Payments

Beacons - Panacea for the Payments Experience?

MEDICICEO

Here at LTP, we have always believed that Payments is the necessary facilitator for Commerce. Payments is a utility more than an experience. It’s a necessary evil to have to pay for the products and services we love to buy. We haven’t seen any robust data on this, but perhaps that view can be challenged a little.

The question is: Did consumer spending (as a share of income) increase just because one could pay with light-weight bills as opposed to heavy jingling coins, or swipe your own card instead of touching dirty paper, or tap a phone instead of swiping a card...?

Regardless, there is clearly merit to the argument that ease of the actual mode of payment has a positive effect on amount and frequency of spend, with potentially negative long term effects for the consumer - however, whether or not demand-side economic theories are effective is a separate topic.

So, here we are...at least a decade since the promise of a change in the actual form factor for payments (after cards), and along the way we have seen mobile phones emitting or receiving bar codes, radio waves (NFC), voice signatures, IR beams, iris scans, fingerprints...and now bluetooth beacons! Have a look at the picture below which describes how iBeacons would work. Paypal is working on their own Beacon offering and so are many others.

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Should we be excited? We think there is reason to be optimistic:

Firstly, if implemented smartly, this should not require the customer to learn any new habits. Yes, the consumer will gladly forget old habits such as having to sign a piece of paper after swiping a card or having to remember a password and a PIN and the name of the make and model of your first car. However, since this is a passive (not user-initiated) experience, we are hopeful that the early implementations maximize the benefits of this “push” model without compromising on security and the potential for abuse.

Secondly, it allows for seamlessness between the online payments experience and the in-store payments experience. Tapping a confirmation box on the mobile phone screen is hopefully the only experience that the consumer will have to face either online or in-store.

Finally, this does not require any POS changes. Yes, new “POS” systems will find a way to create a new market, but unlike NFC, and similar to bar-codes, this will allow for “bypassing” the incumbents in the payments acceptance value chain.

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Now, all the above reasons are also a cause for concern: there will be arguments against a passive experience; there will be noise around risk and fraud and liability; and, there will be pushback from the incumbents who do not want to be disrupted.

Overall though, the biggest thing going for beacons as a payments vehicle is that is seems to be embraced by the biggest stakeholder - the retailer - and that it is an experience that was conceived first for shopping innovation, with the payments experience it enables as an afterthought. Now, that’s back to our original thesis that one should never just innovate for the “payments experience” alone!

Also read about: Apple's iBeacon based ordering and reservation system for Restaurants 

Aditya Khurjekar

MEDICICEO

Aditya Khurjekar is CEO and founder at MEDICI (formerly LTP, Let’s Talk Payments), the trusted source for global FinTech insights and ecosystem engagement.

Previously, Aditya was a founder of Money20/20, and on the the founding team at Softcard, the mobile commerce joint venture between AT&T, T-Mobile & Verizon. Aditya also held a number of leadership positions at Verizon Wireless, CSG Systems, Lucent Technologies and Bell Laboratories.

Aditya holds an MBA in Finance & Management from New York University and an MS in Electrical Engineering. He lives in Charlotte, NC and works with teams all over the world.