The Green Sheet Online Edition
April 11, 2011 • Issue 11:04:01
Social redemption at the POS
The merchant countertop has never been as valuable to so many as it is today. Smart phones, the mobile capabilities of the Internet and the coming of age of near field communication (NFC) and contactless technologies are transforming the countertop - or more specifically, countertop card acceptance solutions - into a focal point for new consumer transaction-based services.
It's the point of convergence for mobile phone manufacturers, telecoms and Internet services companies, as well as for traditional and alternative payment schemes.
Everybody wants a piece of that countertop, but, of course, they want it for free. While some promoters assert that merchants have only to purchase a compatible NFC acceptance device to enable consumer mobile payments, nothing could be further from the truth.
Are you buying your morning coffee with a mobile application? That capability, now available in almost 7,000 Starbucks Inc. stores across the United States, represents the leading edge of widespread efforts to integrate the POS with mobile devices, payment cards and even social networks.
Outfits such as Groupon, ShopKick and Bling Nation are aiming to mobilize web-based social communities and focus that mob power on the POS.
Featuring some combination of loyalty, discounting and rebates, these newly emergent shopping phenomena have already demonstrated an ability to convert web visibility into brick-and-mortar sales.
Integrating new payment options
By now, you've heard press reports about Google Inc., Apple Inc., ISIS, PayPal Inc. and several other potentially high-impact players entering this space. So in addition to the four major card brands, merchant countertops will be expected to handle applications and updates for these new players.
What these new players lack, for the most part, is the ability to easily integrate their redemption value into the storefront merchant's existing payments processes. This integration is an exciting prospect, but it requires effort and investment that has to be funded by some combination of those who will benefit.
At the most basic level, the firmware of contactless and NFC devices requires a unique "card handler" or "wallet handler" for each and every card or wallet that the merchant wishes to accept.
In addition, the applications in every payment terminal, cash register and back-office of a merchant likewise must support the specific features of the cards or wallets accepted.
By routing POS transactions through a payment gateway, it's possible to authorize, validate and process NFC-driven coupons, discounts and other loyalty payouts while settling the balance with the merchant's regular processor. That makes it easier and simpler for merchant and customer.
This is all good news for ISOs and merchant level salespeople. Because merchants will have access to an increasingly diverse - and presumably competitively priced - array of marketing opportunities to their regional consumer base, it provides the feet on the street with the opportunity to integrate these new channels into a richer payment environment.
Some of the new players trying to climb onto the countertop expect merchants to rush out and spend their hard-earned dollars on new acceptance peripherals and terminals. It's not that simple.
Enabling the new countertop
VeriFone Inc. CEO Doug Bergeron recently articulated six key rules that aspiring services companies need to understand in order to make this transformation work. The rules, written in Bergeron's own words, follow:
- Deployment and management of complex NFC technologies will require significant ongoing services from the retailer's payment systems provider. Until retailers are assured of receiving real value from mobile commerce, service providers who stand to gain from carrier fees, advertising revenue or transaction charges must be willing to bear the costs of this highly disruptive paradigm shift.
- Mobile commerce must add value to the consumer. Tapping a phone is a gimmick, no different from tapping a card or fob. In addition to providing the ability to pay for stuff by phone, service providers and retailers need to provide real additional value - such as coupons, loyalty rewards and discounts - for consumers to leave their wallets at home.
- Mobile commerce must be streamlined with existing POS services and managed well for the retailer. Retailers won't tolerate the need for multiple methods of acceptance to accommodate what will become a wide array of mobile commerce schemes. All ideas, regardless of where or who generates them, must converge at a unified point of sale.
- Mobile commerce must go from zero to 90 mph in five seconds. Consumers will not embrace mobile commerce without the confidence that it is being widely accepted. If it only works at a few select retailers, it dies a quick death. Ten percent acceptance is not sustainable.
- Mobile commerce must be integrated with other forms of payment. Mobile commerce won't lead to the quick death of plastic cards and must work with existing payment systems that are certified by all major processors and installed in the vast majority of large and small retailers.
- Mobile commerce must be ironclad secure. Security, both real and perceived, is imperative to the adoption and sustainability of mobile commerce. Even minor setbacks in security could compromise consumer adoption and stop the movement in its tracks.
Footing the bill
We all want this transformation to take place. It represents a great opportunity for traditional payment services providers to ally with other industry segments in providing merchants and consumers with new services that create new payment revenues.
It would be a shame if the opportunity is muffed because merchants are expected to bear the costs. The aspiring players expect that if they can incentivize some of the leading national retailers to adopt this new payment infrastructure, all other merchants will meekly follow along.
Maybe, over a long time, that strategy could play out, but the fact is that if consumers can't use their NFC capabilities at their everyday mom-and-pop stores, it just isn't going to happen.
The retail POS represents a point of convergence for smart phone-initiated payments, social networking and electronic couponing, but it won't happen if retailers are expected, on faith, to absorb the costs of making it work.
Paul Rasori is VeriFone's Senior Vice President, Global Marketing. He can be reached at firstname.lastname@example.org.
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