Not a day goes by without hearing about a new type of payment technology that is making the rounds. We think it’s incredibly exciting to be a part of this enormous shift in thinking where how consumers pay is literally limited to your own imagination. From a phone tap, to ultrasound, to paying from fifty miles away, mobile technology makes it all possible.
Even on Twitter, where we follow search results for Mobile Payments, we have seen results steadily increasing daily – from several dozen tweets just a few weeks ago to several hundred in recent days. It can be somewhat confusing for consumers, so we took a stab at comparing some of these new technologies, and giving our take on how they stack up against each other. Keep in mind, this isn’t intended to criticize any particular solution – we love all these new technologies and are excited to see changes coming to payments in all shapes and forms.
So, to start; here is our initial chart we came up with comparing some various payment types against some different factors and consideration on a “5 star scale”, with 5 being the “best” and 1 being the “worst”. Couldn’t quite fit the full size chart in the post, so click it for the full size version!
At least we didn't include Personal Checks!
Let’s discuss each one in more detail!
Branded Payment Apps
We consider branded payment apps any payment application that has a specific brand associated with it. The most well known one today is likely the Starbucks app, but there are also apps for other quick-serve restaurants like Chipotle.
The Starbucks mobile app (available on Android and iPhone) allows customers to pay for their order at the register with a Starbucks prepaid card that is loaded on the phone. The process involves first typing in the Starbucks card number on your phone to display the balance. When you get to the register, you pull up the app, click “Pay”, and hold the generated bar code under a scanner. A quick beep, and the cost of your grande latte and scone are deducted from the balance on the card.
In general, these payment apps work very good for their unique situation. If you are a frequent customer of Starbucks, this is a pretty great application to have. Same with Chipotle (Although seriously, how many burritos can you really eat?!).
Where we see a downside here is fragmentation. We don’t believe you should have to download an application for every place you frequent. Just take a look at your monthly card statement, and how many vendors you frequent – imagine having a separate application for every one of these places? You could easily have hundreds, or even thousands, of mobile apps clogging up your phone over time.
Other explanations on our ratings:
- Checkout speed is quicker than paying with cash or card, but you need to manually enter your stored value cards initially, vs. having to do it just once for credit card based payment methods
- Queue elimination is somewhat faster since you can prep your payment ahead of time, but you still have the line to contend with
- Security – depends on the application and the company. With the Starbucks app, this is pretty poor – anyone who picked up your phone could use your balance at Starbucks, exactly like they could if they found a gift card that had some value remaining on it
- Rewards can work OK, but only for that branded establishment, so we docked some stars
- Cost to consumers – we docked a point here because with the Starbucks example you need to prepay for your card – which means you tie up money ahead of your purchases on a card. This may vary from merchant to merchant
- Cost to merchants is very poor – for an independent business this is likely the most expensive solution for you as you need a custom-built application and payment integration for your specific circumstance. Starbucks had to install new barcode scanners in every one of its locations
- Consumer reporting is also poor – you get the same level of information as you get when paying with a credit card – your monthly statements at best
Mobile Wallet / NFC / PayPass / Pay by Phone
NFC (near field communication) falls into this category – as does the new technology introduced by Zoosh this week which uses ultrasound to pass payment information to the register.
These technologies are very cool in that they replace your credit cards with your phone, and also assimilate all those irritating rewards cards and track it all automatically. But, as we posted about here before, it doesn’t eliminate the line at the register or waiting for a server in a restaurant or bar. So, while we think NFC and the ultrasound technology introduced this week are preferable over plastic, we don’t think it beats a self-checkout option for the patron.
Other considerations on our ratings:
- No line elimination, but does get an extra star for being slightly faster than credit card / cash
- Strong security, utilizing PIN number
- Very strong on rewards and coupons, and cross-merchant implementations. Although, this could change depending on who the major NFC players end up being
- Merchant cost is fairly good. Some opportunities exist to save money by offering steering incentives to consumer to use payment mechanisms that are cheaper (e.g. giving a discount for using a particular card)
Point of Sale Replacements
Square, recently identified as a billion dollar company, falls in this category. They recently introduced a pretty cool new point of sale “app” that sits on an iPad and allows merchants to quickly process payments and manage transactions in what is probably one of the cleanest implementations we have seen to date. For small boutique retailers – this is a fantastic technology and gets them in business quickly with about as low overhead as you can get.
Again, the downside of this is that it doesn’t remove the patron’s interaction with the register from the equation. The consumer can pay via phone or even by saying their name, but they still need to get to the register and talk to the cashier.
Other examples of this include web-based and cloud-based point of sales systems that are emerging with greater frequency. More commentary on our ratings:
- Checkout speed is pretty much the same as any other register based system.
- Line elimination – same issue as with NFC – the line / queue still exists, but is faster than cash or credit card
- Fairly secure – the Square implementation has a photo of your face for verification. Unless someone pulls off some Hollywood makeup, it’s gonna be tough to fake
- Rewards and coupons are OK, but you need to setup profiles with Square for each merchant. That can again mean hundreds or “cards” in the app, even if they are just in one app.
- Merchant cost is a big plus, particularly when you include the capital expenditure of a new POS system that you can effectively skip
- A downside is that this solution probably isn’t tailored to high volume / multiple lane / multiple location implementations, at least not in its current iterations
Pay At Table
Specifically in the restaurant / food service space, there are really two different technologies in this arena – patron-driven on-table payments (like E La Carte) and restaurant driven checkout (like Micros’ MobileMicros). You’ll also see this in some retail establishments, like the Apple store, in which all employees carry around hand held point of sale systems they can use to check out customers on the fly.
Again, we think this is a great solution – heck, the idea for TotalTab was formed by us thinking about how the Apple store model of employees carrying around pocket size registers could be made even more efficient by removing the employees and their devices from the equation entirely. The patron drive on table payments like E La Carte are a great step in the right direction; however E La Carte won’t apply to all establishments. Fine dining, for example, and the nightclub scene won’t lend themselves well to this technology. Meanwhile, establishment driven checkout like the MobileMicros solution, while elegant, still requires the assistance of a server to actually close the tab.
In our comparison chart, we considered an E La Carte style solution for our ratings:
- Speed is quick, just behind self-checkout. No line, so you can pay when you are ready
- Security is poor – just like with a credit card, anyone can swipe a card and sign for it. All the same risks of fraud exist here. We give an extra star because at least customers maintain possession of their cards
- Rewards and coupons is mediocre. A restaurant can introduce their own coupons on a system, but aggregation or storage in some consumer account is tricky at best. To the consumer, it’s like any other credit card transaction
- Cost to Merchants is high – this is definitely a capital investment, plus likely additional support and ongoing maintenance costs
- Consumer reporting is poor – same is if you used your credit card in a store. You can check your bank statement, basically. One extra star given since some systems allow you to email yourself a receipt, so at least there is an electronic copy of it for future reference
Traditional Cash and Credit Cards
Not really too much to add here, we are all familiar with the Benjamins – some commentary on the comparison chart:
- Cash is very insecure since you don’t know who it really belongs to. A dollar on the street belongs to whoever finds it. Credit cards are slightly more secure in that they need a signature and you can dispute charges, but fraud is still very frequent
- In terms of speed, we didn’t put personal checks on the comparison table but that is pretty much the only thing slower than cash
- For rewards – you can clip coupons and bring in your rewards cards to accommodate your cash or card purchases. Beyond that, good luck!
- Cash has the edge in one category – cost to merchants. No processing fees! (No, I’m not including extra points for under the table payments, so don’t ask! Make your payments to Uncle Sam!)
- Reporting for consumers and merchants is minimal for both technologies. With a card purchase you can at least check your bank statements for history. Cash you have a paper receipt and that’s it!
Consumer Self Checkout
With the obvious asterisk that this is what TotalTab does, we believe this is an obvious solution in many ways. AisleBuyer is doing this in the retail space, and we are looking to bring it to restaurants and bars.
The biggest benefit of self checkout is, as we have said before, putting the power of the checkout in the hands of the patron. Leave when you are ready. Your time has value, right?
Other factors:
- Checkout time and line / queue elimination is the quickest, since there is no checkout process. You just click a button on your phone and walk our the door
- Security is very strong, since you need a PIN to checkout. Credit card data is never stored anywhere but on your own phone in an encrypted format
- Great integration with rewards and coupons systems is possible – it won’t be in TotalTab’s first iteration but look for it in the future once we finish nailing down the payment app!
- Merchant cost is low – no upfront fees, and a low variable cost tied to usage that is almost entirely offset by the time savings gained and additional table turns realized
- Consumer reporting is available from the web or from the phone, at any time. Eventually, we will enable reports to be run from the web based on date ranges – if you are a sales rep or have to take people out for business lunch, this is going to make your reporting a breeze
There’s a Whole Lotta Room for Shaking Things Up!
The bottom line is that cash and card are quickly being usurped by some amazing technology that is being implemented in countless ways – and all in ways that benefit the consumer and merchants. And consumers have the voice to pick and use the technologies they want! In many cases, the options will all be available, and you can use whatever floats your boat!
Post up in the comments if you agree or disagree with our star assessments, and let us know if you can think of any factors we should have included that we missed! Disclaimer: obviously, these results are subjective and were formed during the creation of this blog post, so we are open for a nice discussion in the comments on everything here!
