Top Trends in Retail Payments: A New Celent Report Is Out

Top Trends in Retail Payments: A New Celent Report Is Out
Last week we published our annual report on Top Trends in Retail Payments, which looks back at 2013 and calls out the main themes to watch for in 2014. In 2013 we observed interesting developments in each of the four dimensions defining the battleground for mobile payments – see the chart below. Starting with customer interface, we are seeing the rise of mobile apps from retailers and service providers. These apps focus on adding a digital layer over service provision with seamlessly integrated payments capability. We call this trend “contextual payments” – recognising that customers engage in a broad set of activities and ensuring they are able to pay in any context, while acknowledging that the actual service provider is likely to offer a richer digital experience and customer interface than a generic open payments wallet. Trends chart One of the effects of contextual payments is the increased willingness of banks to consider enabling all types of payments directly from the bank accounts rather than cards, either by building “push” solutions or deploying APIs to expose banking services and enable account access from retailer and other apps. While there has been no breakthrough in the adoption of NFC-based contactless payments in 2013, the emergence of host card emulation (HCE), might just breathe life into NFC and contactless payments by enabling banks and other providers to host credentials in the cloud while making use of the phone’s NFC interface but bypassing secure element owners. However, in our view BLE and Beacons will play a much more important role in marketing than they will in payments. Celent clients can download the report here. If you are interested in hearing me discuss these and other trends in more detail, please join me for a webinar on February 13th – more details here.

Would You Rather Check-in Or Check-Out?

Would You Rather Check-in Or Check-Out?
You know the drill – you go into the store, select your goods, and take them to the cashier to check out and pay. What if we flipped the process on its head and you started with a check-in instead? You come to the store and your phone announces your arrival. The merchant knows you are here and is able to communicate with your phone as you move around the store, providing relevant information, such as product details, stock availability and special offers. When you see something you like, you just add it to your virtual shopping basket and when you are done, you simply leave (most likely, after you’ve demonstrated to someone that the contents of your shopping bag correspond to the items in your virtual basket.) What about payment? Well, the payment simply happens in the background based on your registered preferences (e.g. a card). Forget NFC, EMV and other complex buzzwords. We already highlighted this as a potential future scenario in our report on Digital Wallets last year. A number of announcements in the last 10 days or so indicate that this future might be closer than we think. Both Apple and PayPal announced new developments based on Bluetooth Low Energy (BLE) technology, iBeacon and Beacon respectively. The Beacons are essentially small devices that merchants can put around their stores. These devices then use BLE technology to communicate with other devices, such as Bluetooth compatible phones. Their energy consumption is very low and they don’t need Wi-Fi or a phone signal to work. Most excitingly, with built-in micro-location geo-fencing features, Beacons can enable new applications in indoor mapping. For example, iBeacon supports “enter” and “exit” events, so it can send different notifications while entering into the range and exiting out of the range. BLE has been touted for some time as NFC killer, and it’s easy to see how it can replace the NFC payment (NFC in card-emulation mode). Of course, NFC is also simply a communications technology (peer-to-peer mode), so BLE will also be competing with NFC tags. BLE devices are more expensive than NFC tags (~$30-50 vs $0.10), but their communication range is much bigger (up to 50 metres vs ~4cm), so the merchant would need fewer of them. It may be a coincidence, but there were further bad news to the “NFC camp” in the last few days in the US. First, Capital One, one of the three issuers that supported the Isis pilot (Chase and Amex were the other two), announced it would be withdrawing from Isis. Then, Google Wallet announced its new app with many new features, such as P2P payments. The app will be available to all Android phones, including those running on MNOs other than Sprint. While Sprint was the original and the largest MNO partner, Google Wallet has since rolled out to a number of smaller networks, including Virgin Mobile, US Cellular and Metro PCS, so technically it was available to more than one MNO, just not the 3 large giants behind Isis. The new app doesn’t change that – if you want to use NFC payments at the POS, it will still only work with selected handsets on Sprint and those other MNO partners. However, to me this is another indication that Google Wallet is re-focusing its attention on e-commerce, P2P, and other payment use cases, just not physical POS payments. I also thought the announcement on offers was interesting, as the wallet allows the customer to capture the offer irrespective of where it comes from and present it for scanning at the POS. The significant shifts here are the expansion of the universe of available offers and the fact that you don’t need NFC and tapping to get them redeemed, both of which could important catalysts for increased usage of the wallet. Mobile payments never cease to be exciting and interesting. Integration of BLE technology could be a game-changer for the industry.