Mobile Payments: Thinking Out of the Box

Thinking Out Of The BoxI have an article coming out in the soon-to-be published “State of the Mobile Payments Industry” report by Mobile Payments Today.  In that article, I point out that the ultimate winner of the mobile payments gold rush will likely be the company that can re-envision the entire payments process.  My article discusses how recent adoption statistics demonstrate that consumers see little value in shoehorning existing payment processes into a mobile model.

In anticipation of my article’s release, a recent announcement by PayPal caught my attention.  It seems that PayPal is working on a new offering called PayPal Beacon that will automatically use a consumer’s smartphone, without the consumer’s active participation, to facilitate the payment process at checkout.

Based on the information that is publically available, it appears that the setup process to participate in PayPal Beacon involves the following:

  1.  A retailer must have a point of sale system that will support the PayPal POS extensions.  According to PayPal, the supporting POS vendors include Erply, Leaf, Leapset, Micros, NCR, Revel, ShopKeep and Vend.
  2.  A consumer must have the PayPal mobile app and be a registered PayPal user, which means that they must have their bank account, debit card or credit card linked to PayPal as their funding source.
  3. The retailer must have the PayPal Beacon Bluetooth 4.0 Dual-Mode transceiver installed within their venue or installed in a USB port of the PC that will be accepting payments.
  4. The consumer must have their phone registered with PayPal and must have notifications turned on for their PayPal app.  They must also have their picture and a catch phrase registered with PayPal.  These will be used during the checkout process.

Once the retailer and consumer are equipped to participate, the process will likely work as follows: (Keep in mind that some of this is speculation on my part as the available information is sketchy.)

  1. The consumer enters a participating retailer with their smartphone in tow.  The smartphone, however, does not need to be in the consumer’s hand.
  2. The smartphone senses a notification beacon being transmitted from the PayPal Beacon (Bluetooth 4.0 Dual Mode) transceiver.
  3. The consumer’s PayPal app intercepts the notification and returns an acknowledgement to the PayPal Beacon transceiver.  This acknowledgement identifies the consumer as a PayPal subscriber. The Beacon transceiver interfaces with PayPal via the merchant’s network to create an automated “check-in”, which identifies the consumer as being present at that merchant.
  4. Once the consumer is “checked-in”, PayPal delivers to the consumer, via the Beacon transceiver, a notification response that lets them know that they have “checked in” with PayPal.  The consumer will then shop has normal.
  5. When the consumer finishes shopping, they will proceed to checkout.  Upon completing the checkout process, they will tell the clerk that they wish to pay with PayPal.  The clerk will choose the PayPal option on their POS terminal, which will then interface to PayPal for a list of catch phrases/pictures of all consumers currently “checked‑in” with the venue.  This list will then be presented on the POS terminal.
  6. The clerk will ask the consumer for their catch phrase and then match that phase with the appropriate one in the list.  Once the phrase is selected, the balance due will be charged and recorded to that consumer’s PayPal account.  The consumer will receive an electronic receipt and they will leave with their goods.

The entire process – check-in through payment — will be conducted without any involvement from the consumer other than having them provide the requisite catch phrase at checkout.

In addition, PayPal Beacon is designed to work in areas where WiFi and Cellular are not present.  This is a key differentiator when compared to similar payment models offered by companies such as Square.

If this process works as smoothly as outlined above, then PayPal may have just come forward with a re-envisioned process that will be acceptable to consumers.  If they can seamlessly integrate each merchant’s loyalty program as well as incorporate a wallet feature that allows the consumer to easily store and use coupons across merchants, then they may have just cracked the code.

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