Making Mobile Devices Actually “Pay”

Think about your cell phone. You never leave home without it, right? But what does it actually do? Right now, people primarily use mobile devices for communications ― calls, texts, emails — and some extend the use to Internet, games, apps and music. But, what if we could broaden the role that mobile devices play in people’s lives even more to store and share the critical payment information we use every day?

Near field communication (NFC) technologies, combined with convenient contactless payment applications, play an increasingly important role in retail. Plus, with this year’s announcement of Google Wallet, this type of technology is getting more publicity than ever before. Not only can these applications drive revenue at a time when retailers need it most, they can also increase in-store customer satisfaction and loyalty.

Some of today’s new mobile devices are programmed to act more like “digital wallets,” housing the information needed to make secure purchases and complete transactions. In the future, all phones will have this technology built-in and it will just be up to the user as to whether the technology is activated.

Already, there are similar applications for mobile devices ― such as the mobile boarding pass. Once you have the boarding pass sent to your phone, you simply wave it past the security scanner. The scanner reads the barcode off the device’s screen and off you go. Same thing with mobile couponing, retailers send coupons containing a barcode via email or text message and consumers present in-store at the point-of-sale (POS) on their phones.

Some reviews are happy with these ideas, but frustrated by the either need to reload the barcode image each time the device refreshed or that not all handheld scanners have the ability to scan 2D barcodes. With NFC technology you don’t have to rely on screen images or scanning. A short-range wireless connection transfers the data, so there’s no physical image scan. With fewer limitations, and more technology awareness with Google Wallet, NFC could quickly gain traction.

Driving The Sale

If you are a retailer considering this technology, there are many opportunities to use NFC for customer interactions ― both to drive information to the consumer, and to provide an easier way for consumers to make and track purchases.

Picture this. Sarah walks into her local big box discount store. She sees a large poster display with today’s sale items. There’s a coupon for Cheerios, her favorite cereal. Using her mobile device, Sarah can immediately download the coupon from the “smart poster” display to her device. As she grabs a cart, she stops to buy a gift card for her sister. By waving her device at the gift card station, Sarah downloads and pays for a gift card. She can e-mail it directly from her phone to her sister, who can then store the gift card information on her own phone and use it make purchases any time.

Sarah runs through the self-checkout and scans her device to apply the Cheerios coupon, and other coupons she downloaded throughout the store. With another wave of her device to the contactless POS system, Sarah can pay for her purchases using the credit card data stored on her phone. At the same time, the POS sends a receipt back to her phone.

While this scenario clearly shows the benefit to consumers, there are also significant benefits for retailers.

1. Smart Signage Delivers Instant Coupons: Smart poster applications and digital signage displays allow retailers to promote sale products in places where people are making purchases, driving purchases of targeted items. Consumers can opt in to have coupons sent to their device that reflect previously purchased items, enabling retailers to target specific shoppers to build loyalty and generate return visits.
2. Pre-Paid Cards Lower Financial Risk. Pre-paid store cards or gift cards are beneficial to retailers because they provide a lower financial risk than store credit cards. By providing an easy way to purchase, re-load and track spending on pre-paid cards through NFC kiosks, retailers encourage customers to use cards more frequently. These cards provide an option for un-banked consumers with a limited banking history to have a store pre-paid card, freeing the retailer from potential financial risks associated with credit cards.
3. NFC Enhances Security. NFC-enabled contactless payment applications not only help speed the checkout process, they also help retailers protect credit card information since the physical card never leaves the consumer’s hands. Additionally, since the information is being stored and managed online, mobile providers can more easily disable a lost phone and transfer the customer information to a new phone. Passwords on cell phones help keep the information stored on the phone secure and mobile providers can also shut down a lost phone altogether through remote management tools.
4. Mobile Receipts Create Efficiencies. Allowing customers to capture receipts on a mobile device can eliminate the hassle of physical receipts, decrease store operation costs and also improve the consumer return process. Since the receipt is transferred to the device via a secured wireless network, it helps retailers save on printer ink and paper cost, and reduces waste.

Getting Ready

Thankfully, some of the industry’s leading retailers are already on-board with this technology and are realizing great benefits to help other retailers justify deployment costs.

If you are just getting started, remember ― when evaluating near-term POS installations or other technology projects, make sure to discuss migration to near-field and contactless payment systems. Building an infrastructure with NFC projects in mind can ensure that you’re ready to take advantage of the benefits as adoption of the technology grows. We may not be using this platform widely today, but no one knows what tomorrow may bring.

Brad Fick has been with Direct Source since 1993 and currently leads business and sales operations for the company. He was previously Vice President of Sales and Marketing. With multiple years of operational management, marketing, product management and sales experience, Fick has held leadership positions with many companies in the retail and technology markets including: Donaldson’s Department Store, NCR Corporation and DataServ.