The Future of Retail: How Mobile Payments Are Changing the Retail Experience


Retailers are trying to cope with the challenge of an increasingly mobile consumer who conducts life digitally. This means meeting consumers’ expectations on a whole new playing field: the mobile device.

According to Interbrand’s just-released Best Retail Brands 2013 report, “retailers are mobilizing to address the larger issues around digital: Where and how does it fit into the organization? How can development teams be reorganized and silos lowered to accommodate a multichannel approach? How will the brand’s culture change in response?”

While mobile sales are insignificant now, they are growing rapidly. In-store mobile payments almost quadrupled last year, and PayPal alone processed around $14 billion in mobile payments in 2012, according to Business Insider. That means mobile payments need to be a key part of future retail strategy. Just last week, the U.S. Federal Trade Commission (FTC) issued a report, “Paper, Plastic… or Mobile?” The FTC cites a KPMG survey that found that 83 percent of executives in retail, financial services, technology and telecommunications believe mobile payments will see widespread consumer adoption by 2015.

Another recent study, by JPMorgan, divides the current state of the mobile commerce market: mobile acceptance (any mobile-based payment solution), mobile wallets (applications that enable consumers to use mobile devices for payment instead of credit or debit cards) and mobile commerce (e-commerce via any mobile device).[more]

A multitude of vendors pitching a wide array of solutions are entering the mobile payments market at an almost dizzying pace. The recent Mobile World Congress saw the introduction of a mobile payments system called MasterPass by MasterCard. At the same time, Visa announced mobile payment partnerships with Samsung and Roam, a maker of point-of-sale systems. But that’s just the tip of the mobile payments iceberg. A host of others, including eBay’s PayPal, Affirm (launched by PayPal co-founder Max Levchin), Google Wallet and Square (which scored adoption of its mobile wallet by Starbucks) are in the mobile payments hunt. Some players, such as Intuit Pay, are using a more receptive European market to launch mobile payment services before rolling out globally.

Some major retailers and small businesses have been taking a baby-step approach to the new-ish technology, replacing cash registers with iPads and equipping sales personnel with handheld credit card scanners, a la Apple stores. Surely small changes like these, which don’t require much action from the consumer and provide a more efficient shopping experience are often well-recieved, but would the consumer ever embrace a cash-less, check out-less in-store experience? At least one retailer, JCPenney, has toyed with the idea. Last July, at Fortune‘s Brainstorm Tech conference, controversial JCP CEO Ron Johnson announced that the embattled retailer would eliminate physical checkout counters by 2014, notably a drastic change to the landscape of a brick and mortar retailer. 

While it’s likely that JCP has a long road ahead before it kills the cash wrap, most retailers and credit services are concerned with the big buzzword, “NFC,” which stands for Near Field Communication technology. This allows a consumer to wave a credit card or even a phone at a payment terminal without touching it (a “contactless” payment, as it’s called) to complete a transaction. Tests of NFC have been ongoing since last year, and vendors like Lenovo and Samsung are building NFC into tablets and phones, but it has been slow to take off.

“NFC is available on only a few dozen phones—meaning it is in few consumer hands—and it is not on iPhone,” reports “Nor is it, as far as anyone knows, on the iPhone roadmap for near-term deployment. Merchant adoption of NFC readers also has lagged, with only a handful of national retailers (and few local stores) offering the capability. Even if you have an NFC phone, there is nowhere to use it to pay.” This prompted Doug Aamoth of TIME to suggest “the true power of NFC lies in its ability to unlock doors without using traditional keys.”

Of course, mobile payments have far-reaching implications for retailers. Despite benefiting consumers, mobile payments also raise such issues as data security and privacy. “All of a sudden the mobile phone is about to be transformed beyond a spy in your pocket to your bank, your mortgage lender and your landlord,” notes Jeffrey Chester, executive director of Center for Digital Democracy. “In a way, it’s kind of a privacy tipping point, because one single device knows wherever you go, your geographic history, your social media connections and your financial behaviors,” he told the Sacramento Bee. “At the end of the day, this is about exposing your financial behaviors to a daisy chain of financial and other marketers who will have a very detailed understanding of where you are, where you spend your time and how you buy.”

Such concerns are not stopping retailers from pushing the mobile payments envelope, though. Retailing king Walmart is reportedly ready to roll out Scan & Go, an iPhone-only (for now) self-checkout system. The system, which was piloted by Walmart Labs last August, allows consumers with iPhones to scan items as they shop and pay for them at a checkout station, making the in-store experience that much more efficient. Walmart says it is working on an Android version of the application, as well.


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