Starbucks is introducing mobile payments with the help of mFoundry and the iPhone. Starbucks customers can now use their mobile phones to purchase coffee at participating stores as the coffee chain conducts a mobile payment trial.

Starbucks joins the growing list of retailer’s rolling-out mobile payments solutions.

I recently downloaded the application from the App Store to test it out. It is a simple and straightforward App as you would assume and has a useful ‘Find Store’ feature to help locate the nearest participating store front.

The App allows users too:

§ Reload your card

§ Setup auto reload

§ Sign up for promotional and discount offers

§ Enable a pass code for security

The App utilizes a 2D bar code and is scanned by a Starbuck’s POS device for a quick transaction allowing for ease of use at check out.

More important than the Applications’ features and increased speed at checkout, it is another shot in the arm for mobile payments by getting customers familiar with using their mobile phones as a payment device.

I would assume it is only a matter of time before we see a convergence of mobile payments and mobile marketing as Starbucks already offers loyalty rewards to registered prepaid users. The mobile channel allows Starbucks to establish a 1-on-1 relationship with each customer.

If we can expect a mix of mobile payments and mobile marketing what impacts might this have on other mobile payment technologies such as NFC?

According to an article from the American Banker, “”I still believe that NFC will benefit from it, and other mobile payment companies will benefit,” Drew Sievers, a co-founder of mFoundry said. “I think that this is a great way to get consumers thinking about their mobile phone as a payment vehicle.””

Considering this is a closed-loop system, will this be a ripple or a wave for mobile payments in general? If Starbucks prepaid users embrace it, it will be a pretty big splash.

According to an article from Payment News “since 2001, the Starbucks Card has revolutionized the way customers pay for their daily coffee experience. With more than 193 million cards issued in the U.S. and Canada since its introduction, there are approximately five million active Starbucks Card holders at any given time.”

Lets hope Starbucks will achieve a similar success as it moves to the mobile channel.

AmericanBanker

After we looked at the results we reexamined their mobile banking strategy, having a long-term plan is the only way to select the proper mobile banking solution.

Why do I say that??  Because complimentary offerings vs. basic banking features and which or how many communications protocols will be utilized are critical before selecting a mobile banking vendor solution.   And those are the easier decisions to make.

To set the stage and look at a few of the decisions that need to be made, let’s look to ABI Research which recently ranked/rated mobile banking vendors and the criteria used in their rankings.

ABI Research Ranking Criteria

Implementation:

The seven categories are:
1)    Bank relationships (both the relative size and number of banks they have relationships with)
2)    MNO relationships (both the relative size and number they have relationships with)
3)    Solution breadth (does the vendor offer solutions by SMS, mobile Internet, and mobile application
4)    Complementary products (products related to mobile banking that a prospect might be interested in, such as domestic p-to-p, mobile top-up, mobile international remittance, bill pay, mobile commerce, etc.
5)    Partnerships (distribution partners beyond banks or MNOs, such as device manufacturers, IT companies, etc.)
6)    Financial and organizational health
7)    Supporting products and services (products and services that facilitate mobile banking so the company does not need to partner [provides some cost and information advantage such as an SMS gateway, GRX, or integration services]).
Innovation:

The three categories are:

1)    SMS — Functionality and Security
2)    Mobile Internet -Functionality and Security
3)    Mobile Applications – Functionality and Security.

Although I did not utilize the ABI report for my vendor assessment I think the criteria is a good benchmark when evaluating mobile banking vendors.

So do you just pick the winner and go?  Or maybe you select the most cost effective of the top 5?   Issue an RFP to the top three?

Features are relatively irrelevant from a vendor software solution standpoint or put another way they are identical for all vendor solutions.   Any features your financial institution provides to its online banking customers can be delivered via the mobile.  It is very difficult to select one vendor over another because they can extend your online services to the mobile.

Features being equal do you focus on what is likely the biggest concern?  Security.

Security is first on consumer’s minds and financials institutions as well but how secure the solution is or needs to be really depends on the mobile banking strategy.

If you are using SMS for example you will have very different security concerns than a downloadable application.  Also, if information is stored on the phone, the security strategy becomes much different for solutions that do not store information on the phone (USSD for example).

Triple play is a buzz word (SMS, Mobile browser and downloadable application) or quad play (SMS, USSD, Mobile browser and downloadable application) for mobile banking.   Is it good that a solution can offer all these access channels to your customers?

That depends on if you are prepared for the maintenance and customer support that will be required to support each.   Not to mention, each will have its own security issues, implementation cost, technology issues, customer education, etc.

If your organization is ready is the customer ready?  In the geography you operate, customers may have limited exposure (if at all) to USSD for example or have limited experience with downloading applications to phones.  So maybe SMS is the right answer or focusing on Smartphone’s such as the iPhone and Blackberry?

Arguably the quickest and easiest way to offer mobile banking is via WAP and a mobile browser.   Even this requires a marketing strategy, support and customer education.  Again, first you would need to understand if mobile browser would work for your current customer base.   Are data services common where your financial institution operates?  Is it expensive for customers to use?

The complexities keep growing if you do not put some forks in the road early and often.   To confuse things a bit more, the mobile banking vendors are in ‘partner mode’ at the moment so identifying a clear strategy is key to investing in technologies that will work for all your customers.

Considering it is cheap for banks and other financial institutions to support when compared to other channels such as call centers and more and more customers are expecting their banks to offer it, mobile banking is here to stay.

Putting the long-term plan in place early will allow your mobile banking offering to grow properly over time with limited investment risk.

Read More?

Mobile Banking Users, who are they?

The Mobile Banker from the American Banker published an article about Mobile Payment Systems also known as Mobile Payment Solutions or simply as Mobile payments.

The article stresses the importance mobile payments, contactless payments, Near Field Communication (NFC) and related mobile services will play in the coming years. According to the article as much as 20% of all credit/debt transactions could be mobile or an alternative by the year 2012.

What is interesting is who is leading the change and how the change is being executed in the marketplace.

Before the discussion around mobile phone payments was dominated by the question of how will the value chain be sorted out or more specifically how will all the players share the profits. The players being the merchants, source of fund providers (banks, credit card Companies, stored value), customers and mobile network operators.

The argument or concern was that until this question was answered, mobile payments would remain stalled, especially in geographies such as North America.

MasterCard is helping to answer this question by facilitating the infrastructure upgrades vs. negotiating how much of the transaction they are willing to forfeit.

MasterCard is working directly with specific retailers to upgrade their Point of Sale (POS) systems. Currently, MasterCard is working with Home Depot, Hess retailers and Sports Authority to upgrade over 3,200 locations to accept payments from mobile handsets, NFC cards, NFC mobile phones and the like.

If the retailers are willing to work with the credit card companies to upgrade the infrastructure, it leaves little room for the MNO’s to add value. Mobile Operators are going to have to get creative if they expect to share in any revenue generated by contactless or mobile payments.

They may need to quickly re-focus their efforts on something like reserving screen space for mobile marketing or working on how they can assist mobile loyalty schemes.

As encouraging a sign as the trends indicate about the future of mobile payments, this has to be equally discouraging to all mobile operators who are currently struggling through negotiations on how to share in the revenue stream.

As the merchants, processors and card networks appear to be willing to make the investment to upgrade the POS systems, operators around the globe currently in NFC/mobile payment trails whether they are successful or not must be concerned.

I would not want to be at the negotiating table as the POS systems begin their upgrades.

For more about this article please visit the link below.

http://www.americanbanker.com/issues/174_198/trends_bode_well_for_mobile_pay_adoption-1002928-1.html

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