Mobile payments are on the up and up and, as we assessed last week, we think it's only a matter of time until they explode and take a large market share. There are, however, a couple of markets where they are already making real progress. Naturally it's in markets were the wants and needs of both the merchant and their customers are closely aligned that we have seen the most mobile payments activity. Starbucks is perhaps the biggest of these success stories. The coffee giant’s official app for both Android and IOS devices allows customers to make payments with just one scan. Sound familiar? Certainly to my ears. However, unlike the way Ensygnia has implemented scanning capabilities, the Starbucks system works a little bit differently.
Essentially the app allows customers to create a virtual 'Starbucks card'. It works pretty much like the equivalent physical loyalty card; customers can top up their mobile phone "card" from within the app and when they make a payment, they simply hold their phone up to the barista who then scans the bar-code on their phone.
It's a nifty way for Starbucks to shift their audience towards mobile payments. It doesn't change the status quo too much for their customers, as the act of paying from a pre-paid account is familiar to their users already. What’s more, a sizeable portion of Starbucks' customers already own Smartphones and are comfortable using them and using Apps to make purchases - in fact, according to the company, mobile App payments are now accounting for some 14 per cent of Starbucks' US sales.
This is a very simple implementation, that makes it easy for consumers - no fiddling around trying to find your card - and it also helps automate the tracking of the company's loyalty and reward schemes.
But it is not just Starbucks that are giving mobile payments some serious consideration. It would seem that McDonalds is "loving it" as well. In 22 stores in the US, the world’s largest fast food company has been trialling a mobile payments application this month.
The app is called 'McD ordering' and seems to go a step above what Starbucks are offering at the moment. The McDonalds' trial allows customers to plan and select their order within the App long before they arrive at the restaurant.
Once inside, or at the drive-thru point, customers scan a QR code to place their order and pay for their meal. To be able to decide and plan your purchase in advance on the app, rather than waiting in line, and then order it immediately, seems to be an application with enormous potential. It might be even better still if you could pre-order a collection time, but I can imagine that will come in over time.
Like Starbucks, the McDonalds App is a great tool for handling special deals and loyalty programmes as well.
This is further evidence of the push behind mobile payments. Big companies will eventually spend big money to promote such schemes. There are, however, still a number of hurdles and issues to overcome. For example, the Starbucks app on IOS has had a flurry of poor reviews since the latest update. A number of users are frustrated by the issue of having to repeatedly log-in to the App - which is a new security feature that has been introduced.
There is also the larger security issue of storing payment details. The Starbucks and McDonalds' apps currently require you to store your payment details directly with them, something that is not ideal for customers or merchants.
Furthermore, if mobile payments do explode in the future in this way, will you have to have an app for every single shop you use? That could mean a lot of usernames and password. Let alone make it difficult to even find the right app on your Smartphone. When new technology succeeds best, it is universal availability and compatibility that fuels growth. In mobile payment terms, that requires payments apps that can be accepted everywhere. And that’s where we come in.
By Matthew Taylor 24th June 2014