I started off my week with a trail run and then a quick stop off at a downtown locally owned coffee joint. The coffee shop is filled with laptop toting Silicon Valley types, local Lululemon wearing trail bunnies and a myriad of salon and spa employees on their way to bill $150 for a 1-hour deep tissue massage. I stood in line and waited to pay for my overpriced cup of coffee. I’m an old school guy and paid in cash while most people paid using their debit/credit card. It seems strange to me to pay for something so cheap with plastic…but, hey, I AM old school right? However, of the 10+ payment transactions I saw, no one paid with his or her phone using the NFC feature of the payment reader. Now don’t panic…you are not the only one who has not seen the NFC technology in action. Very few merchants even have a card reader that includes NFC technology. Forbes magazine ran a piece in mid 2013 that asked the question if NFC payments were dead. After all, the only major retailer to include NFC technology at checkout is Walmart…and adoption is LOW. However, this will most likely all begin to change on September 9.
Apple yet again has the media and its loyal customer base all in a flutter with what will be announced at their big event on September 9. Of course everyone is super excited about what’s happening with the iPhone 6 and the expected announcement of their first wearable device. There is also buzz around a key feature of the iPhone and wearable – will these devices enable customers to make payments for goods and services at retail? Will Apple finally break into the payments space and push mobile payments into the mainstream? This buzz, of course, is mostly coming from technology people, but will have massive implications for consumers and merchants now and in the future. A big shift is coming.
Reports from the Financial Times and tech bloggers indicate that the iPhone 6 will include a near field communication (NFC) chip to enable mobile payments. Adding fuel to the mobile payments speculation, CNET recently reported that Apple has forged partnerships with all the major credit card providers and payments networks including American Express, Visa and MasterCard. Wow, these relationships are great leading indicators that Apple is poised to bring a true mobile payments tool, or wallet, to the mainstream audience. Color me stoked.*
Looking at this a little more closely, however, the media focus is on the consumer side of Apple’s payments technology. But wait…I thought NFC payments was dead with very few retail shops and big box stores offering this form of payment? Is Apple setting itself up for a black eye if their payments tool is not accepted at most locations? Did Apple only think of the consumer side of this equation and totally miss the merchant? Not at all. Apple thought through this quite nicely and I’m surprised there is not more technology media focus on this strategic partnership that ties it all together. Once again, Apple has proven the importance of controlling the complete ecosystem to create products that revolutionize consumer behavior. Here’s how.
Apple announced a few months back a strategic alliance with Big Blue. I provided my point of view in an earlier post on how the Apple/IBM partnership will affect the banking industry. This partnership will also affect the technology these banks provide their business banking clients (merchants) at point of sale. For example, the infusing of Apple technology into the bank provided payment terminals will enable merchants to collect payments using NFC in addition to accepting card swipes. Apple strategically addressed the biggest roadblock in enabling adoption of mobile payments – how can merchants accept payment from a mobile device without undoing the POS payment system that is already in place.
The Apple/IBM relationship enables Apple to create the complete system required to connect consumers with merchants through a single payments technology. No other technology provider can do this. However, Samsung sees this happening and is quickly putting together their “me too” plan for the Android market. There are rumors flying around that Samsung is partnering with Loopt to connect consumers to merchants through one payments system as well.
There will be a lag between what Apple announces around payments and the launch of the complete ecosystem. However, given the amount of iPhone users who already have their credit card on file in iTunes, the major credit card providers will be HOT to get the NFC card readers in place to enable card use in the online and offline world. We can expect a lot of pressure on the banks to get the NFC enabled payment terminals out to market quickly.
How we pay for things will be very different a year from now. Now if Apple can solve how to securely store my driver license, loyalty cards and annual memberships cards as well, I can finally stop carrying around my wallet!
* I’ve sprinkled many “Easter Eggs” through out my posts to make reading more fun. These eggs include cultural references from the ‘80s, ‘90s and present day. If you get the reference, send me a tweet (@ericdunstan) with the answer.
1 Comment | tags: Amex, AppAdvice, apple, Big Blue, CNET, Financial Times, Forbes, Google wallet, IBM, iPhone 6, iWatch, Loopt, MasterCard, mobile payments, NFC, payments, peets, Samsung, Visa | posted in Apple, Easter Eggs, Financial Technology, Mobile Payments
As I walked through the Financial District in San Francisco last week I came across one of the oldest forms of marketing promoting the newest way to pay for something; a sandwich board offering $5 off for customers who pay using PayPal.
I did a double take when I saw the PayPal logo for most restaurants promote their relationships with Yelp, Foursquare or OpenTable…let alone promote the use of a mobile payment tool. I’ve seen very minimal payment tool promotion beyond what Peet’s is doing to promote their relationship with Google Wallet. As we all know, Google Wallet has gained little traction.
I ducked into the restaurant, Bamboo Asia, to get the special offer that required me to pay with the PayPal mobile app to receive $5 off my purchase. I ordered a Bhangra Bowl and a tea. I opened the app on my phone, paid and received the discount. Cool. It was easy.
Clearly Bamboo Asia is part of PayPal’s merchant payments pilot program and has been provided incentives to generate consumer awareness and drive app downloads. PayPal has an up-hill battle here for there are other payment solutions, such as Square and Dwolla, who are competing for awareness and consumer wallet adoption as well.
The $5 off purchase offer may help PayPal increase trial, but it falls down at driving repeat use. This week I went back to Bamboo Asia and used the PayPal app to pay. The restaurant manager said, “Oh, the discount is one time only.” “No worries…I still want to pay using PayPal,” I replied. The manager looked at me like I had a booger hanging from my nose. “Why would you want to use the app again without the discount?” That statement points out the importance of not only increasing adoption, but also providing reasons why consumers should continue paying with the mobile wallet.
Unfortunately this store manager was only focused on the immediate discount offer and didn’t really see a benefit if his customer base continued to pay with PayPal. Bamboo Asia customers were also not provided a reason to pay with PayPal either. This should be concerning for PayPal for two reasons. First of all, the merchant will see a spike in sales for the short term, but will not see a continual lift from repeat customers. In this case, consumers downloaded the app just to get the discount. The merchant may wonder why he participated if none of the PayPal app users become repeat customers. Secondly, PayPal is driving downloads, but not demonstrating to customers the value in continuing to pay with PayPal…which leaves the consumer mind share WIDE open for a competitor to tell consumers WHY they should pay with a mobile payments tool.
What do PayPal and the merchant need to do as a follow up to the “download the app” discount program? Offer incentives for consumers to continue to pay with PayPal. Maybe Bamboo Asia offers special deep discount offers to users who use the app to pay 10 times? Or, maybe PayPal creates a consumer loyalty program that offers points every time a consumer uses the app to pay for anything at a restaurant? OpenTable followed a similar strategy by rewarding their customer base with 100 points for each reservation made through their service. I believe the customer is sent a check or discount coupon from OpenTable to spend at a restaurant of their choosing.
Given how crowded the mobile wallet space has become, it’s clear that consumers need an incentive to adopt a solution. PayPal has the right brand awareness in the B2C and B2B space. The big question is how PayPal can make it easy for merchants to use their mobile payment tools. A second factor to success will hinge on what co-op marketing programs PayPal can build out with merchants to provide incentives for consumers to pay with PayPal. PayPal, the field is wide open now. You’d better act fast or the teams at Square and Dwolla will get there first!
2 Comments | tags: bamboo asia, Dwolla, eric dunstan, foursquare, mobile commerce, mobile payments, mobile wallets, opentable, p2p payments, paypal, peets, square, yelp | posted in Financial Technology
I am a Starbucks loyal customer mostly due to their convenient locations, innovative marketing programs and mobile application. Yes, as a coffee guy I prefer the flavor of Peet’s, but let’s face it, there are simply more Starbucks locations. I use the mobile application several times a week, have scheduled auto-reload and have downloaded the free app of the day once in a while. I also like how Starbucks informed me of The Share Event through the app’s messaging feature. Well done, Starbucks. What a great way to keep me connected to you and to increase my lifetime value as a customer.
Given all of this Starbucks love, I was SHOCKED by what happened to me this morning when I bought a small drip (dark roast, by the way) coffee. I paid using my mobile app and the Starbucks guy handed me this…
“If you buy 5 holiday beverages you get one free. Carry this with you and collect the stickers…it’s a good deal,” he said.
Starbucks knows what I buy broken down to the transaction level. Now I’m required to remember to pull out a wrinkly loyalty card from my wallet after I buy a holiday beverage….even after I paid for this beverage with my mobile app? In a panic, I opened up my mobile app and checked “Messages” for a note that tells me how to sign up for this program through my phone. Nothing. Sigh.
However, this is not the only mobile marketing program fail that occurred this morning. My lovely (and I mean lovely) wife received an email from Starbucks regarding the Holiday Star Dash. The email requested that she click through the link and enter a 9-digit code on her Starbucks.com account page. She popped open the mobile app hoping to find an easier way defined in “Messages.” Nothing. Sigh.
So why does this upset me so? Well, for one it’s clear that the online marketing and mobile marketing teams are not communicating. I would imagine that the mobile marketing team is a separate group. The mobile team should be an integral part of the overall marketing organization to avoid these kinds of consumer experience disconnects. However, the biggest offense to me is that Starbucks has missed a huge opportunity to demonstrate how mobile can drive engagement and loyalty through incentives.
Several articles have been written about the challenges of driving mobile adoption and engagement…specifically in the mobile payments space. Imagine if Starbucks focused the “buy 5 holiday beverages” program on the mobile audience by guiding people to pay with their mobile phone? Or enabled Holiday Star Dash activation through the mobile app? Engagement and redemption metrics would increase…and the lifetime value of these customers would increase.
By enabling online and mobile app participation, Starbucks will be able to compare the ROI across both channels. It would not be a stretch of the imagination to guess redemption rates will be higher for mobile and that the life time value of the mobile user would increase with the right incentives. The most interesting metric would be the lifetime value of users who pay for their Starbucks items using their mobile device. Starbucks has the opportunity to show real leadership in how mobile payments can help drive revenue.
Leave a comment | tags: eric dunstan, mobile, mobile commerce, mobile payments, mobile wallets, p2p payments, peets, starbucks, starbucks mobile app | posted in Financial Technology