There are mobile payments and then there are mobile payments.
One of the main drags on using a phone to pay, at least in the U.S., has been the issue of what problem it solves.
Anyone who has used a credit card or cash and then compared that ease of use to any mobile payment method has likely found there is no great improvement.
Of course, there is the coolness factor, like when paying via the little LoopPay FOB device, or tapping an Android phone to a terminal or, if you have an iPhone 6, trying out ApplePay.
The reality is that we’re still quite early in the evolution of mobile payments.
In search of where this might be headed, I recently visited Paydiant’s new headquarters and consumer experience lab just outside of Boston to spend some time looking at the future with company cofounder Chris Gardner.
Paydiant is one of a number of mobile commerce companies flying under the radar, what I refer to in my book Mobile Influence as facilitators of mobile influence. They are essentially the empowerment plumbing or the engines behind a lot of the activity of mobile commerce.
I hadn’t seen Gardner since last year, around the time Paydiant was selected as the company to create the Subway app, including some rather sophisticated payment features.
“The payment is the least interesting part of what we do,” says Gardner. “The value is before the paying.”
And this may be where the differentiating factors around mobile payments come in.
In mobile payments from the joint venture of Verizon, AT&T and T-Mobile called Softcard, formerly known as Isis, NFC (Near Field Communication) inside an Android phone is used in a tap-to-pay method at checkout. I’ve used this numerous times, essentially using a phone like a credit card.
As anyone who has tried it has found, ApplePay has fewer moving parts and in many ways is a more elegant and seamless payment system.
In those cases, the phone is essentially used to replace a credit card.
Paydiant takes a different philosophical approach to mobile payments by integrating loyalty and rewards with payments.
The Subway app is a good example. “About half of the Subway stores have mobile payments running, with almost all expected by the end of the year,” said Gardner. “Marketing has not even started yet. “It’s (payments) in the app, so it’s just people who bump into it and discover it.”
“It’s cross-sell, upsell, less tomatoes, extra spinach, add chips and then hit checkout,” says Gardner. “If you hit pay, it sends a message to the POS at Subway, it starts a beep that times out in 20 minutes, the store hits print, and out comes a receipt. If you hit pay on the phone, the sandwich is ready in 15 minutes.”
It’s also Paydiant’s payment technology that powers the Merchant Customer Exchange (MCX), the mega retailer consortium of major brands including Walmart, Target, Best Buy, Dunkin’ Donuts, Publix, Giant Eagle, Gap and Kmart, just to name a few.
The Paydiant Lab is working on integrating point-of-sale and mobile technology and conducting usability testing with mobile consumers.
There are soda machines with touch screens to select a drink. Once selected, a QR code is displayed and once scanned with the phone out comes the drink. It’s very quick.
The lab also has an ATM machine where you use a bank app powered by Paydiant. In advance of arriving at the machine, we entered a withdrawal amount on the app and then scanned the QR code at the ATM. The identity was matched in the cloud and out came the cash.
In one of its demonstration areas, the lab has a Bluetooth Low Energy device to show how a beacon could be used as a similar trigger for an encrypted, cloud-based transaction.
The obvious difference in this approach is the use of codes on a screen (somewhat like payments at Starbucks) rather than using NFC to tap.
“One of the weaknesses of NFC is it does one thing,” says Gardner. “It’s a uni-tasker. It does one thing, and it does it well. One card, one payment. It’s one tap. If you want to do anything else, you’re tapping again or you’re pulling out paper.
“It’s a fine experience, but you can’t send coupons, you can’t send anything other than a debit or credit card. You can’t send private label, you can’t send loyalty information. You tap and it will send one card, and that’s all it does. With ApplePay, if you want to do loyalty, you put your loyalty card, QR code in Passbook maybe, they scan that with a wand. It’s this multi-step thing. With us, you hit pay and you have offers and loyalty. Everything’s saved and it’s just one button and it goes.”
One of the issues major retailers face with any mobile payment mechanism is integration with their loyalty programs, which has always been part of the Paydiant DNA.
“Take a look at Macy’s,” says Gardner. “They do over 50% of their transactions on their private label card. And when that can’t be supported, it’s a big problem. Using your own app is the only way for loyalty to work.”
Gardner sees that battle being over owning the customer. “With ApplePay, they say when someone taps, it’s completely anonymous, which is true,” he says. “But that’s terrible for retailers. When you put ApplePay in an app, every single transaction goes to them. They get all the data.”
Paydiant is one of those mobile payment companies no one is likely to hear about, since their white-labeled, cloud-based platform always runs under someone else’s brand.
The final verdict on which mobile payment method will catch on and reach mass adoption is still out.
As Gardner says: “It’s still the first inning.”