By Biff Matthews
CardWare International
While not the brightest bulb in a chandelier, I see critical problems in the practical application of mobile payment applications at merchants. I began my business career in retail management, so I have a bit of experience. I understand and embrace merchants increasing sales by taking transactions to where consumers make buying decisions on the sales floor.
To the merchant, how this happens is somewhat incidental. The "how" today is the race to merchant-oriented mobile payment apps running on a plethora of smart devices.
I believe payments industry gurus are missing a critical factor that will be the downfall of mobile payment apps in retail. That is, on whose smart device will these apps be loaded and used? Application installation and use, just like transactions, don't just miraculously happen.
Is the merchant going to provide a smart device to each member of the sales staff? Is the sales clerk going to load the merchant's mobile app on his or her personal smart device? From a practical perspective, what have these sages been smoking to expect either to occur?
I'll share an example involving mobile apps in the tradeshow lead generation industry. At the example's end, ask yourself if there is a parallel with mobile payment apps.
A company, let's call it Izan, developed a tradeshow lead generation app for smart phones.
Typical of that industry, Izan rented smart phones with its app installed to exhibitors. Many of Izan's smart phones "walked away" because since they had retained their full smart phone capabilities certain exhibitors found them too irresistible to return. The rental fee was also less than the cost for a typical consumer smart phone plan. Duh!
Izan's next approach was creating similar apps for a variety of smart phones. For a nominal fee exhibitor personnel loaded the Izan lead generation app on their personal smart phones. However, once exhibitors loaded the app, they used it at one tradeshow after another, ending recurring revenue for Izan. Worse, some exhibit personnel found the apps had viruses, causing critical problems in their smart phones.
Here's the parallel with mobile payment apps. A merchant-provided smart device with desirable consumer functionality would simply walk out the door. Also, retail sales clerks are unreceptive to providing their personal smart devices for their employers' benefit.
That is like telling them to bring their own cash registers. Neither will they be open to loading the merchant's mobile payment app on their personal devices.
Proprietary devices and technology abound within the retail industry, with inventory being their primary function. And manufacturers in this sphere, Symbol Technology for example, can and have adapted inventory devices to add POS and card functionality. However, their devices are expensive for retailers who have numerous sales associates. They are also too costly for even midsize businesses.
An important factor is the ability of these devices to integrate with inventory and other in-store systems to offer significant multifunctionality. Imagine a robust POS system in your hand versus a single function device or app driven by the card payments industry. When economies of scale at these farsighted manufacturers reduce equipment prices, retailers will flock to their hand-held POS systems.
In my humble opinion, the payments industry suffers from decades-old, myopic, self-serving thinking when developing single-function payment apps just as they created single-function, gray boxes - but why? Have our industry's gurus considered why retailers migrated from simple cash registers to fully integrated systems? Or why merchants shun single-function devices or apps?
The card brands, terminal manufactures and mobile payment developers touted throughout this and other publications have lost sight of who the customer is.
Biff Matthews is President of Thirteen Inc., the parent company of CardWare International, based in Heath, Ohio. He is one of 12 founding members of the Electronic Transactions Association, serving on its board, advisory board and committees. Call him at 740-522-2150, or e-mail him at biff@13-inc.com.
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