Paying by Phone – Conveniences and Cautions
It seems like every time I get to the register of a chain store, they offer me a new way to pay with my phone. But these new modes of paying have serious pros and cons – and there may be compelling reasons not to dive into mobile payments just yet, despite their growth.
Mobile Payments Predicted To Go Up 44% in 2013
Research firm Gartner says over $235 million in payments will be made with mobile devices this year. In retail outlets, those pay-by-phone options break down into three main categories: brand specific apps (like the Starbucks app), payment apps (like PayPal or Square Wallet), and NFC – Near Field Communications (special phones linked to a Google Wallet or Isis account).
NFC – Near Field Communication
Let’s start with NFC since it’s gotten all the hot press. This technology is built into certain devices, predominantly Android and Blackberry phones. You link the phone either to a Google Wallet account (tied to your bank or credit card), to an NFC credit card account (like Mastercard PayPass), or to an Isis account (tied to your mobile phone billing), then tap a terminal at the checkout to pay. But these tap-and-go contact-less payments will account for only 2% of all mobile payments in 2013 according to Gartner. Stores with NFC terminals are limited, and only a handful of phones have NFC technology built in (and the iPhone is NOT one of those).
Probably the biggest issue is that NFC is a solution in search of a problem: how difficult is it to swipe a credit card? More explicitly, what does NFC payment do for the consumer’s convenience that swiping a credit card can’t? If NFC terminals were everywhere, maybe it would facilitate leaving home without cash or a credit card, but until then, the technology faces significant inertia, and I wouldn’t buy one phone over another just because it has NFC baked in.
Brand-Specific Apps uyl_WaysToPay_still_embed
Many chains have their own apps that let you input your credit card info and “load” money on the app for in-store payments. By combining the payment functionality with apps that track purchases and reward loyalty, “regulars” get a significant convenience and can even frequent their favorite joint without a wallet. Do you go for a run every morning and grab a coffee when you finish? Hello Starbucks app on your phone!
I particularly like the order ahead and pay by mobile functionality that chains like California Pizza Kitchen App have brought to market. This makes the take-out pizza experience incredibly easy. Order and pay by app, walk in, tell them your name, get your food and walk out in under three minutes. The app even remembers your previous orders so you can replicate them with one click – genius. Jamba Juice is said to be testing pre-order and pre-pay for their app, and when this is a feature is replicated by more chains, it will bring many loyal customers into the mobile payment world.
Paypal and Square wallet are the two biggest players in app-based mobile payments. Stores that offer payment by app either let you key in your mobile phone number and a pin or use location data captured by your phone, in which case the phone will generate a QR code to be scanned at the register. Again, stores need special equipment and merchant accounts. Plus, the major benefits of using Paypal or Square are still limited to people who don’t have a bank account or credit cards and prefer a mobile option.