The mobile payments boom in the last two years has spawned a host of new initiatives -- but only one breakthrough startup in Square. That’s largely because it’s a business dominated by major players like Visa and MasterCard and point-of-sale (POS) systems makers like Verifone.
Supplanting entrenched payment systems with mobile alternatives promising greater convenience and value is a daunting challenge. That's why one startup is avoiding it—instead offering retailers software compatible with their POS hardware but delivering more in-depth customer data to help boost sales.
Founded by two core members of the team behind Google Wallet, San Francisco-based Index aims to give traditional retailers the kind of granular shopping data typically associated with their online counterparts, especially Amazon. That information is used to build customer profiles and make tailored recommendations and targeted offers.
Co-founder and CEO Marc Freed-Finnegan points out that Amazon says 35% of its sales result from recommendations. While in New York for the National Retail Federation’s annual convention, he and co-founder and CTO Jonathan Wall gave a demo of their software designed to integrate with existing retail POS technology.
Giving retailers the ability to track the specific purchases individual customers make is at the heart of Index’s proposition. “We can say how much people spent and what they bought,” said Freed-Finnegan. “Having that conversion data in real-world stores helps us provide an efficient set of tools to our retailers.”
Wall pointed out that big payments processing companies like Visa only provide transaction data on basket totals rather than each specific item bought during a shopping trip. “We saw this as an unsatisfied tech requirement for the market,” he said.
Based on a customer’s purchase history, retailers can add product recommendations to the bottom of paper receipts. If a shopper follows up buying a suggested item, they might then be prompted to provide their e-mail address through the POS terminal to receive more tailored recommendations via email. A retailer could also send a coupon or special offer for a product they want to upsell or cross-sell.
Index’s technology can also be integrated into a retailer’s mobile app. A customer with the app would then get checked in automatically when they enter a store via geo-fencing. They would be able to browse the latest personalized offers. At checkout, that user would be able to simply enter an Index PIN code in the POS terminal to pay and redeem any coupons used.
The Index system would extend to the desktop Web as well. By matching an opted-in customer’s email address with associated cookie data, it would run targeted offers on the site that person is using to help drive store traffic. In addition, Index is planning to roll out support for iBeacon -- Apple’s in-store location technology -- to provide more personalized service while a customer is actually shopping.
A sales associate would see on their tablet device when a particular customer has come in, along with their purchase history, to provide “VIP” service. Keep in mind, that the product is geared to national retail chains, not mom-and-pop stores.
Index hasn’t lined up any major retailers yet, but is testing its system for now with a bakery and ice cream chain in the San Francisco Bay Area called Cako. Owner Albert Chen said the company is using the Index platform to send recommendations and discounts through its mobile app.
“Prior to Index, we had a few disconnected systems which made it impossible to know what our customers were buying and what other products we could recommend to them,” he said. “Now we have a way to systemize this more broadly.”
Even without any big retail customers, Index has backing from high-profile investors, including Google Chairman Eric Schmidt and Khosla Ventures, providing $7 million in funding in November. The founders also benefit from lessons learned developing Google Wallet, the NFC (Near Field Communication)-based mobile payments system that has struggled to gain traction with retailers and consumers.
“We were betting on new hardware [with Google Wallet],” said Freed-Finnegan. “Here we’re only betting on software.”