Despite all the excitement around mobile payments and mobile wallets, consumer adoption has been disappointingly slow. One reason is that current payment apps don’t enable “non-cash” payments and promotions, which reduce the customer incentive and benefit to use them. The value of storing credit and debit cards on a mobile wallet is obvious, but today’s mobile payment apps will be incomplete until financial institutions capitalize on the importance of promotions, coupons and loyalty programs, and effectively address the widespread use of barcodes. Until then, the mobile wallet is really just a smartphone alternative to swiping your card.
Most retail transactions today incorporate some form of non-cash payment or promotion at checkout, which can include loyalty cards, gift cards or coupons. These types of non-cash payments typically contain barcodes. The problem is that barcodes cannot be read from smartphone screens by traditional retail laser scanners, the most widely used scanner in grocery stores, drug stores and mass merchandiser chains. And point-of-sale (POS) systems are not designed to accept these barcoded payment methods into the payment terminal, only into the scanner.
Approximately $500 billion worth of coupons are distributed each year, according to industry data. Of these, about $5 billion are redeemed at checkout to partially pay for items. At some point, paper coupons must be “cleared,” which means they are physically sent to a warehouse to be verified through laborious manual counting and processing.
The same challenge holds true for plastic gift cards, e-gift cards and retailer loyalty cards, all of which usually contain barcoded data. Whether a bank’s customer is using a plastic gift card, e-gift card or even a loyalty card, it remains a separate transaction from the mobile payment substitute for the bank card. The shopper still must first hand over gift and loyalty cards and coupons, to be physically entered by the cashier, before completing the transaction by tapping the payment terminal with their smartphone.
All aspects of this process would be better served by a fully functioning mobile payment app that can also transmit barcoded information from customer smartphones into the scanner. It’s also a way for banks to accelerate the adoption of mobile payments across retail and other industries. Otherwise, the banking industry’s current mobile wallet is really just a mobile bank card replacement and the checkout process using a mobile wallet can best be described as a hybrid process that is part-digital and part-manual. To provide consumers with truly mobile payment capabilities, banks must ensure that their mobile payment apps are able to handle all popular payment types including those based on barcodes as well as magnetic stripes and EMV chips.
From a technology perspective, financial institutions and major payment app providers are quickly realizing that the only solution to this industry-wide challenge is beaming technology, which overcomes historical technical barriers and enables POS laser scanners to read barcodes on mobile devices. Light-based beaming technology pulses the phone’s proximity sensor LED to emulate the reflection of a barcode, which the laser scanner interprets as “reading” the barcode. Thus, beaming enables a mobile payment app to effectively process all barcoded promotion and non-cash payment types. In many ways beaming is like Bluetooth, NFC or Wi-Fi, a new method of contactless communication between a smartphone and a receiver, in this case, a laser scanner.
As more non-cash promotion and payment types become increasingly popular, mobile payment apps with beaming technology will enable financial institutions to provide customers with true mobile wallet capabilities: universal, smartphone-based POS processing for not just their payments, but also loyalty cards, membership cards, gift cards, tickets, vouchers and coupons. So that the consumer really can leave their physical wallet at home.
Mr. Garrick is CEO of Palo Alto, Calif.-based Mobeam. He can be reached at [email protected].
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