Cellular Payments and Contactless Technology

Near field communication is at the heart of cellular electronic payment, so any explanation of cellular payment needs to start there. What exactly is NFC? It’s a short-range wireless communications technology standard that allows electronic devices to communicate with each other, for example, to make a cellular payment. Using a short-range radio frequency, an NFC reader can read data from a tag or another device placed very close to it [sources: Nokia Europe and NFC Forum].

It’s similar to the radio frequency identification (RFID) technology used in wireless inventory tags, contactless credit cards and transit cards that you can touch to a reader. NFC and RFID both transfer data via inductive coupling. Induction occurs when a wire or other conductor of electricity passes through a magnetic field, generating an electric current in the wire.

An NFC-equipped cell phone is outfitted with a chip with a built-in coil of wire. The payment station, or reader, generates a magnetic field and also has a coil of wire inside. When the phone is placed within a few inches of the payment station, an electric current jumps between the coils of wire, signaling data-carrying radio waves to pass between the devices.

But NFC connectivity can do more than RFID solutions, which is particularly useful for electronic payment. NFC offers two-way communications, so the payment station can send information like discount coupons or carry on a conversation with the chip in the phone. That also offers added security. The pay station, for example, can request account information from the chip, which can ask for time for the user to enter a password on the keypad. The devices can keep the connection open until account and security information is provided and the transaction approved.

Are you ready to give it a try? Analysts anticipate a booming market for NFC technology, predicting that the number of annual cellular  electronic payments will increase fivefold by 2013, with mobile phone users spending more than $300 billion worldwide each year on digital goods (such as music, tickets and games) and physical goods (such as gifts and books).

However, a few obstacles stand in your way. The first is that you need a  cell phone  equipped with an NFC chip. No problem with that, if you live in Japan. The phones also are becoming more common in Europe. In fact, the Far East and Western Europe are expected to represent 60 percent of cellular electronic transactions worldwide in 2013 [sources: Juniper Research].

But the NFC-enabled phones aren’t expected to be available for purchase in the United States until 2009 at the earliest. They have been tested in pilot studies, including for ticketing on the Bay Area Rapid Transit System in San Francisco, with the MasterCard PayPass processing system in Chicago and with 600 merchants accepting PayPass in New York and on a line on the city’s subway [sources: MSNBC].

While the response from consumers has been positive, stores, restaurants, ballparks, gas stations and other retail establishments need to see enough value in cellular electronic payments to install NFC technology and adapt applications on their end to work with enabled cell phones.

Beyond any reluctance to accept cellular electronic payments, many merchants are not ready to do so. M.V. Rajamannar, executive vice president for CitiGroup’s Citi Brands, estimated after the New York City study that only about 40,000 of the nation’s more than 6 million merchants were equipped with contactless readers .

 

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5 Mobile Banking Innovations to Watch

When Texas bank USAA introduced mobile remote deposit capture in 2009, nobody knew how big the tool would get and how fast. But ask credit union mobile banking experts today for the defining moment in the niche’s brief history and all signs may point to MRDC.

That’s because the mobile tool potentially lets users do something they could not do quickly or easily with online banking, some insiders say. For now, deposits via MRDC are bigger than deposits at ATMs. A growing number of financial institutions are on the prowl for the new tool that may bring in that next big wave of mobile banking users with some of the larger ones leading the way.

“We already see more money coming in through MRDC,” said Christopher Owens, mobile product manager at the $4.1 billion Pennsylvania State Employees Credit Union in Harrisburg, Pa.

Meanwhile, other credit unions and vendors are expecting to see a number of new innovations deployed in the remote and mobile arenas.

1. Virtual Assistants

“I can guarantee you it won’t be long before a Bank of America rolls out a virtual assistant,” said Brett Wooden, senior vice president of marketing and innovation at the $192 million Cy-Fair Federal Credit Union in Houston.

Wooden pointed to Apple’s Siri and said, “Already, you can tell Siri to open an app. Soon, you will be able to tell her to ‘pay $75 to the electric company.’”

He strengthened his case by pointing to the huge investments that both automobile makers and established tech players such as Google and Apple are investing in in-car computer technology. Where better to reconcile an account with the help of a virtual assistant, said Wooden, than stuck in traffic.

The $2.5 billion MSU Federal Credit Union in East Lansing, Mich., is heading in that direction, said Sarah Bohan, vice president of corporate relations.

“We plan soon to build at least limited voice commands into our mobile app,” she said. “We will introduce new features in stages.”

In its first iteration, members probably won’t be allowed to pay bills but may transfer funds between accounts, make balance inquiries and do similar actions, Bohan explained.

Add it up and voice-activated virtual assistants have much going for them in a mobile phone context, some experts say. And with the rising popularity of Siri and its competitor, Android virtual assistant apps, advocates think virtual commands will be the next big thing.

2. Cardless ATM Cash Access

“We believe this can be as big as MRDC,” said Chris Gardner, a co-founder of mobile payments company Paydiant Inc. in Wellesley, Mass. “It’s super compelling. It is faster and easier and more secure than using a card at an ATM.”

Here’s how it works: A member opens the mobile banking app, selects cardless cash access, designates an amount and an account, then goes to an ATM, taps that same selection and a bar code appears on the screen. The member scans the code with his or her smartphone, it’s validated, and the ATM dispenses the requested cash.

Gardner said the service is in a pilot phase at three financial institutions with five to 10 more in a queue to get active.

“We really believe this will become very big,” he predicted.

3. Personalization

“The mobile banking app is very impersonal. Everybody gets the same. But you already see the big banks moving towards a next gen app that will be highly personalized for each user,” said Ido Ophir, vice president of product management at Personetics Technologies, a White Plains, N.Y.-based firm that develops apps that predicts customer behaviors.

“Banks are fearful they will become commodities. Personalization will help create loyalty,” Ophir suggested.

If the app knows the user and his or her interests, who would want to leave that app for a financial institution that does not know them? Ophir said the cutting-edge financial institutions get this and it may well become a battleground in the next generation of mobile banking apps.

4. Marketing Smarts

At the $5.2 billion Digital Credit Union in Marlborough, Mass., there is growing interest in finding ways to push appropriate marketing messages to members via the mobile channel, said Julie Moran, vice president of support services.

Industry watchers say with branch traffic down, some institutions are detecting a shift in volume from online to mobile banking. The problem is that with its small screen size, mobile is a challenging place to market in ways that do not annoy members.

Moran said DCU is using what it calls account manager tools to send individualized, custom messages, including members’ credit scores on a monthly basis – “so people want to look at it,” she noted. If a member has been just approved for a car loan or a home equity line of credit, a message will pop up in account manager.

While mobile marketing is in an early phase, the recognition is spreading that making the strategy work has to be solved.

5. Photo Bill Pay

“We believe photo bill pay is up and coming,” said Christopher Whalen, an e-services specialist with the $400 million Connex Credit Union in North Haven, Conn. “We don’t presently offer it, but we are investigating this. We believe it will explode.”

Experts say the genius behind photo bill pay is that it uses a strong feature of the mobile phone – a high-quality camera – to do the data input that is otherwise clumsy and slow for many who find typing on glass to be cumbersome.

“Photo banking – anything with a photo – will be big,” said Mary Monahan, an executive vice president with Javelin Strategy + Research in Pleasanton, Calif.

Ralph Marcuccilli, president/CEO of Allied Payment Network Inc., a Fort Wayne, Ind.-based firm that sells a photo bill pay service currently live at three credit unions with two more in the queue, said that half of photo bill pay customers are not signed up for Internet bill pay. This may mean the product appeals to a different user.

“People use this because of the simplicity,” said Marcuccilli. “Snap a picture, put in an amount and the day you want to pay it, and you are finished.”

He said there is also is growth in where the one-time payments can occur such as to a physician dentist, or perhaps a plumber. For that consumer, paying by snapping a photo is much easier than inputting the required data to create a new payee.

Will photo bill pay take off? Adoption has been slow and so far, no money center bank has signed up. However, little by little, Marcuccilli said the sheer simplicity of paying with a snap of a lens will take off.

With a number of channels on the cusp of breakouts, experts believe what is certain is that there will be a next MRDC and the real question will be who gets to deploy it first. Advocates are convinced that those will be the financial institutions that sprint ahead of their competitors.

Source: CreditUnionTimes

Mobile POS in Supermarkets Threatens Revenues

Installing a Mobile POS in supermarkets can seriously reduce revenues and will prove to be a real juggling act between convenience and profitability.

Whole Foods Market has announced that it will install Square in different parts of its stores in order to allow customers to pay conveniently. Should this decision be followed by other stores? The answer depends on how this experience will turn out. All the other stores are anxious to see the results.

As much as it is convenient for customers to pay for that one item that they want and then take off, supermarkets with their super-thin margins make their money on product placement and making sure customers go through as many aisles as possible in order to grab that extra item before they leave the store.

Why Is Milk in the Back of All Supermarkets…

Many people run to the supermarket to grab milk. In fact, milk is one of those items that consumers are likely to purchase by itself. Did you notice that milk is actually at the back of every supermarket?

If supermarkets cared that much about the convenience of their customers, they would place a fridge with cartons of milk right at the door. They know this, but they don’t do it.

It is no chance that milk is at the back of supermarkets. It is done on purpose to get consumers to meander in the labyrinths of aisles and rows in order to be exposed to other items.

…  And Bins at the Entrance?

In fact, it is not by chance that when you walk into a supermarket or a big box store that there are always large bins in front of you. It is done on purpose to “break the run” of the customer. As customers walk into a store, they usually do it at the speed they were walking in the supermarket’s parking lot or in the mall.

Placing bins allows them to slow customers down. Bins or shopping carts or any other device put in front of customers in supermarkets is designed to slow you down and change your mental disposition from a state of walking to a state of shopping and browsing.

Also, bins in supermarkets always direct you to the right hand side. That too is on purpose. There is a certain way supermarket designers want all costumers to walk through the aisles. Believe or not, the majority of people follow that invisible route.

Would adoption of Square payments lead to smaller shopping baskets at Whole Foods Market?

Is Payment Convenience a Good Idea…

Allowing customers to pay for items wherever they are reduces the chance of them getting exposed to other products. It reduces the chance for another impulse purchase at the cashier which is another area loaded with products that are conducive for last minute purchases.

 … Or Is Loyalty the Better Idea?

The fact that Whole Foods Market is going to use Square’s wallet is pointing the strategy in a totally new direction: Loyalty.

The first and biggest lever of loyalty is recognition. Recognizing customers and calling them by name is what makes customers go back to a certain place. By encouraging customers to use Square’s wallet, anybody at Whole Foods Market can address a customer by their name because of the interaction between the mobile wallet and the mobile terminal.

Once that becomes an everyday practice and if Whole Foods takes advantage of it, then Whole Foods is really safe because many customers will go back just for the recognition and whatever Whole Foods may be jeopardizing in smaller basket tickets, they can make up for it in return business.

Conclusion

Theoretically, allowing for consumers’ convenience by placing mobile POS is a  dangerous proposition because it will reduce the value of basket. But following up with a loyalty plan can really turn the situation around in favor of whole foods. Only time will prove if whole foods’ idea is a stroke of genius or if it ends up costing them extra sales over time.

 

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