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Copyright 2012. All rights reserved, Mobile Wallet Media, Inc. News & Opinion on the Future of Mobile Payments & Commerce!
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Bridging The POS GAP - Disruption is Overdue!
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Tour D' Mobile Payments
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The Future of Money
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Bridging the POS GAP
NFC is Tortoise and the 2D Bar Code is the
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By Randy Smith,
Mobile Wallet Media
October 10, 2012
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 Startup Alley Winner.
The convergence of Social & Rewards is here!
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Mobile Wallet Media is a news media, analyst, marketing and consulting firm focused on the future of mobile: payments, commerce, daily deals, security, loyalty, marketing, prepaid cards, virtual currency and the convergence
of them all with social and local. Learn more
In thinking of proper analogies regarding NFC in mobile payments and wallets, an 'Arranged Marriage' is what comes to mind. It best suites the incumbent parties (networks, banks and equipment providers) and leaves the groom (NFC-Wallets) and bride (merchants) hoping it works out well.
Why does NFC suite the incumbents so well? NFC requires a reader in the terminal and is designed work in conjunction with conventional banking and prccessing methods. As Jerry Seinfeld might say "Not that there's anything wrong with this." But as the marriage has been delayed, the bride is becoming restless and questioning if the arranged marriage will be worth it. Retailers, the bride, know what they want (MCX), but remain open to other suitors that are now wooing them away from the marriage with NFC: Pay with Square, LevelUp, PayPal, Apple (? - said no to NFC) and more! With NFC, it takes the phone and terminal to engage and so the retailers are looking at other options to fuel their desire to gain mobile payment engagement.
NFC is the Tortoise and QR/2D bar codes are the Hare, but is there a Cheetah that might chase down the Hare and further stall the Tortoise?
And in the end, who will be the Lion and King of the mobile payments?
In relating NFC to mobile payments, the core purpose of mobile payments is enhanced convenience, speed, security and decreased costs for merchants and consumers alike. The NFC and Mobile Payments marriage may end up producing these results, but it sure seems like the marriage is traveling on a rocky road and is still yet a fragmented arrangement. A single standard has yet to emerge and merchants are wary of investing in technology that is not ubiquitous or may be 'Dinosaur Tech' in 6-18 months.
Just last week LevelUp announced it has partnered with three top POS vendors to seamlessly integrate their solutions: MICROS, Positouch and Dinerware.
Here is an excerpt from the announcement:
"LevelUp is all about helping businesses save time and make more money. That's why we're integrating with three of the top ten point-of-sale (POS) systems, MICROS, POSitouch, and Dinerware.
So what does this mean? Well, for one, LevelUp is now integrated with 30% of all the POS systems that exist. Basically, we just got a lot closer to our goal of becoming the most universally accepted way to pay. We're on a mission to integrate with every existing system out there to make it easier for merchants to accept LevelUp's unique combination of mobile payments and customer loyalty campaigns.
For the merchants with MICROS, POSitouch, and Dinerware systems, these partnerships mean that LevelUp transactions will be even faster, easier, and more seamless than ever. First, LevelUp transactions get logged alongside every other credit card and cash transaction for the day, making it much easier to balance the register at closing. And second, the analytics from LevelUp's loyalty-driving campaigns get integrated right into the merchant's existing POS system, making it easier to track all of that amazing data on who's coming back and how often, as well as what they're ordering.
We know time is money. This integration gets rid of some steps, so you can focus on what you do best: serving your customers."
Now this is being on focus with merchant needs and wants. They are setting a new standard for ease of adoption by merchants by removing the barriers to adoption. And with the wait comes more time for merchants to ponder their choices and opportunities and more time for innovative solutions to gain ground.
Mobile Security is Going to Improve with Mobile Wallets
With mobile payments, security is a major concern. But better security is what we shall get in coming years via mobile payments and in conjunction with the EMV mandate (2013-15: varies by size of merchant). It is my opinion that cards will be around in the U.S. for at least another decade or two and therefore have improved security at POS makes sense, especially if it decreases interchange costs for merchants for conducting chip & pin here in the U.S.. I believe retailers are pushing for this very thing.
Also rather than static mag-striped cards with fixed CVC's, smartphones with NFC can enable Dynamic CVCs (Google Wallet, ISIS and others), a vast improvement over static CVCs on mag-striped cards that may be easily cloned. Now this is security around NFC, but what more is or can be done with alternative mobile payments?
Tokenization is now a trend that is standard, not just in moving forward with mobile payments, but also with card and card-not-present transactions. Cloud based services and storage of card credentials by 3rd parties is becoming the standard to adopt by merchants rather than ever attempt to handle the 'radioactive card data.'
But what if there was another way to process transactions via mobile? What if even tokenization was not even necessary to complete transactions by merchants? What if card credentials were never shared with the merchant? Would they not be completely removed from PCI rules on such transactions? If card data is never shared, would this not drastically reduce fraud? If so, should not interchange rates be much lower as well? What if this became the new standard to process mobile transactions? I'm sure MCX and Tier 1 & 2 merchants are also asking such questions. The smart thing to do here is not stick one's head in the sand, but to embrace innovation. The question you are wondering is how this can be done. Right?
Alternative Methods to Connect POS to Mobile Wallets
Well there is a method to accomplish this via OTA (Over The Air - from user's mobile) and tying the transaction to the terminal or retailer's MID. This method does not require using NFC or even bar codes, but users could simply manually enter a code, like Mocapay. I believe many have incorporated such a model, with using a digital wallet securely stored in the cloud by a capable, trusted, proven and compliant partner.
Now this can take integration with POS software providers, adding an optical scanner at POS, adding bar codes for each terminal and pairing it with a QR code smartphone scanner. However, is there a way it could be done without any integration or changes at POS? No new terminals and not even new POS software? Yes, there is a way where there seems to be no way. It is possible and may adopted by any merchant that accepts credit cards. The catch, this solution has yet to surface in market and only awaits a partnership with one of the top four payment networks to make it a reality. I hinted at this is a previous article last week.
This would be the first generation of such a solution and eventually a minor adaptation (mush less than appears to be taking place by current mobile solutions) at POS might be enabled to make it even more seamless at POS terminals and/or software. A bit vague, well the future always seems to be this way, now doesn't it. But it does not have to be, as it is clear from my view.
The Close
To wrap it up. The race in wooing retailers is about enhanced speed, security, cost savings and sales at the register. It's also about consumer engagement. While the service providers are wooing the retailers, it is the retailers that simply want to maintain or advance their engagement with their customers. More loyal customers lead to more revenues, which leads to happy shareholders and CPGs as well!
I recently attended the Mobile Contactless Payment Innovations Summit in Chicago. At this event, Richard Crone, of Crone Consulting, a 30-year veteran in the industry stated in his presentation "The one who enrolls is the one who controls." I buy into this theory. He was referring to not only control of the mobile ecosystem and mobile wallet, but also the data collected about their customers and the ability to use and control this data. "Big Data" of course is the catch phrase of the moment and for good reason. Targeted campaigns tied to "social, local and mobile" are the future of commerce. Consumer reach will look much different in just a couple of years, expecially once 'SoLoMo' marries with the Mobile Wallet.
The 'Big Point' I'm getting to is this. If Richard is right, then this is mostly about "Elegant Speed," like that of a Cheetah. The elegance of a Cheetah is quite something to watch. In Mobile Wallets, this means that they offer everything one now carries with a physical wallet. It replaces plastic and paper cards and coupons and works to free the consumer from enslavement to them. The one who does this will capture the engagement of consumers. The Mobile Wallet that ties together it all in one package and provides the most convenience to consumers and merchants alike will win, not just market share, but mind share tied to the customer's mobile phone and wallet. This will take mass adoption and ubquity on the same scale as Visa, MasterCard, AMEX and Discover or PayPal online. I will be speaking more on this in my upcoming article on Search, Social or SuperCommerce.
Until the Mobile Wallets have their technology vetted, tested and approved by the retailers, there is no opportunity to enroll. Richard was speaking mostly of proprietary solutions of which retailers do not need to wait for, but may engage in now. Retailers may even use their existing hardware and simply upgrade their software or add a scanner. But, Mobile Wallets are are first and foremost about consumer convenience. Having an app for every store a consumer likes is not convenient. It's a repeat of the late 90's and loyalty and gift card adoption all over again.
What would be really convenient is a platform that could provide retailers with both a white-label solution that also serves as their 'Ubiquitous Solution,' as provided by a universal mobile wallet player. Are we seeing the beginnings of this with Apple's Passbook? A recent article by Forbes, about Passbook, leans towards this position and maybe even beyond. The article warns that Passbook simply through an iOS update could instantly become an iwallet, at which point it becomes the Lion and King of mobile payments and Mobile Wallets. Will PayPal and Google follow suit and provide API's? LevelUp has already offered a white-label solution and is integrating with POS providers. MasterCard's Shopable is an awesome vision for the future of commerce and Visa and AMEX have yet to give us an extended tour of their Mobile Wallet offerings. Our next chapter of disruption via the Mobile Wallet will be discussed in an upcoming article: The Future of Money - See the 2020 Vision!
