Bank of America is testing a mobile payments solution enabling users to pay for in-store purchases by scanning a QR code at the cash register using their phones.

The program is being tested by the bank’s employees in Charlotte, NC and follows a previous test of NFC technology to power payments. The move comes as mobile banking and mobile payments continue to grow, with consumers getting more comfortable using their mobile phones for financial transactions all the time.

“We’re always looking at new and innovative ways to provide our customers with convenience and flexibility in both banking and in their daily lives,” said Tara Burke, spokeswoman at  Bank of America, New York.

Owning customer touch points
The number of players in the mobile payments space is quickly growing and includes Google Wallet, PayPal, LevelUp and others.

While banks have been slower to jump into the space in a big way, they recognize the need to be in the game or else they risk being disintermediated from the payments process as alternative methods grow.

“Banks want to own this customer touch point,” said Chris Gardner, co-founder of Paydiant, Wellesley, MA. “They do not want to let other third parties – like big technology concerns or wireless carriers – come between them and their customers.

“All these players know that the consumer wants to make in-store payments using their phones,” he said. “They also know that providing their customers with the technology to do it allows them to own a lot of control points – e.g., advertising, offers, which credit card the consumer uses, etc.  

“These all impact revenue and customer satisfaction.  Banks can’t afford to let someone else control those touch points with their banking customers.”

Bank of America offers mobile apps for smartphones and tablets and is leveraging mobile in a variety of ways to enhance its relationship with customer. Its partner for the mobile payments trial is Paydiant, whose technology does not require merchants to invest in new point-of-sale equipment.

Secure payments
The pilot was launched a couple of weeks ago with five merchants in the Charlotte area and will last three months.

To make a payment, users use an app to store their payment card information and to scan a QR code at the register or, in the case of a restaurant involved in the trial, on a receipt.

Paydiant is reportedly running tests with several other banks as well.  

Besides appealing to the growing number of mobile consumers, offering a mobile payments solution also enables banks to leverage new revenue opportunities such as mobile advertising, offers and target messaging.

However, banks face some challenges in this space, including the need to ensure a good first experience for consumers or else risk slowing the adoption of mobile payments.

“They need to be able to deliver on mobile payments today – rather than waiting for the next generation of mobile devices or waiting for retailers to upgrade their point of sale infrastructure,” Mr. Gardner said.  

“They need to ensure a secure mobile payment process.  Some of the mobile payment initiatives trialed to date have exposed security flaws in certain approaches from some of the technology concerns and the carriers,” he said.

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York