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Economic model must change for merchants to embrace mobile payments: panelist

ORLANDO, FL – Many merchants still have reservations about near field communication and mobile payments that must be addressed to convince them to make the necessary upgrades to their point-of-sale systems, according to a  panelist at CTIA Wireless 2011. 

The panel was moderated by Steve Mott, principal at Better Buy Design, Stamford, CT. While the panelists all agreed that mobile payments are gaining momentum, panelists had differing views about what is necessary to take the ecosystem to the next level. 

“We are seeing a migration toward NFC,” said Dodd Roberts, president/CEO of Merchant Advisory Group, Dallas. “In a recent meeting, merchants, issuers, acquirers and card brands got together and all agreed that there is an unquestionable movement in the market toward mobile transactions and information. 

“There is recognition that the current economic model must change to entice merchants to move forward and embrace this mobile technology,” he said. “A focus on revenue from loyalty and incremental transactions versus payments would help to keep those buckets separate. 

“All players must acknowledge and respect the business case—don’t catch up, lead—invest in the future, not the status quo.” 

Mr. Roberts said what many in the audience were probably thinking: So if there is agreement among these groups, and the wireless community is ready, why aren’t things moving faster? 

For one, merchants are confused, per Mr. Roberts. 

Issuer plans for 2011/2012 ranged from doing nothing to MSD contactless and programmable cards, from EMV contact and EMV contactless cards to, yes, mobile NFC. 

Merchants’ fears are serving as a barrier to investment in the necessary infrastructure to make NFC ubiquitous. 

One of their biggest fears is continuing to waste money on incremental solutions that do not solve fraud problems, for example, PCI compliance and bridge solutions such as encryption and tokenization. 

In addition, there are internal company conflicts between marketing and finance—merchants’ various departments need to communicate to provide a full customer experience that takes advantage of all that mobile can do from both marketing and transactional perspectives. 

Finally, merchants are worried about the transference of the current economic model to mobile, the status quo except with more middlemen wanting to take their cut. 

“Greed will ultimately decide how fast we go or what’s going on,” Mr. Roberts said. “Changes upset the apple cart, and controllers of the apple business don’t want the cart upset. 

“There are new players that want to get their hands in the bushel of apples, while merchants think the apple pie should be divided differently,” he said. 

So are there solutions to help the industry overcome these barriers? 

Mr. Roberts said there needs to be a high level of collaboration between the various ecosystem players to move faster with efficiency. 

“We all have to sit down at the same table and communicate so there is no more waste on incremental technology, and we need to make a commitment to a more secure system, which is one huge concern in the merchant community,” Mr. Roberts said. 

“A transition time period will be necessary, but it should drive toward the end result, not create unnecessary expenditure,” he said. “We may need help from the public sector. 

“Law enforcement may be necessary to kick-start the ecosystem and provide guidance.” 

Mobile marketing, mobile commerce, mobile loyalty
The panel featured various players in the mobile ecosystem. 

Mike Grimes, CEO of Modiv Media, Quincy, MA, said that a focus on the in-store shopping experience is key. His company focuses on mobile shopper marketing using tablet devices, scanners and a bright color screen for retailers to engage consumers with marketing communications. 

Mobile bar code specialist Scanbuy announced a partnership with Home Depot. The retailer is running a print ad campaign featuring QR codes that drive to information about Martha Stewart Living products. 

“Retailers can use mobile to get consumers engaged in the purchase experience,” said Mike Wehrs, CEO of Scanbuy, New York. “You may have influenced them through advertising or a catalog, you’ve influenced them in store and if you have given them an experience with mobile that is more than getting them in or out of a line, you can go beyond something that undervalues the brand. 

“Rather than have them find a cheaper price using ShopSavvy, using a 2D bar codes you can do some incredibly competitive things to get out of the race to the bottom in terms of price points,” he said. 

The competition between retailers is moving inside stores. Price comparison is becoming much easier with mobile devices, and product reviews and service information are becoming more accessible and transparent. 

Mobile’s transformative effect has made the point of sale into the point of integration. Static and defined content is now dynamic and engaging. Single-purpose design is now multi-purpose design. Merchants have had to move from being process-focused to become consumer-focused. 

Mobile has moved from the cost of doing business to adding value to retailers. 

“NFC has definitely hit the inflection point, and we are putting everything behind it to make sure it succeeds,” said David Talach, vice president of global product management at VeriFone Systems Inc., Sacramento, CA. “What I am most bullish about is NFC—if you layer on NFC, you layer on a whole new set of opportunities. 

“It has hit critical mass in terms of interest and momentum,” he said. “It is redefining what the checkout does—with NFC, the checkout is coming alive. 

“Payment is just the fundamental foundation everything else is built upon—it is all of the other value-added services such as coupons and loyalty programs that will make it really sing and hum.” 

The CTIA Wireless 2011 Money Over Mobile panel 

Final Take
Mobile POS – VeriFone PayWare