A Finextra member 28 January, 2011, 08:31 0 likes

That is cool app! Easy to use and customer get feedback for purchase.

I was yesterday talking with another Finextra member over lunch and we were discussing about similar idea. In our discussion payment platform would be on keyring. As we are in Europe and EMV chip card technology makes (I guess) to use PIN codes.

For that reason I came up with idea which needs more your input but basic idea would be like this. Bank issues me a keyring containing my credit and debit card info. It has also unique barcode. When I go first time to my grocery store, I show up my new key ring and register it to store to get my loyalty bonuses. Same barcode can be used in different stores. Then I pick up stuff and go to teller and pay. I show my keyring to scan my barcode and same time NFC- communication connection is established over my keyring and POS. For validating my payment I use card payment terminal.  I can select credit or debit, but if my merchant knows me, he can offer me also direct debit or e-invoice as payment option. I select my payment method and verify that in card reader using my PIN codes. With this solution there is only limited connection problem for NFC, but keyring like this could work several years with one battery, same way as you car keys.

Benefits for this; merchant can offer more payment options/ reduce price of one transaction. Me as a customer, instead of having my wallet with me- I have only keyring and it contains all my payment methods and bonus/loyalty cards in one place, not several cards in my wallet. For banks: they can offer more payment methods for customers. POS vendors- add NFC and integrate it to card payments.

I am planning to draw more this idea open, but would like to get your feedback and comments.

Matt White - Finextra - Toronto 28 January, 2011, 09:55 0 likes

If the future involves a separate app for every retailer I think I'll forgo that 10 seconds spent fumbling for coins and stick to good old universal cash.

Actually, I don't really buy any of the benefits you list for mobile payments:

"Safe (more secure than plastic or cash)" - I don't know how you can say that with any conviction - you don't explain why. The resourceful criminal fraternity will find a way.

"Speed" - by your own admission it's only "probably" faster and I'm not that excited by the prospect of saving 10 seconds at the till anyway.

"Easier than cash (less fuss)" - How? When did using cash become difficult?

"Great feedback on transactions" - I don't need feedback on a cup of coffee.

"Better deals - Starbucks give a 50 cent discount using the card" - This is the only one that I can see the benefit of but it's no different to having a Starbucks card so isn't a bold new thing, just a slightly different delivery method.

If you want to reinvent payments, I'd have thought it's important to not just be about as good as an incumbent that's been on the scene for thousands of years, you really want to be better.

I'm sure mobile NFC payments will take off - how can it not when all the big banks, telcos and handset manufacturer, not to mention Visa and MasterCard, are pouring money into it. The UK Barclaycard-Orange deal is certainly a significant step (far more so than Starbucks' app).

But please, the hyperbole is getting out of hand; if there's a single major banks that's not still issuing cards and opening checking accounts in July I'll eat my hat.

Brett King - Moven - New York 28 January, 2011, 13:53 0 likes

Matt,

Let's drop the hyperbole and look at the facts.

Safety.

I didn't say the method was immune to fraud. However, as we move to NFC, which will be the pervasive mobile payments tech, the use of dual security measures on the phone (EMV and SIM encryption) along with embedded authentication make this at least 300% more secure than physical cash or card. Chip & PIN is an improvement, but we need to make it tougher for those intent on such nefarious activites.

Speed

The average mobile interaction takes 6-9 seconds, while cash takes upwards of 10-15 seconds. That's half the time.

Easier than Cash

No more searching for an ATM to get cash out...

Great Feedback on Transactions

The average bank and credit card statement is appalling in respect to the feedback we get on the merchant, purchase, transaction, etc. We absolutely need a revolution in this respect. Additionally, such data will be the driver for both improvements in PFM and in better, highly targeted marketing approaches.

Better Deals and the "App" question

The ability to contextually offer you deals because your phone is both a payment device and a mobile information platform are extremely compelling. If you don't understand this, examine the $6 Billion offer Google made to Groupon.

Obviously we will soon be dealing with a Android based payment system, versus an Apple/iTunes based system, with Visa/Mastercard et al also competing. My guess is it won't be long before there is a single App you can use for every payment interaction, so this is a non starter.

This is not Hyperbole - this is 1.0 versus 2.0 thinking. We are in the midst of a serious modality shift based on behavior. It's not about the technology, it is about a better, simpler experience at the POS. Cash may survive for a time, but the concept that you can hold back the impetus here in favor for a long outmoded system is ludicrous.

Everyone has a choice, of course, but I think the rate at which this change will be effected will catch most by surprise. 

Matt White - Finextra - Toronto 28 January, 2011, 14:18 0 likes

Safety: Having three security measures in place does not automatically equate to 300% more security, that's dodgy maths. You simply can't say how secure it is until it's in the real world and being tested.

Speed: I've already explained that saving 10 seconds doesn't seem like a game-changer for me, I guess you must be busier.

Easier: I can't remember the last time I couldn't either pay by card or find an ATM.

Feedback: Personally I think you greatly overestimate the average person's desire to keep a record of every last pound they spend, where they spend it and on what. However, I'll accept that for some this could be of interest/value.

Better deals: Fair point. In the UK we don't have the same culture surrounding coupons and deals but I understand that in the US this is big business.

Finally, please lay off the straw man arguments, it does you no favours. I specifically noted "I'm sure mobile NFC payments will take off" and have no time for the "concept that you can hold back the impetus here in favour for a long outmoded system".

I don't engage in "1.0" thinking or "2.0" thinking, I prefer good old fashioned critical thinking.

The reason I used the word hyperbole is because the Starbucks app is patently not "payments reinvented" and I very much doubt banks will be "in a world of hurt" if they don't all stop issuing cards within the next six months.

Brett King - Moven - New York 28 January, 2011, 14:25 0 likes

Matt,

Fair enough - will be an exciting and disruptive time.

We'll see how it plays out.

BK

Matt White - Finextra - Toronto 28 January, 2011, 14:29 0 likes

There's no doubt it's going to be interesting - trust me, you can't write as many stories on mobile payments as I have without understanding it's a big deal.

Paul Penrose - Finextra - London 28 January, 2011, 15:06 0 likes

The real value of the Starbucks app may not be in the number of seconds it knocks off transaction times (or whether it's safer or easier than cash), but in the visbility it brings to the mobile experience.

With a Starbucks on every street corner, the chain is bringing mobile payments out of the techie labs and debating chambers and putting it front and centre to millions of ordinary punters every day.

In this way, Starbucks is helping to shape opinion and shift perceptions, but let's not get over-excited - it's just one of an array of options presented to the consumer. And in the early stages, I suspect it will have a limited appeal only to a minority tech-savvy user demographic.

Elizabeth Lumley - Girl, Disrupted - Crayford 28 January, 2011, 15:51 0 likes

Oh my, didn't realise there was a debate going on here (read Finextra, Liz, Ed).

I thought I'd look at this from a consumer perspective and not a fintech journo perpective:

This will only work with a Starbuck's card? So this isn't a straight mobile payment from my bank account? (am I reading this correctly?)

As Matt pointed out with all the investment banks and providers are pouring into mobile banking and NFC, why can't I just pay for my coffee with my phone? Why the prepaid card? (I guess it's the coupon/voucher aspect, right?) I threw out my Pret card a while ago, because I was always forgetting to load it with cash and ended up paying with cash anyway. (I'm rambling now, aren't I?)

Much like the conversation I had with Transport for London, Oyster cards will soon be replaced by contactless banks cards (or mobiles) that have transport passports on them. No need for an extra card. I have a feeling that this 'Starbucks card mobile app' will be a cute app that people will use for a while, before full blown mobile payments (direct from my bank account) takes over all small transactions. 

Anyway, interestingly enough, I was talking with my best friend in the States the other day. She manages a Shaw's supermarket. She told me that her biggest headache at the store lately was the time it takes her and her staff to re-type in bar code numbers associated with store loyalty cards. 

It seems there is an iPhone app in the US with will convert your supermarket loyalty card into a bar code on your mobile. Great idea? Yes. But it seems that the Shaw's cash registers (and self serve registers) can't read the bar codes on the phone. So, iPhone loving, plastic card disposing US grocery store shoppers get tripped up by having to wait while a surly, pimpled 16 year old re-types their loyalty card number into the store's scanners. 

The future of money looks all rosy, until you place it in a lower middle class American grocery store. 

Brett King - Moven - New York 28 January, 2011, 15:51 0 likes

Paul/Matt,

I guess I am just an excitable kind of guy :)

For me the issue here is behavioral shift. We're seeing the start of the most significant change in the way we transact and pay, well... ever.

I know this is a decade long transition, but so many are totally unprepared. How many banks still don't have a head of mobile?

BK

Matt White - Finextra - Toronto 31 January, 2011, 09:38 0 likes

Good Economist article showing the range of uses for mobiles in the developing world. Mobile money - including, of course, M-Pesa - features heavily. I also like FrontlineSMS, which uses open source software to disseminate information. We've previously covered its use for financial services.

Brett King - Moven - New York 31 January, 2011, 10:11 0 likes

Matt,

Did you see the Daily Mail Feature last Thursday on Mobile disruption to credit cards? Predominantly an education piece, but the buzz on this is huge. If Apple comes out of the gate selling 5 million iPhone5's in the first few weeks...how does that change adoption expectations?

If you check out BANK 2.0 Chapter 14 you'll see my timeline is that by end of 2012 Contactless POS is at critical mass, and by 2015 NFC based payments exceeds physical plastic. I still hold that this is a realistic timetable...

BK

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 31 January, 2011, 12:35 0 likes

Even if it's one app at the level of a loyalty network - a la Nectar in the UK or T-Punkte / PAYBACK in Germany - I see some chance of this taking off selectively.

But, in its current form where it needs one separate app for each retailer, I think mass adoption is far away, if it ever happens.

Moving on to more open forms of NFC mobile payments, most current implementations merely replace the plastic form factor of the credit card by NFC. The credit card account, merchant fees, interchange, issuer bank - all of them continue to play their usual role in the payment transaction.

IMHO, NFC mobile payments can cause true disruption only if it changes the traditional four-corner retail payments model and offers concrete monetary benefits to one or more participants ex: lower merchant fees. Judging by that criteria, I see far greater potential for mass adoption for somebody like BlingNation, even if it's closed-loop.

Nick Collin - Collin Consulting Ltd - London 31 January, 2011, 15:00 0 likes

Sorry Brett, but I'm with Matt on this one, as I explained in my Finextra blog "Contactless, Mobile, NFC - is it all Hype?" [why can't I put a link in here?].  Like Matt, I think it will take off eventually, but not nearly as fast as most would have us believe.  In the meantime, the really big cash-displacement story, which no-one seems to have noticed, is that with chip & PIN, the humble debit card is now increasingly and routinely used for low value payments such as buying a pint of beer in a pub.  It's fast, easy, familiar, highly secure, convenient for both cardholders and merchants, and crucially, the acceptance infrastructure is already in place (no need for new terminals, never mind fancy new phones or different consumer behaviour).

Matt White - Finextra - Toronto 31 January, 2011, 15:10 0 likes

Nick

You should be able to link...

Adam Nybäck - Anyro - Stockholm 02 February, 2011, 06:55 0 likes

Is the QR-code the same all the time or is it generated dynamically for each purchase? That would make it very secure (can't be skimmed).

Other security can easily be added such as PIN-code so you could use it for higher value payments.

Another interesting thing about this technology is that it could be extended to P2P payments since smart phones have cameras too.

Brett King - Moven - New York 03 February, 2011, 23:24 0 likes

Adam,

Correction - I am told the latest version of the Starbucks app uses a Stacked Linear Barcode for security purposes...

BK

Elizabeth Lumley - Girl, Disrupted - Crayford 04 February, 2011, 07:48 0 likes

Stacked linear barcodes are in the public domain. There used a lot in transport (boarding cards) because they are free and you can use them without a license. They're convenient and easy to implement, but not secure.

Tim Tyler - Misys - London 04 February, 2011, 08:59 0 likes

In isolation, these individual payment apps can work well, however I've not yet been sold as to how good a mobile wallet experience will be, replicating my real-life wallet where I carry a variety of cards. I have no fear that this will be answered, and broadly agree with BK's timeline that NFC will gain broader acceptance by 2015.

The other issue here is trust, and who is going to own the customer on the device? MNO's will make a play here (as per O2) and of course the banks.

I also believe we'll see Apple, Google and Facebook jostling for a position - in fact, I was involved in a Finotribe session at Sibos debating a new, virtual mobile currency: could this now be realised through Facebook Credits? And who is to say that Apple, when releasing the iPhone 5, will allow third-party access to the NFC?

I have a real concern though that we'll see fragmentation at the point-of-sale, and this will impact the wider adoption. Customer confusion might reign for a while before consolidation takes place. 2015 doesn't feel that far away now.

But then the poor mobile signal drank all my battery and my phone died...

Adam Nybäck - Anyro - Stockholm 04 February, 2011, 14:22 0 likes

Ok, stacked linear barcodes. That doesn't make much difference to me. The question remains - is it the same barcode each time or is it unique for each purchase?

The obvious way to make this secure is to have the app download for instance 10 unique one-time codes from the central system, then display one at a time for each purchase. When the number of codes goes below 5 (or whenever the device happens to be online) more unique codes are downloaded.

Another question is how easy it is to make cash registers feature this payment method. Can stacked linear barcodes be read by the same readers the cash register already use for scanning EAN codes?

Elizabeth Lumley - Girl, Disrupted - Crayford 04 February, 2011, 16:38 0 likes

Yes, but is a pre-paid loyalty card. You measure the level of security against the risk. What would someone lose? What, like £10? It is worth it to Starbucks to shell out for a heavy duty barcode/PIN etc... security for a loyalty card?

This isn't a banking payments app which is connected to your bank account - that would require more robust security measures. 

Tim Tyler - Misys - London 04 February, 2011, 17:00 0 likes

I would guess that yes, existing POS equipment can read these - looked like a "standard" bar code reader on the video that Brett posted, but I guess it depends upon the specific model. For what Starbucks have created, which appears to simply represent the equivalent of a stored-value/gift card number as a bar-code, is any other security (between phone and reader) required? All you've done is presented a graphical representation of a number; there's no stored value on the phone and the POS does the same validation as if you had presented a physical payment card.

Other scenarios then yes, I would agree, greater security would be required (perhaps encrypted text generating the bar code). On this occasion, Starbucks have followed the tested principle of KISS.

Brett King - Moven - New York 04 February, 2011, 18:19 0 likes

Adam/Liz/Tim,

Starbucks App from a security perspective is different from NFC where we are going, so let's not discuss the Starbucks App specifically. 

There are an abundance of options on security for NFC. Firstly we have the EMV chip standard, we have biometrics options, as well as onboard encryption, etc. You can bet that Apple has done a heap of thinking and they've already solved this.

Regardless, you're talking like security concerns will slow down adoption of NFC payments - I think that's not going to happen.

There's one simple question:

Will people be using NFC payments via mobile more or less in the next 2 years?

The answer is very straightforward, and thus the outcome is the same. If you are involved in the payments space or retail banking, you need to get moving...now

BK

Adam Nybäck - Anyro - Stockholm 04 February, 2011, 18:29 0 likes

Yeah, I guess Starbucks doesn't need more security right now. I'm more interested in how this technology can be used in other locations as a replacement for debit/credit cards. Most people seem to agree that NFC isn't going to happen any time soon because there isn't enough phones or terminals that support it. If this technology works with the current phones and cash register hardware this could be a cheaper way to introduce mobile payments. Just need to add the software part.

Matt White - Finextra - Toronto 09 February, 2011, 12:14 0 likes

How to compromise the Starbucks Rewards Card app in 90 seconds - Mobile Commerce Daily (via aden_76)

Adam Nybäck - Anyro - Stockholm 09 February, 2011, 15:01 0 likes

Matt,

That's a really lame article. People who leave their phone on the table in a café while going to the restroom should worry about loosing their phone, not about loosing a cup of coffee. And yes, it takes less than 90 seconds to steal a phone.

In other news: If you leave your wallet somewhere people can steal money and cards from it.

Matt White - Finextra - Toronto 09 February, 2011, 15:12 0 likes

Adam

Haha, yeah, completely agree. Just saw a tweet and thought I'd throw it in to see if I could get a rise out of Brett (I'm mean like that).

Brett King - Moven - New York 09 February, 2011, 21:00 0 likes

Matt,

Next time you leave a phone on a table at Starbucks, I'll be there!

BK