Mobile payments, mobile marketing, mobile couponing, mobile wallets. For an industry grown out of a nation with wander and road-lust, the petroleum and c-store market and the mobile world looks like a match made in heaven.
However, there are many questions around what’s to come revolving around convenience retail and mobile devices, not to mention how social media plays into it all. This article is meant to be an overview of what is happening in the mobile space right now and what might be coming down the pike.
The regular occurrence of consumers paying with their smartphones is already well underway in other countries, most notably in Japan. So considering that, and recent data showing the number of U.S. smartphone users passed the 100-million mark earlier this year, it’s a good bet that it’s going to become much more common in this country.
“Eighteen percent of the population has smartphones,” said Kelly Hlavinka, managing partner of Colloquy, a provider of loyalty marketing research, publishing and education, based in Cincinnati, Ohio. “And it’s growing exponentially,”
When it will start really taking off is anyone’s guess, but works fueled by major companies, like Google and Apple, are trying to ensure their technology will be the dominate one. In his educational session at NACStech 2012, NCR Corporation Vice President Chris Lybeer laid out the different methods of mobile payments by putting them into three categories.
One technology is NFC, or Near Field Communication. Technically, NFC is a standard for smartphones and similar devices to establish very short-range radio communication with each other, usually by touching them or bringing them very close together, usually no more than 15 centimeters.
Isis, which is based on NFC, is a joint venture between AT&T, T-Mobile and Verizon Wireless in the mobile payment space, announced in November of 2010. It is based in New York City and according to its website, www.paywithisis.com, “The venture is chartered with building Isis™, a national mobile commerce venture that will fundamentally transform how people shop, pay and save. The Isis™ mobile commerce network will be available to all merchants, banks, payment networks and mobile carriers.”
In a test market effort, this summer, hundreds of merchant locations in both Austin and Salt Lake City will accept contactless payments, ensuring that consumers can use the Isis Mobile Wallet at the merchant locations they shop at every day.
According to Lybeer, the pros of NFC is its security offerings. However, one of the big unknowns about the technology is the rate of consumers getting these phones, although there are a few available domestically already. Also, in order to complete the transaction, merchants have to have equipment that can communicate with the technology.
Another method of mobile payment is based on cloud computing, which delivers its services over the Internet. More people, whether they know it or not, likely already have used this kind of technology, such as those with a Web-based e-mail account, like Hotmail or Gmail. A Web browser or mobile device is used to access the cloud-based application, while the data and software is on servers elsewhere.
Businesses can use a mobile application and send bills to customers’ phones. These customers can then pay without using a cash register or a payment card, so essentially the phone becomes the payment terminals. Lybeer sees this as having less friction to roll out and easier to update, but potentially could be less secure.
Alternative Processing Channels
There are some methods of payment that can avoid dealing with credit and debit cards altogether, such as Automated Clearing Houses (ACH), an electronic network for financial transactions, and digital or electronic cash.
One of the biggest players making a move in mobile pay is PayPal. With a network of 9 million merchants and over 100 million customers, PayPal has recently started to offer new features in the digital wallet category, such as its PayPal Here service, which has a device to plug into smartphones for payments anywhere. However, it also allows wireless payments with participating retailers by taking a photo of a credit card instead of using the thumb-sized card reader.
PayPal has said that it expects its amount of mobile payments in 2012 to reach $7 billion. That figure could be helped by Cumberland Farms new SmartPay program, which lets their customers who have a GPS enabled mobile device and a PayPal account pay for gas with their smart phone. As an incentive to pay this way, the customer saves 5 cents per gallon. The company has rolled this out to 50 sites in Massachusetts so far, but plans on expanding it.
Retalix, headquartered in Ra'anana, Israel and holds North American headquarters in Plano, Texas, helped in this solution. Yoav Linik, c-store project manager with Retalix, explained that retailers can offer the mobile method of payment both in and outside of the c-store in a variety of scenarios.
Linik demonstrated at NACStech 2012 the way that customers can pay inside the store without having to go through a checkout lane. Shoppers can utilize Retalix’s Mobile Shopper application to scan products’ barcodes directly on their smart phones, then touch the “Pay” button, and select a payment option, whether it is a credit card or any other digital payment method.
“Everything is in the cloud,” Linik said, “and all communication is PCI approved.” For shoppers that just want to use their smart phones to pay, a store clerk can scan the products in at the store and shoppers receive a Retalix Shopper Gateway issued code, which is presented at the till. POS operators select the “Mobile Payment” option, enter the unique code presented and approve the transaction.
With all the choices of payment methods, it’s no wonder why mobile pay is taking a while, and will likely to continue to take a while, to shake out. Lybeer said he predicts 2013-2014 that mobile payments will take off, but really, “when” isn’t the question, it’s just knowing that it will be significant in the near future. Also, he stresses that there will likely be more than one winner, since the space is so huge. So his advice is to choose the most flexible implementations that limit huge changes or investments, but still move you forward.
As the mobile methods of payment play out, what can you be doing now to get in the mobile game? Marketing, of course. One of the easiest things to do in the mobile empire is utilizing social media, since a large portion of it is free and relatively simple to use.
“There are many old and new social media websites,” said Victoria Cash, marketing manager of Outsite Networks, headquartered in Norfolk, Va., “but the size of FaceBook is a country at this point, with 900 million users. If you don’t have an official social media program, that’s obviously the best place to start.”
She advised that for those who are getting started, it’s important to get out there and listen and watch.
“Use existing resources for content, whatever items are for sale, your two-for deals—this is a good place to start to provide initial content,” she said.
Colloquy’s Hlavinka advises retailers who have loyalty programs to start with their members to help spread messages via social media.
“According to the research conducted by Colloquy, people who are members of a loyalty program are three times as likely to recommend an offer or promotion, compared to just 13 percent of non-members,” she said. “These people are called ‘Word of Mouth Champions.’”
Another route is offering mobile coupons.
“Retailers are looking to leverage mobile in multiple ways,” Hlavinka said. “Mobile is a good way to get coupons in the hands of consumers.”
“It’s the only technology I know that you send to a customer and you know when they come back with it and use it,” said Rick Sales, president of Abierto Networks, based in Eliot, Maine. He gave an example of working with a c-store to set up a promotion related to a local county fair that involved sending out daily, unique offers. At the end of the fair, a coupon was sent to everyone who participated. They found that 50 percent redeemed the coupon in 24 to 48 hours.
“You have no way of knowing that information unless they are redeeming that electronically,” he said.
His company sends coupons through texts, and not apps, mostly because they want to reach customers that don’t have smartphones.
“A large percentage of our industry’s customers have a prepaid phone and card with text plans, but don’t have a smartphone,” said Sales. “So why ignore these people?”
Additionally, with this type of mobile coupon, it allows the retailer to promote a certain type of product or food program. “If you’re trying to grow a breakfast program,” said Sales, “you can say, ‘Here’s a free cup of coffee, if you buy a breakfast sandwich.’”
He said the key is good marketing and offering good value in your coupons. “If you provide good offers, people will redistribute,” he said, on places such as FaceBook and Twitter.
The Check-Out Game
“Over the last couple of years, we are seeing that all the components are merging together,” said Anton Bakker, president and CEO of Outsite Networks. “POS, loyalty and mobile are all integrating together.”
Bakker says that we are on the cusp of a big shift in the mobile platform, changing from a location-based service to a transaction-based service.
“With loyalty and digital wallets, it’s not about the check-in game anymore, it’s about the check-out lane,” he said, referring to Foursquare, which is a location-based social networking website for mobile devices, where users “check-in” at sites via the GPS hardware in the mobile device or network location provided by the application.
Instead, Bakker said, with the transaction data available coming from the POS, loyalty and mobile tools, retailers can do basket analysis and make their promotional system more relevant to shopping behavior.
Hlavinka agreed, “Bringing together the mobile channel and the tracking behind the scenes is a recipe for success.”
She said retailers who electronically track what a consumer regularly buys enables them to automatically alert that customer to upcoming sales of that product.
“POS, loyalty and mobile are converging into an ecosystem, which is the cornerstone of where we are going to go in the future,” said Bakker.
“We think mobile will play five different roles in the future,” Hlavinka said and continued to explain that mobile devices will do the following:
- Serve as a regular membership ID—instead of people carrying around a number of different cards.
- Redeem points for loyalty programs.
- Become an instant program upload channel—so that customers can get updates on the fly and let them know how many points away they are from the next reward.
- Provide high-impact communications—alerting customers to sales.
- Be a delivery channel of rewards—providing content such as games, etc.
For those retailers interested in offering a mobile application, Bakker advises to look for it to be integrated at the transaction level. Additionally, if retailers have a loyalty system, make sure it’s integrated with the transaction and mobile platforms.
“You have to make sure your solutions are transaction driven,” he said, and added that retailers need to make sure that their application is connected to social media.
“Can users have a conversation about the brands? That conversation is going to happen no matter what,” he said. “So you can either participate and learn and steer the conversation, or you don’t participate and lose control of it.”
One more piece of advice that Bakker offers, as an industry-level comment, is that the days of retailer branded apps might be coming to an end.
“For retailers that have 50-100 stores, having their own branded app might not be a good idea anymore,” he said. From a consumer standpoint, more people want apps that are specific to an industry, not necessarily a brand. He said these types of general apps already exist in other industries, such as Urbanspoon, which covers restaurants, or Flixster, which covers cinema.
“Things have been too fractured so far,” Bakker said. For instance, a retailer that puts together a promotion that rewards the shopper for buying five Cokes benefits Coca-Cola. He thinks once there are general industry applications available, Coca-Cola would be putting that together for the retailer because it’s the manufacturer that is ultimately being rewarded.
Hlavinka offered three recommendations for those retailers looking to leverage mobile. The first being to think about your value proposition.
“If you’re sending texts, that customer might be charged minutes for getting those,” she said, “so you better offer a great promotion.”
Secondly, retailers need to give the customer the control. This is especially important to consider when setting up mobile communications with consumers, “regarding opting in to receiving messages and offers, but also opting out.”
And finally, messages sent need to be personalized using the electronic data to offer consumers the deals they are interested in.
“The customer’s perspective is, ‘If I’m letting you in, then I want to receive something that I care about,’” she said. “If you don’t do this, your opt-out rate will be very high.”