It’s early days for the mobile payments market, and only time will tell which of the very many services achieves ubiquity, but all finance professionals need to keep a watching brief and some of you may need to take the leap. So FSN writer Lesley Meall takes a look at what is involved whilst consuming her favourite Starbucks treat.
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The other day I gave in to temptation and bought a dark hot chocolate with salted caramel from Starbucks. It was the first of what will probably become many, as my weakness was rewarded with the most wonderful bitter sweet taste sensation I have ever experienced. It was yummy. By now you are probably wondering why I’m sharing. It’s not because I think that FSN readers should all rush out and buy one too (though I can’t recommend it enough). I’m sharing because I paid with cold hard cash and the customer ahead of me flashed a barcode and paid with their iPhone.
On this occasion and in this branch of Starbucks the customer used the retailer’s own app that links to its loyalty card (there’s one for Android phones too). But in some Starbucks’ branches the mobile payment options also include Apple’s Passbook and the Square payment service (that merchants and field traders can use to take payments with a reader that plugs into phones and customers can use to pay with a mobile app). And looming on the horizon are: PayPal Here which comes with a free app and yet another card reader, contactless payment by phones with ‘near field communications’ (NFC) built-in or added with a sticker (such as Barclaycard PayTag), contactless NFC cards, Google Wallet, payment services using Quick Response QR codes, and more.
Which of the emerging (and seemingly never-ending) range of payment services and options Starbucks decides to use remains to be seen; likewise which ones eventually emerge as winners (and losers) in the mobile payments war. ‘While consumers are rapidly adopting smartphones and tablets, and there is no shortage of companies eager to provide mobile offerings to retailers, they are taking a measured view of the immediate benefits of these efforts,’ notes Forrester Research vice president and principal analyst Sucharita Mulpuru, ‘in part because of the myriad challenges that must be considered when investing in mobile for their company.’
They range from the multiplicity of mobile payment services and readers a business can potentially use for transactions, to the many software tools that they may need if they want to get that (all important) transaction data into systems such as accounting or CRM or inventory management – which helps to explain why offerings such as GoPayment from the software vendor Intuit have found favour with millions of small merchants and field traders in the US. It also comes with a free card reading device (though it’s a different one to PayPal Here and Square, of course), but the Intuit one links with all of its accounting products plus other software in its ecosystem such as the sales and inventory management from the vendor Fishbowl.
It’s hard not to see the mobile payment market as a metaphorical Wild West. ‘As a nascent industry it is just beginning to realise its full potential as a robust enabler of global electronic commerce,’ says Jackie Moran, executive director of federal relations for Verizon, and chair of the recently formed Mobile Payments Committee of the Electronic Transactions Association. ‘The committee is designed to ensure that the early stages of mobile payments are handled in the best possible way by all of the players involved in the future of mobile payments,’ explains Moran, which may (or may not) lead to more ‘joined-up’ thinking and fewer overlapping initiatives at some point in the future.
Meanwhile, issues such as network interoperability among merchants, credit card companies, mobile networks, equipment operators and manufacturers, and financial institutions are challenging those involved, and policy-makers and legislators are waking-up to the risks of this nascent market. ‘While we support new and convenient payment options, small businesses and consumers should not be punished with hidden fees or undisclosed conditions,’ says Ted Menzies, minister of state for finance in Canada, which recently expanded its Code of Conduct for the credit and debit card industry to ensure that transparency and fairness are upheld for payments that access debit or credit accounts through a mobile device at the point of sale.
The growth of mobile payments is also creating challenges for finance professionals. As holders of the purse strings, some of you will be involved in investment decisions on mobile payments; others may need to scope the mobile-enabled software needed to handle the back office processes, or prepare for e-receipts for mobile purchases (they’re in the pipeline, too); some can look on from the other side of the bleeding edge at the confusion and complexity created by the very many overlapping and incompatible mobile payment services and wait for the dust to clear. But while you’re doing this, you may want to keep an eye on Starbucks: it’s hedging its bets and has even invested in Square – and it makes the yummiest hot chocolate.