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Posts Tagged ‘Starbucks’

QR Codes: Scanning for Loyalty and Payment

December 10, 2012 in Uncategorized | Comments (0)

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A few weeks ago, I posted about the recent Square round of funding and how there’s a battle going on over control of the point-of-sale (POS)—and it’s not only about payment. I believe it’s about loyalty, and leveraging the power of mobile to create a direct relationship with customers.

There are a number of solutions available that incorporate quick-response (QR) codes into purchase transactions. They all work like a virtual punch card, where customers spend a certain amount of money, and get some freebie or discount as a reward. They measure loyalty better than Facebook or foursquare “check ins” because customers actually have to buy something to get access to the QR code. Some solutions print the code at the bottom of each sales receipt (RewardLoop, Punchd), or allow customers to scan a code at the register (Perx, Belly).

The biggest bonus for retailers is that the QR code can contain information about the purchase: what was sold, date, time, location and payment method. Using this data, companies can get to know their customers buying habits and tailor their marketing based on that. The setup is lightweight, integrating with existing POS systems via an add-on device or software plug-in.

The quick scan also makes it easy for customers to enroll—and having your mobile replace the stack of paper cards in your wallet (or forgotten in your kitchen drawer) is a bonus too. You simply scan a code again each time you make a purchase, and the loyalty information is stored in the cloud. I myself have used a Subway iPhone application for the last few months, which follows this exact process.

Paying via QR code is gaining some traction as well, as we have seen with PayPal conducting some interesting pilots this year in Singapore on the walls in the MTR (the Singapore subway). It allows you to buy products directly from advertisements by scanning a QR code and entering your payment information. The QR code presumably captures the place and time you scanned, providing valuable information to retailers, as well as a direct connection to your mobile device.

At the same time, we’re continuing to see many banks start to incorporate QR codes into their mobile banking application for bill payment and also P2P payment. Start-up Paydiant, a white-label mobile payments API, recently received $12 million in funding. Pioneering restaurants, hotels and bars can use it to print QR codes on receipts, allowing customers to pay and leave when they want—and now Bank of America is testing the technology.

I’m not convinced QR code payments are the next killer app, but they are one more way to enable mobile payments without NFC. They’ll certainly play a role going forward in mobile CRM and payments. After all, Starbucks with its 2D barcode technology has already generated over $40 million USD in payment transactions as reported at the end of the first quarter this year.

Battle at the POS Heats Up

November 13, 2012 in Uncategorized | Comments (0)

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In September of this year, mobile payments provider Square announced that it had raised $200 million. Investors included, among others, Starbucks Coffee Company—a surprise for many in the mobile payments industry, as Starbucks has been so successful with its own app.

The press release about the funding includes some impressive numbers. Last fall (2011), Square had about 150 employees and processed about $1 billion in payments (annualized). This fall, it has over 400 employees and processes over $8 billion in payments (again, annualized). Talk about explosive growth.

Square pioneered a new point of sale (POS) by allowing small businesses and consumers to accept credit card payments via their mobile devices. Several Square-like equivalents have popped up lately, including PayPay Here, iZettle in Europe and Tortuga in Asia.

Now it’s clear that Square is onto something new. Its Pay With Square app allows consumers to pay for purchases by simply telling the cashier their name. GPS and a few apps cooperate behind the scenes to take care of the rest—no credit card swipe required. (See my earlier post for details.)

Square’s success is certainly helping to fuel the battle at the POS not only in terms of where the payment is taken, but also in the method of payment. Back in May, Visa and MasterCard both entered the ring in an effort to defend their long-established market dominance. Each launched its own “digital” wallet service—not “mobile” wallet, mind you. Yet.

Visa’s solution, called V.me, is made for online transactions. It stores your credit card, billing and shipping details, allowing you to pay for online purchases by providing only your V.me email address and password to the merchant. It’s not tap-and-pay, but it’s a start. And the company says it plans to introduce the mobile aspect soon via NFC, QR codes or other technology that would allow tap-and-pay, scan-and-pay or something similar.

MasterCard’s answer is PayPass Wallet, which expands on the PayPass brand that does currently offer tap-and-go NFC payments (i.e. Google Wallet). The new addition, PayPass Wallet, is also geared toward online purchases, storing the necessary card, shipping and billing details and allowing you to check out faster, though via a special button on the websites of participating merchants (or in their mobile apps). And like Visa, MasterCard says it has plans to roll out to points of sale at some point in the future, but offers no specifics regarding timeframe or technology.

POS rookie Google Wallet continues to march on, working out the kinks, adding more credit cards, and steadily signing up merchants and users. One stumbling block continues to be the small range of compatible consumer devices. Isis, the NFC mobile payment joint venture between AT&T, Verizon and T-Mobile, just launched its pilots in Salt Lake City and Austin in October.

It’s an interesting battle to watch, and not only because of the different companies vying for control. Technology is developing so fast that NFC may already be yesterday’s news. We’re clearly still in the learning phase, with each solution providing valuable lessons for the next. Offerings are also moving from payment only to payment + additional value. And I think that “additional value” is the key to making mobile payments work. Check back soon for my follow-up post about how QR codes are entering the fray and may give NFC a run for it’s money.

Mobile OS Vendors Continue to Invest in Mobile Payments

July 11, 2012 in Uncategorized | Comments (0)

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In the last several weeks, two leading mobile operating system (OS) vendors moved into the mobile payments space. Apple announced its new mobile wallet Passbook that will debut with iOS 6 this fall. Microsoft quickly followed with its announcement of the new Microsoft Wallet mobile payment app, also due out this fall as a part of Windows 8…and Google continues to revamp Google Wallet

It’s clear that Apple and Microsoft are making a big move into new territory. Neither company is waiting for an ecosystem to form before they jump in. They’re not waiting for co-ops like the Isis partnership, banks or brands. They want to make sure that they’ll become a key component of the value chain.

While on the surface it appears the three major mobile platforms now have a mobile wallet capability, as always the devil is in the details. Each vendor has taken very different approaches to create a mobile wallet service within their OS, particularly in how they authenticate payments.

Google’s wallet is device-centric, with a secure element embedded within the phone itself being used to validate payments. So if you want to access the service, you can only do so from a handful of devices. Microsoft has adopted the SIM-centric model that has been promoted by the GSMA.

With Google’s model, the Operator can be excluded from the value chain, but with Microsoft’s the operator is required for the provisioning of the SIM.

Apple, as they often do, has taken a very different approach. Apple’s Passbook enables third parties to push barcode- and QR code-based loyalty cards, store cards and boarding passes in to a single location on the iPhone. So the British Airways boarding pass for your flight tomorrow, or your existing Starbucks card barcode, could be stored in you Passbook.

Apple’s Passbook is, in many ways, more remarkable for what it doesn’t do. Whilst British Airways could update that boarding pass if the gate changes, you can also use the pass to confirm the time of the flight. And while your balance on the Starbucks pass can update, you can’t top up your account from within Passbook. To do either, you would need to use the existing iPhone app and not Passbook

Depending on your definition, you could argue Apple’s solution is not really a mobile wallet, as it purely stores passes, and has no payment capability of its own. Apple seems to agree, as the product name is Passbook and not (say) iWallet.

However, while Passbook is limited, it is an incredibly simple version of any existing service that uses barcodes or QR codes to push passes in to Apple’s Passbook. And there is no cost for third parties to do so.

This is the start of the bid from the mobile OS vendors to say that they’re going to control the wallets. Operators are making a clear play for a slice of the pie, but at present only the Microsoft wallet has a clear role for operators in the value chain. With the approach that Google and Apple have taken, the only thing mobile payments need from operators is really the connectivity. Again, it’s all coming down who is going to own that relationship with the customer.

Take Apple. When it launches Passbook, it will already have worldwide distribution. And though the current version has no payment capability, Apple has the credit card details of 400 million customers already banked in the iTunes Store, to which it could easily link to this. I can’t imagine that Apple won’t leverage that advantage in some way down the road.

Watch this space over the coming months, as this looks like it is just about to explode…

Start-Ups Build the Mobile Payment Ecosystem

May 31, 2012 in Uncategorized | Comments (0)

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There’s been lots of hype in the North American market recently about mobile point-of-sale (POS) startup Square—and for good reason. The company has made a habit of revealing impressive stats about its rapid growth. For example:
• It processes at a rate of $5 billion USD per year (up from $3 million a year ago, and $4 billion in March).
• That divides up into about $416 million per month (compared to $11 million just last month).
• As of December 2011, the company had signed up over one million merchants.

Square and its disruptive cousins, including Intuit’s GoPayment and Swiff, make it easy for merchants to accept credit card payments using smartphones and tablets. Their simple, elegant solutions are creating a new ecosystem and accelerating mobile POS without waiting for the big players.

Even though they’re still processing payments through Visa, MasterCard and American Express, the startups are doing so well in part because they offer merchants a better deal. They provide for a market that would normally be unable to access card processing, and previously only accepted cash. In addition, Square just announced it’ll deposit funds in its merchants’ accounts by the next business morning for all transactions that go through before 5PM. Traditionally, merchants have had to wait two-to-five business days.

Square has also recently expanded its offerings to include a new mobile payment app for consumers. People with the app can pay at any merchant with a Square mPOS without even swiping a card. Compared with the successful Starbucks Mobile app, this solution is so interesting because it’s open and has tremendous growth potential. Starbucks Mobile is so successful because the company has a large and loyal following that buys coffee every day. Preloading the app with a credit card payment so they don’t need cash is a convenience, and getting the loyalty points is a bonus. For companies that sell products we buy less frequently to a smaller clientele, say books or appliances, the same kind of closed-loop system wouldn’t work as well. Something like Square’s growing ecosystem just might crack the code—or at least get us one step closer to a widespread mobile payments ecosystem.

Startups success doesn’t mean that the big players are out of the mobile payments game. Square is displacing some acquiring banks and the POS terminal suppliers, but Visa is a major investor in the company. MasterCard’s new Mobile Money Partnership Program (MMPP), in which Sybase is a partner, aims to deliver financial services to the unbanked and under-banked through mobile phones. The natural extension of the MasterCard approach is leveraging merchants.

These initiatives have potential to work together to create open payments systems and extend coverage from mobile wallets to payment through mobile POS. Nowhere are mobile payments poised for greater success than in emerging markets where POS infrastructure is limited. The main reason people don’t have bank accounts in these markets is that they lack access to banks—yet most people have mobile phones. That’s all well and good, but doesn’t make a success story unless there are also merchants who accept mobile payments.

The challenge is to create interoperability for mobile payments, so consumers can pay as easily with their mobile device as with cash or credit. Square, the MasterCard MMPP and solutions like Telefónica’s mobile wallet that are focused on interoperability will drive the market forward.

Retailers Winning with Mobile Payments

April 19, 2012 in Uncategorized | Comments (0)

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Two recent announcements prove that retailers are very much in the mobile payments game. First, The Wall Street Journal reported that Walmart and Target were among two dozen retailers collaborating on a mobile commerce project. Then, Starbucks shared the impressive numbers from its Starbucks Mobile app, which launched in the U.S. in January 2011, and the UK and Canada a year later. 42 million: that’s how many transactions the company has processed in the 15 months since it launched, and 16 million of those happened between December and April.

Retailers aren’t waiting for NFC, or for banks or Google Wallet—or permission. They’re getting ahead and launching their own systems. And why not? They’re seizing the opportunity to take control of the customer relationship, which they already own, in a new channel.

The Starbucks Mobile app is a great example of what it takes to succeed with mobile commerce and mobile CRM. It’s not fancy or complicated. It’s simply a digital version of the coffee giant’s existing loyalty card, already popular with millions of customers. Load funds to the mobile app starting with a prepaid card and then a credit card, bring your phone to any Starbucks in the U.S., UK or Canada (it works across countries), and scan the barcode at the register after selecting your coffee. Simple, and here’s the key: more convenient and rewarding than cash or credit. (Though the loyalty aspect, which only applies to U.S. customers, requires a hefty 45 purchases to receive your first free drink, it only takes 15 to earn them thereafter.)

Once a company has a successful mobile payment method, it’s a short road to mobile loyalty and engagement programs. Not only do retailers have a direct marketing channel for sending offers, coupons, alerts and reminders, they also receive detailed information about each customers’ purchasing behavior.

The two-way communication that’s possible with mobile means retailers and brands can truly know their customers, and deliver the right message at the right time to the right person. “Haven’t seen you in a while, Mr. Talbot. Come back in for 15 percent off this month’s signature drink.”

Retailers understand that making the most of mobile means tying it into what they already do, enhancing every stage of the customer lifecycle.