AutoID & Data Capture Blog

New Kid(s) On the Payment Block

Around this time last year, we introduced you to mFoundry and its digital wallet & vCard solutions, heralding an entry into the plastic-less future of commerce. Starbucks (SBUX), one of mFoundry’s premier customers since 2009, recently announced a nationwide rollout of its consumer mobile payment initiative, extending to all of its 7,500+ stores/outlets. Loyalty card holders with Smartphones can now pay for their purchases at these locations via a 2D barcode displayed on the mobile screen that is scanned at the point-of-sale using Honeywell 2D barcode scanners. This new scan-and-go capability at these stores promises to quicken the check-out process while potentially lowering investment in point-of-sale peripherals such as payment terminals. And most importantly, this alternative payment method manages to effectively engage today’s increasingly technology-savvy consumer base and enhance their overall experience while also pitching SBUX as a technology-forward organization.

Mobile barcoding has been around for a while. For instance, one of the nation’s largest retailers, Target, rolled out a scannable mobile couponing initiative in 2010 allowing its customers to receive exclusive offers directly on their mobile phones and redeem them by scanning a barcode on the phone at checkout. Barcode technology suppliers are increasingly targeting this emerging, high-growth market segment with optical scanners designed to effectively read barcodes from a mobile (eg. Motorola's DS4208 & DS9208 and Honeywell's Genesis™ 7580 & Xenon™ 1900).

The general consensus among many of the payment processing and telecommunication industry stalwarts has been that NFC (Near-Field Communication) is poised to be the next evolutionary platform for contactless payment. Why then did SBUX choose 2D barcodes over NFC? There are several reasons:
• SBUX already uses a mobile couponing program, so the extension to another mobile barcode application is not a significant undertaking
• Barcode scanners are readily available and at a much lower price point – these are less capital intensive and scanners can be used to support multiple applications
• There are a very-limited number of consumers with NFC-equipped devices (especially in the US)
• Deploying NFC infrastructure into each store would require significant capital and serve a very limited customer base

But let’s be clear – SBUX does not appear to be writing off NFC. Their decision to use a barcode system is most likely an interim alternative until NFC adoption gains traction … and it’s well on its way. Support for NFC is foremost on the minds of most of today’s leading Smartphone and mobile device developers. For example:
• All Nokia Smartphones shipped in 2011 will be NFC-equipped
• Google’s next version of Android is expected to include NFC-based tap-and-pay functionality
• The next-generation of the Apple iPhone and iPad are rumored to have integrated NFC
• RIM is evaluating NFC for the possible inclusion in one or more of its BlackBerry models
• Contactless payment infrastructure – which NFC can leverage – is being deployed at a rapid rate and end users are becoming more comfortable with the solution. VDC predicts that revenue from contactless payment hardware deployments will grow in excess of 40% over the next 3-5 years.

And this bodes especially well for payment terminals suppliers who now have their task cut out for them. The need to rapidly innovate and future-proof product offerings to reflect changing end-user requirements are expected to drive development initiatives for this automation technology in 2011.