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Some might call it the nerdy behavior of a passionate m-commerce professional, but each time I check out at the grocery store I am intrigued by these small, strangely designed payment terminal devices on the counter. They're a mix of metal, plastic and unhandy wires, key paths with flashy color combinations, and a display that seems to date from the eighties. In various countries, such as Turkey, you even see several of these devices on a single counter - resulting in even more unhandy wiring.
On the one hand, shop owners spend so much money to create an attractive shopping experience, just to ruin it all by the forcing their customers to put a card in the sleeve of an appalling payment machine. It's a machine, by the way, that shop owners have to buy or rent, a machine that comes at a cost.
So each time before I swipe my card, I not only wonder why they can’t seem to make these devices more appealing, but also why they are still there in the first place!
My smartphone is a mixture of plastic and metal coating as well, but it has a fancy touch screen and touch path, powerful silicon inside, and a range of wireless communication options. Is it too much to ask to leverage these nice, 21st century features, and change the way we make payments for brick-and-mortar shopping?
Innovation is happening, but have you ever been at a check-out without a payment terminal? Not too often, right? Especially if you’re living in Europe. Indeed, even most of the ongoing payments innovations are still leveraging the "payment terminal" model.
Take the “contactless” innovation wave: contactless cards (or any virtualized versions on NFC-enabled mobile handsets) are simply trying to create more convenience (no PIN for micropayments) and speed (wave vs. swipe). But these cards don’t disrupt the payment flow. We still have the payment terminal, this time upgrading the sleeve with an antenna.
And the rise of mobile wallets, with Google Wallet as a leading example, are only reconfirming the status of the payment terminal. The current NFC version of Google Wallet, for instance, extends benefits of contactless payments, using your virtualized card on the handset, with advertising services. While valuable for merchants seeking to attract customers with personalized discounts/vouchers, and providing more value to consumers, it is still leveraging payment terminals.
For sure, there is the successful adoption of Square or iZettle (often by merchants who didn’t have a payment terminal yet) turning a mobile smartphone into a payment terminal by plugging a card reader dongle into the headset slot. It's very innovative and already shifting payment terminal features to phones by means of dedicated hardware extensions. But still it's enforcing the concept of a payment terminal (be it completely portable this time).
So why can’t we get rid of the terminal concept completely, through a simple “check-out button” on a smartphone, for instance?
Let’s call it the “cloudification” of the payment terminal. The cash register, rather than contacting the payment terminal, could call a virtual terminal in the cloud, which then pushes a kind of check-out button to people’s smartphones to debit their cards and accommodate the payment. Consumers just have to register their card details once, which are then securely stored in the cloud (so not on the phone) and payment at brick-and-mortar shops become as simple as the check-out at Amazon or iTunes.
Feasible? Yes. It is happening already. Cash registers have become increasingly "open" and cloudified, connecting them to a physical payment terminal or a virtualized one should be equally easy.
Just look at the recent announcements of PayPal with high street brands such as Oasis, Coast, Warehouse or Karen Millen in the U.K . And the latest services from Square, its Pay with Square product, allow shoppers to leave their leather wallet with plastic cards at home.
Additionally, cloud-based services can easily be combined and glued together to build new consumer experiences, hence cloud-based payments could be perfectly extended with other cloud-based marketing services such as targeted offers or coupons. Consumers can benefit from a single check-out for both paying and redeeming a coupon, while the merchants get sales activation services on top of just a new way of paying.
The remaining barrier might be the discrimination of e- and m-commerce transactions from card payments. As long as merchants have to pay payment scheme providers more for a check-out button on your smartphone compared to paying with your card directly, the business model might be challenging.
Of course, this fee structure dates from the time where "card not present" types of transactions like remote mail-ordering or online commerce were subject to higher fraud risks. But cloud-based payments don’t require card details of (unprotected) handsets, and today’s smartphones capture relevant context to spot fraud patterns at location. So wouldn’t it be great if the payment schemes could take a fresh look at declining risk levels, and thus the rates for m-commerce transactions.
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