Less than zero

Yes, it’s my Starbucks card. I’ve been using my Starbucks app for a while now. It’s worked perfectly, every time. It’s worked cross-border. When I have no money, I can top it up in seconds and pop in for a coffee and cake while I work. it’s not limited to £15 like contactless cards (well, shortly to be increased to £20, but you get my point) so if I’m buying a few coffees because we’re having a business meeting there, there’s no problem. My Starbucks card is now in the bin, replaced once and for all by my Starbucks app. I think I just heard Brett King say at IPS 2012 that a quarter of Starbucks US customers are already using mobile, and I for one cannot see any reason why they would ever go back to plastic.

Incidentally, I got an e-mail from Starbucks telling me that from now on if I use my Starbucks app to buy in-store then the staff can call me by my name. I had to go and log in to my Starbucks account to find out what name I’d used when I set it up. Naturally, I hadn’t used my “real name”, which in this case is pretty handy. When they call out “Latte with extra shot for Dave” there might be many Daves and so confusion, but when they call out “Latte with extra shot for Theogenes de Montford” I’m pretty sure I’ll be the only one up at the counter. But I digress.

My prepaid coffee card turned out to be the vanguard for the next generation retail experience. Not so my bank-issued credit card, my driving licence, my Waitrose loyalty card or my gym membership card (OK, I made that one up for effect), but surely it’s only a matter of time. So why was my Starbucks card the first to go? I think that illustrates a more general point about mobile payments that we’ve been discussing on the blog for a while. As a retailer, Starbucks had control over the acquiring of the transaction. This is the critical path. Making it simple and easy for the customer to use the mobile app made customers want to use it. And it didn’t matter that they could only use it in Starbucks, and it didn’t matter that the security isn’t “bank grade” and it didn’t matter that it’s a bar code instead of NFC.

One thing that I think that the Starbucks mobile experience has shown us is how willing consumers are to adopt mobile payments solutions that only work in limited locations, like one store.

[From Handicapping PayPal and Google in the Mobile Transaction Platform Race – pymnts.com]

Correct. This what I’ve referred to in the past as “branded ubiquity”. One thing I learned from the failed attempt to roll out Mondex was that geographic ubiquity was, with 20-20 hindsight, totally the wrong way to roll out a new payment proposition. It didn’t matter to the public that (I’m making up this example) their new card worked in Burger King but not MacDonalds, so long as it worked in all Burger Kings. Customers needed certainty of tender.

What does this imply when we move to mobile? Having a different card for each coffee shop, as I do, is a bit of a pain. Having a different loyalty card in my wallet for every shop I might conceivably visit is out of the question. But having a million slots in my mobile wallet is not. In fact, it’s very desirable as a consumer. I don’t want to have to remember cards: I just want to tap, and have the phone take care of everything else.

This means, as we all understand, that the link between payment products and value-added services is fundamental to a sustainable business model. More integration and sophistication is just around the corner. Suppliers are already working to make this easier, and it’s one of the key reasons why merchants are looking forward to mobile wallets.

The First Data OfferWise solution allows offer publishers to electronically attach offers such as deals, eCoupons and loyalty programs to one or more of a consumer’s payment cards or mobile wallet to enable streamlined and automatic redemption of the offer at the point of sale (POS).

[From First Data Presents OfferWise to Streamline Offer Redemption and Customer Experience | Daily Deal Media]

To be completely honest, this is going to be bad news for people who have built their future on transaction revenues from retail payments, because those transaction revenues are going to trend down under the pressure of competition from new entrants who don’t care if those transition revenues run on zero margin, or possibly even a less-than-zero margin. That means an entirely new kind of competition at POS.

These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers