May 12, 2015
Bluetooth low energy-based beacons indeed mark the future of customer engagement. These low-power devices have been witnessing a large scale adoption in proximity marketing solutions where merchants are putting up beacons to send offers, promotions, coupons, etc. in the form of proximity messages. But stakeholders are looking beyond the proximity marketing aspect and want to leverage these BLE beacons to enable proximity payments.
There are certain reasons behind the optimism for beacon-based payment experience:
Firstly, the BLE beacon does not require the customer to learn any new habits. Since this is a passive (not user-initiated) experience, 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 whether online or in a store.
Finally, this does not require any POS (point-of-sale) changes. Yes, new POS systems will find a way to create a new market, but unlike NFC, this will allow for bypassing the incumbents in the payments acceptance value chain, similar to bar-codes.
This optimism has led to numerous use cases of adoption of BLE beacons in payments as highlighted below:
The Merchant Adoption
Gilbarco Veeder-Root uses Qualcomm’s Gimbal Bluetooth beacons to provide customized offers to motorists as they buy fuel. When the user approaches, the gas pump recognizes the user’s phone if the service is opted for. Payment options are offered on the consumer’s smartphone, where the transaction originates, rather than at the pump. As the consumer pumps, targeted commercials play on the pump screen, with associated offers sent to the phone.
TruBeacon has developed a range of bluetooth-based technologies for mobile payments. The Payments Beacon, which is a white label platform that works with smartphones, payment terminals and other point-of-sale technologies such as MICROS and NCR devices. It provides an application programming interface (API) that allows retailers and banks to integrate mobile wallets into iPhone and Android apps, supporting contactless payments, e-receipts and offer redemption.
Beam Wallet is the first company in the MENA (Middle East and North Africa) region to introduce Bluetooth low energy (BLE) beacon technology, enabling consumers to shop, earn and redeem rewards. Fitted with the latest BLE technology and supplied by BluVision, iBEEK Beacons offer immediate engagement with the more than 100,000 customers already registered with Beam Wallet. Shoppers receive a personalized notification through their Beam Wallet app and payment transactions are completed in contactless fashion.
DigiCash, the bank-led mobile payment scheme, did a pilot project using the beacon model in Luxembourg. For payers, DigiCash Beacon devices at the point-of sale integrate with DigiCash apps that are issued by retail banks. Payments are made using SEPA credit transfers straight from the payer’s current account. DigiCash partnered with three retail banks: BCEE, POST and BIL. DigiCash also enabled successful SEPA payments using the beacon concept.
The above use cases do show that beacons do have the potential to gain large scale adoption in payments. But there is existing skepticism around why BLE beacons may not be the best options for enabling payments. This can be attributed to the security issues as highlighted below:
The Security Issues
Visual security: Since BLE enables transactions over long distances, there is lack of additional visual security because the customer might not see the POS which the smartphone interacts with via beacons. The long range transactions become easier to be spied on and interfered with. Another possible threat could be the denial-of-service attack where hackers could intrude the long range BLE transmission.
Compliance/Certification: For card-present transactions to happen, beacon technology requires a hardware and software-based setup related to POS, handset, etc. The issue with BLE is that such required configurations need to be compliant and certified by existing payment networks. Given the security issues pertaining to these long range transactions, it may be difficult to obtain such certifications. The other option could be card-not-present transactions which are less secure and costlier.
Shopper-merchant linkage: With BLE, the linkage between shoppers and merchants involves shoppers being identified via their position through BLE triangulation or through BLE distance. This additional step makes it difficult to match the right customer with the right transaction. The risk becomes much higher if there are a large number of customers in-store.