Mobile payments and the demise of the cash register
January 24, 2012
Jonathan Stark is vice president of application architecture at Mobiquity Inc.
Imagine a world in which all you need before heading out the door to shop, grab a bite or catch a movie is your smartphone. That is right: no wallet, credit cards or cash required, just your smartphone loaded with some pretty smart applications.
This is not some hazy future prediction.
Rather, this transition to mobile payments is well underway and will ultimately revolutionize how we buy.
Mobile and money are merging, and retailers will have an enormous advantage if they capitalize on the imminent shift in consumer behavior before their competitors.
Slow NFC adoption is red herring
There has been a lot of talk in the press about the lack of standardization in the near field communication (NFC) spec and the slow adoption of handset manufacturers.
Analysts often point to this fact as evidence that mobile payments are years away.
While it is true that NFC has taken longer to reach the market than expected, there are several other ways to buy things with your mobile phone with widely available consumer technology.
Starbucks has been accepting transactions at retail for more than a year using traditional point-of-sale technology to scan a bar code displayed on customer phones.
Square offers a free magstripe reader that plugs into the headphone jack of popular smartphones and allows anyone to process credit cards. It has been used by the Girl Scouts of America to take payment for Girl Scout cookies and, this past holiday season, the Salvation Army bell ringers used Square to accept donations via credit card.
QR code-based payments are also in the marketplace, such as LevelUp, where individuals are assigned their own unique QR code. When it is time to pay, you scan your QR code, which is linked to some payment instrument, such as your debit or credit card. And all retailers need is a bar code scanner.
Extending current mobile commerce trends into the relatively near future, two scenarios stand out as likely eventualities:
1) Traditional POS will go away
The "roving customer service rep" pioneered by Apple retail stores has demonstrated the viability of the mobile/in-store checkout model.
Other retailers are following suit. Currently, these mobile POS solutions require a credit-card swipe but at some point, bump to pay functionality will be added, where payment information can be shared instantaneously by the simple tapping of the phone.
Apple has taken this one step further by allowing you to buy computer accessories in-store through your iTunes account.
Square recently released Card Case, which accepts payments via a mobile phone without ever removing your phone from your pocket.
All of these new technologies have the capability to completely transform the mobile payment landscape, providing quick and easy transactions for the consumer.
2) In-store ecommerce will become commonplace
Many retail locations will take on the feel of a showroom. Inventory will be very light, and knowledgeable salespeople will be plentiful. Purchases will be made on the spot in real time. Some purchases will be carry-out, but most will be shipped directly to the consumer. There will be no cash registers, no salesclerks and no checkout lines.
Consider this: in-store ecommerce is what put Borders out of business. It carried, literally, tons of inventory, had approximately half its staff stuck behind registers, and customers were often forced to wait in line to check out.
Customers came to realize they could spend a nice afternoon thumbing through a book at Borders and then scan the bar code to order it with one click on Amazon.
No need to wait in checkout lines, no reason to take out a credit card and, in some cases, a lower price.
Ignore mobile commerce at your peril
Granted, large retailers are not going to in fact, they cannot radically change their operations overnight, and some product categories will be more resistant to this shift than others.
However, companies that carry products that are available from online competitors should be thinking hard about how they are going to give customers a compelling reason to buy from them and not the guy who already has their credit card and shipping address on file.
As adoption of mobile payments in its various forms becomes more ubiquitous, we will see the emergence of loyalty rewards programs and coupon programming based on the concept of scanning once from a smartphone.
The combination of convenience at checkout, hyper-targeted offers and compelling loyalty benefits will exert a gravitational pull on consumer behavior.
Retailers should not be lulled into believing mobile payments are three-plus years off the shift is happening today.
Organizations that are not making preparations now will be left scrambling to deliver the experience their customers are going to demand.
Jonathan Stark is vice president of application architecture at Mobiquity Inc., Wellesley, MA. Reah him at .
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