Guest post written by Marc Gardner
Marc Gardner is CEO of PayAnywhere.
Arguably the most important revolution in retail commerce – so far – began in 1958 when Bank of America introduced the BankAmericard, now known as Visa, which became the first widespread payment instrument that let consumers buy both goods and services on revolving credit.
No one can argue the importance of credit cards in today’s retail economy. Even in this tough economy, U.S. consumers and businesses purchased more than $1.5 trillion using credit cards last year, according to Visa and MasterCard. But in the half century plus that has followed the introduction of the BankAmericard, the consumer’s in-store shopping experience is largely unchanged. But a new revolution is underway that will radically change this shopping experience, and retail itself.
There are a lot of companies right now introducing products and services that promise to revolutionize commerce. You’ve probably heard about some of these technologies: NFC, digital wallets, 2D barcodes and tags, retailer apps, in-store location based services, digital coupons. It’s a long list, but none of these technologies by itself is going to radically change the shopping experience for either the consumer or the merchant. Yet all these technologies have one thing in common, and that’s the piece that’s going to revolutionize retail: mobile.
Let’s define “mobile” in this instance to mean smartphones and tablets. We just celebrated the fifth anniversary of the Apple iPhone; truly the mobile industry game changer. When the iPhone was introduced in June 2007, the smartphone market was strictly for business use, but Apple changed that by making a smartphone for consumers. Soon thereafter RIM, Google and Microsoft followed suit. Today nearly half the U.S. population carries a smartphone, and the penetration rate is still growing by double digits every quarter.
What makes the smartphone and tablet so special is that they are essentially just like your PC, small computers powered by a central processing unit . This CPU is what lets the smartphone run apps and interact with other features like the touch screen and GPS. Most important, these small computers go places your PC never does, like restaurants, night clubs, ball games and shopping.
Now think about that for a moment. When you go through the typical checkout line at a retailer, the phone in your pocket is smarter than anything you see at point of sale. It’s smarter than the cash register, and certainly much smarter than the credit-card terminal. In order to function, this point of sale equipment must connect to a network and interact with servers. They are not much different than the 1970s-era dumb terminals that dialed by modem to connect with mainframe computers. The intelligence was in a central location. But with smartphones, you carry the intelligence with you; the intelligence has been pushed out to “the edge.”
The benefits of this intelligence to consumers are becoming more apparent as the technologies I mentioned earlier make their way to the marketplace. Today consumers can use their phones to locate stores, scan barcodes and comparison shop right from the store aisle, make purchases and collect loyalty points. But we’re just scratching the surface of what is possible in this upcoming mobile commerce revolution.
Today the vast majority of retail point of sale equipment is the same as it was years ago. Maybe the device itself is new, but it only replaced something that worked the same way, just like those dumb terminals. But occasionally you bump into something different, such as a tablet instead of a cash register. The fact is that a cash register costs about as much as an Android tablet. In the near future, as companies refresh their retail infrastructures, you’ll see widespread use of tablets at point of sale.
What’s more, the point of sale itself is mobile, meaning the merchant can bring the checkout line to the customer. I’ve worked in merchant transaction processing for more than two decades, and never have I seen a faster uptake of a new technology then this current rush from merchants to embrace mobile. More and more merchants are using smartphones and tablets as their point of sale device. And for good reason.
The “dumb” cash register is a completely separate device from the “dumb” credit-card terminal. Each connects to a completely different network. The cash register communicates with a store’s inventory and pricing system. The credit-card terminal interacts with the credi- card interchange, outside of the store’s IT environment where credit and debit card transactions are processed. Aside from passing the total bill and the payment confirmation back and forth, this equipment never interacts at all. However the smart POS system running on a smartphone or tablet, integrates both independent processes into a single app on a single device, capturing important business intelligence with every transaction.
Smartphones and many tablets are location aware. That’s an important feature for the mobile merchants who may cross different city, county and state boundaries, each with its own different sales tax rate. With a mobile point of sale system, the tax rates can be automatically determined using GPS. But more than that, the location of every transaction can also be captured and used in business analytics, allowing merchants to better target the locations where they will sell their goods or services.
As location based services improve, working inside buildings with greater accuracy, consumers will soon be able to use their smartphones in new ways as they shop, interacting with retailers and brands. Imagine launching a retail app from a supermarket and as you shop receiving coupons and incentives – you’re standing in front of the cold medicine aisle and your phone gets a coupon for Kleenex. Or you’re looking for a particular product and your app guides you to the right location in the store, or summons a customer service person to come and help you, letting him know just where to find you.
Mobile apps combined with the power of cloud computing will allow business intelligence and analytics to become affordable to even the smallest of merchants. The same information that large retail chains pay hundreds of thousands of dollars for will be available to your landscaper, mom and pop shops and even street artists. Business intelligence leads to better decisions, like what items to stock and in what quantity. Better decisions translate to more revenue.
Today, even with mobile POS technologies, people still swipe their payment cards. But just as credit, debit and prepaid cards are creating a cashless economy, mobile will create a plasticless economy in the near future as mobile devices start communicating with each other at check out. Then, as the retailer uses the tablet to tell you what to pay, you will use your mobile wallet to decide how to pay. You will still use the same credit and bank accounts, only the information will be securely transmitted from your phone to the retailer’s mobile POS system. And guess what? That gives consumers more analytics too; transaction analytics are not just for business owners. Consumers can track what they buy, when and where they bought it and how much they paid.
How many times have you lost a receipt for an item you needed to return? Well, your mobile wallet will replace the paper receipts with digital ones that you can archive and never lose, even if you lose your phone. The same will be true for coupons and loyalty cards.
This is truly an exciting time for retail. The shopping experience that has been largely unchanged for more than the last half century will be radically transformed in the next few years. This transformation is taking place globally. Smartphones will lead to smarter retailers and smarter consumers. I’ve only touched on a few of the ways mobile will change commerce, but I can tell you there are a great many more.
This revolution is unfolding rapidly. Those merchants who adopt a wait and see attitude toward mobile will be left on the sidelines scratching their heads and wondering why they are becoming less competitive. Those consumers who are slow to adopt mobile will be wasting time and money. It’s time for consumers to start paying attention to the retail technologies that are being introduced, and start using them; and it’s time for merchants of all sizes to embrace the power of mobile for their businesses.
