Phoning It In
Mobile payments received some big-name support this summer — and it may be just the lift necessary to finally get the concept moving.
Although there have been a number of payments tests involving near field communication (NFC), Google Wallet has the potential to stir widespread support for such payments. With NFC, pertinent credit card data can be stored in cell phones, which can then be used to pay for goods or services when “tapped” near a POS terminal equipped with a special contactless reader.
The Google Wallet announcement was made in late May by Google, Citi, First Data Corp., MasterCard and Sprint. A number of national retailers, including Bloomingdales, The Container Store and Jack in the Box, are also participating.
The fact that this program brings together major players in the banking, payments network, payments processing, technology, retail and cell phone industries has many people excited.
“There have been a lot of experiments and pilots to test near field technology,” says Dom Morea, senior vice president and division manager of advanced solutions and innovation for First Data Corp., “but this is the first time representatives from all the major stakeholders are coming together to build and grow this payment technology.”
Because the Google Wallet program rests on an open platform, other payments companies, retailers and phone networks can easily join the program without significant changes to any existing NFC work they may already have invested in, Morea says.
For retailers, two attributes of NFC are being promoted: speed and CRM integration. With NFC, consumers can simply wave their phones over a payment terminal and the purchase will automatically be charged to a credit card. The entire payment and authorization procedure should take seconds to complete.
“The ability to accept contactless payments at a physical point of sale is particularly inviting to retailers that want to speed up their checkout time,” Morea says. “This is particularly important to retailers like those in the quick service, drug store and sporting goods businesses.”
The second benefit to retailers is the ability to wed the payments function with store loyalty, couponing or other promotions. The Google team is working with POS terminal manufacturers and top retailers to create what they are calling a “Single Tap shopping experience.” With this, customers will be able to pay for goods using a credit card or gift card, redeem coupons and earn loyalty points with a single tap of their phone.
Retailers participating in the Single Tap program will need to install special software in addition to having a contactless reader on their terminals, but Morea believes that integrating payments with loyalty programs will have great appeal.
“The reality is that for most customers and retailers, the mag stripe card works well in terms of just making a payment,” he says. “What retailers want is a program that they can use to drive customers to their stores and to make purchases there. And they can get those benefits with this program.”
The Container Store is planning to integrate its gift card program with Google Wallet. Catherine Davis, the company’s direct marketing director, says the chain plans to launch the program at 20 stores on September 1.
Davis says The Container Store has worked with Google on a number of other technology programs and was intrigued by wireless payments. The only initial reservation the chain had pertained to data security, “But after examining the system, we feel good about the encryption and felt it is safe and secure,” Davis says.
Jack in the Box began rolling out the service to 35 locations in the Los Angeles and San Francisco regions in July. While The Container Store has to install readers on all its POS terminals, Jack in the Box has been using such terminals to accept PayPass contactless credit cards for some time.
Stevie Liang, director of IT innovation for Jack in the Box, says customer acceptance of the PayPass program has been “hit and miss” at various test locations, but the chain is looking to see if mobile payment will be more widely accepted. “It appears to be more convenient to customers,” he says, “but the biggest question we hope to answer is whether customers will really use this.”
In addition to the direct retailer benefits, many payment experts believe retailers will want to satisfy their customers’ desires to use their phones for more applications. “We’re finding that consumers want to use their smartphones in more and more ways,” Morea says, “often in ways which we might not have initially expected.”
Similar to many retailers, The Container Store’s customers “are more reliant on mobile phones these days,” Davis says, “so it is only natural that they will want to use them to make purchases.”
Higher interchange rates?
Not everyone is convinced that retailers will flock to sign up for the program. Avivah Litan, vice president and analyst for technology research company Gartner, questions whether pricing will initially hamper the progress in signing retailers.
“In order to get to the long-term benefits that retailers will see from tying this into loyalty programs, some short-term hurdles have to be overcome,” Litan says. “Some of the retailers I’ve talked to … seemed to be put off by the rates they are being quoted for contactless payment that were higher than what they pay on traditional swiped card transactions. They need to offer retailers more in the short term to get them interested.”
A MasterCard spokesman says Google Wallet interchange rates — the fee assessed for retailers to accept a card payment — will be comparable to the rates retailers pay for card-present transactions. And both Liang and Davis say the cost they will pay on Google Wallet transactions is comparable to what they are already paying for other card transactions.
Beyond just installing the terminals, it is the retailers that influence how consumers pay by suggesting that they try using their phone, Litan says. “The retailers have to really want this in order for them to encourage their customers to try it,” she says. “It is the retailers that drive payment choice, not the banks that issue the cards. The banks aren’t there when the customer has to decide how to pay for something.”