order processing and checkout combined with the opportunity to "up-sell customers." I see mobile POS being used to accomplish both by extending the reach and capacity for order-taking and checkout.
In restaurants, mobile POS enables a server to add an order in seconds without duplication, delay or increased chance of errors. The time freed up for servers will enable ample time for up-selling and providing better service, thus consumers will be more satisfied and more likely to return sooner and more often. At a busy night at the bar, a "line-busting" mobile order capability could increase orders by 15-30% or more. Bottom line is adding Mobile POS technology can cut employee costs and enhance service and sales.
Merchants can effectively market these solutions by tying to loyalty and 'Offers tied to enrollment.' Smartphones and tablets are everywhere now and "Cool, Convenient and Savings" is the way to sell. The new mobile channel will move to eventually tie all campaigns under one coherent marketing umbrella. Loyalty programs tied to paper or plastic have long restricted the adoption rates of consumers. Who wants to carry around a card for every store they frequent? Merchants may empower their customers to "Go Mobile and Earn Special Rewards." Once customers are on a Mobile POS or Mobile Wallet platforms, merchants are enabled to extend personalized offers based upon past order history or proximity offers using GPS and coherently tie to all other marketing channels.
About Mobile Wallet Media
Mobile Wallet Media is a news media, analyst, marketing and consulting firm focused on the future of mobile: payments, marketing, loyalty commerce, security, prepaid, virtual currency, daily deals and the convergence of them all with social and local. The Chief Editor, Randy Smith, was the primary founder, inventor and former CEO of MobilePayUSA, a TechCrunch Disrupt Award Winner.