Internet of Things, Part 2
Consumers, retailers present hurdle to era of device connectivity
ATLANTA -- The potential for mobile applications at c-stores is only a small aspect of what a larger era of "device connectivity" can bring to everyday people, says one industry observer.
Eric Barfield, director of product strategy for payments processor WorldPay US Inc., initiated a discussion with CSP Daily News about what the larger picture of device integration may mean to c-store retailers in the first part of a two-part question-and-answer session. (To see Part 1, click here.)
In this continuation of that discussion, he talks about what needs to happen to forward the uses of mobile technology at retail and the bigger goal of device connectivity.
Q: In this era of mobile connectivity and what you describe as eventual device connectivity, where do you think consumers stand?
A: Our primary audience is the business owner, but we can never lose sight of the fact that it's ultimately about creating something that helps the business owner engage with their consumers or prospects (often consumers… although business-to-business also plays a major role).
If you think about it, there are more smart phones activated each day by a multiple of five or six than there are people born on the planet. Just in the world of shopping and money management with phones, those same consumers regularly use mobile banking, price compare, make in-app purchases, browse retailer mCommerce sites, run person-to-person transactions and more. Underestimating the importance of mobile to the consumer would be akin to someone in the 1990s saying people never embrace the Internet.
The fact is the genesis for the innovation taking place in mobile begins with the consumer. All of the development and technology you're seeing is in direct response to the fact that consumers have been quick to embrace mobile technology. That's not to say all of the ideas are coming from the consumers. Rather, it's that the tech companies are responding to the openness–and in some cases, outright affinity–consumers have shown to mobile and are creating new ways to meet the demand, for both consumers and business.
But, consumers as a whole aren't necessarily screaming for something to replace their plastic cards. However, if the value of a new technology is clear, the consumer will make the switch. So that's where it's on us (and all of the technology companies) to create services that provide value to the consumer or the business owner. Solve a particular problem. Make some aspect of their life easier for them. Where mobile payments are distinct is that they can provide unique interactivity with the consumer. Many companies are approaching this value proposition many different ways, but whether you are offering line busting or discounts, the interactivity of an app has clearly got the potential to exceed the experience of a static card in your wallet.
Q: Where do you think retailers stand? In our space, Cumberland Farms made an announcement of high numbers of users.
A: I think looking at [Irving, Texas-based mobile-wallet firm] MCX and its participating members list shows a very active interest in the convenience-store space for what mobile wallets offer. I think that same list shows an overarching concern around how companies choose to monetize consumer data and the cost of interchange that can't be ignored. My sense from retailers is that they are not interested in adopting new technology, along with all of the costs it entails, just simply to do it. Retailers, like everybody else, could think of any number of projects to commit their time to if they eliminate generating new revenue as a core metric by which the project is measured. For that reason, finding the right offering with the right value proposition is really the key.
So where hardware upgrades, particularly at the pump, are concerned, merchants frequently adopt a wait-and-see approach. Where the value is easier to see and utilizes existing infrastructure, I see mostly positive interest. Unfortunately for retailers, even where their hardware can accommodate an offering, the fragmented nature of the current wallet space leaves any program isolated. Adoption rates by the consumer ultimately dictate the success or failure of a program. As we discussed at PCATS, we are barreling down a path of unlimited wallet offerings, so much so that you may very well soon need a wallet to accommodate all of your wallets to consolidate them into a single interaction point for the consumer.
Q: How do you think processors like WorldPay will position themselves in the space?
I think it's fair to say that anyone in the payments space who isn't putting a major emphasis on mobile really doesn't intend to play in this space for the longer term. If you look across the industry, all of the major players are already (or are in the process of) providing considerable support for mobile options and/or have developed their own proprietary takes on it.
At WorldPay, it's not simply on our radar. It's a reality. And part of that is helping our customers navigate a quickly expanding and ever-changing market.
As merchants begin to incorporate digital wallet acceptance into their payment mix, they are currently presented with limited options for managing those connections. With 50 mobile payment options available today and 100 more in the pipeline, you can easily see a retailer asking themselves where to even start. Without an acquirer in the mix, the only option would be to adopt a process incredibly similar to managing an independent processing relationship with every single credit, debit, EBT [electronic benefits transfer] and fleet network in the plastic processing model.
While there are some wallets promoting exclusivity, I'm not sure how receptive businesses and consumers are going to be to it. It's akin to a business only accepting one kind of credit card. If anything, research shows that while consumers definitely have affinity toward their preferred payment types, they also like having options.
If there were only one option on the table for the consumer, that would be a fine option. But when the payment options are fragmented rather than consolidated, the option simply doesn't take the consumer's experience into account.
The concept of mobile wallet technology is exciting because it is new, but how new is it? In many respects, mobile wallet reflects a many-to-many relationship, which is exactly what processors such as WorldPay excel at. As wallets take hold in the space, I'd expect to see processors perform a role not unlike the one that they already perform, and the opportunity in this space far outweighs the threat.
Q: You mentioned PCATS, which of course is the NACS standards group known as the Petroleum Convenience Alliance for Technical Standards that met at the association's Tech Event earlier this spring. What are your thoughts on mobile payment standards?
A: As quickly as mobile technology is developing, we're quickly reaching the point where the creation of key technical standards are going to have to be established. While the innovation that's taking place in the industry is exciting, the volume at which it's taking place is not inherently scalable. Imagine building 150 interfaces for mobile payments into a few hundred POS systems.
That's not to say the user interfaces have to be standardized. It's going to be the ease of use and inherent functionalities that help distinguish the different digital wallets. Ultimately, the consumers (and business owners) will decide which succeed and which they must adapt or be left behind. If a wallet can't differentiate itself, its market share will be understandably limited. But on the other side of the spectrum, standards for interaction with point-of-sale (POS) registers and banks have an inverse effect. Spotty, one-off interfaces built on proprietary specifications or locked through exclusivity lowers the consumer-adoption rate of a wallet, because they can't use their wallet everywhere they shop.
Ubiquity of service is the only way that a consumer will actually discard a leather wallet in favor of digital, and standards are the most common way to drive ubiquity.
[Editor's Note: As a way to continue the discussion of mobile and its vast potential within c-store retail, CSP editor Angel Abcede has initiated both a blog and a series of ongoing CSP Daily News articles to cover everything from payment to marketing, internal operations to loyalty. For past blog entries, click here.]