Eliminate the POS and Optimize Loyalty in Mobile Payments

Last week I made a passionate plea to mobile operators to take advantage of consumer and market lethargy in order to win in mobile payments. Since that writing, two events have occurred that have reinforced and added to those beliefs. First, waiting on POS upgrades is a waste of time, not only because being mobile means that people shouldn’t have to wait in line, but because making the POS more complex creates more problems than it solves. Second – though just as important – loyalty optimization might be the best way to drive mobile payment adoption. Here’s what happened…

1) Cash Trumps Mobile Pay at Starbucks
I’m almost ashamed to admit that I’ve become one of those people who goes to Starbucks for coffee almost every morning before work (that new blonde roast is just so darn good). Anyway, I often see people using the Starbucks mobile payment app at the register. Basically, it’s a gift card on your mobile phone. After you buy enough overpriced coffee, you get rewards and advance in the Starbucks loyalty ranks like you would in a video game. The payment works via code scanner; users hold the graphic on their phone in front of an infrared scanner and when it beeps, they’ve paid. Except when it doesn’t work. The young woman in front of me was quite vexed to find that her account was out of cash and she didn’t have enough points for a free Venti skinny half-caf whatever…The entire queue was stalled due to this dilemma and no one on either side of the counter knew what to do. I know my coffee costs $2.47. I held up three singles and said, “This works.”  They took my cash and I was on my way.

Though this was an instance of user error, in the sense that the young woman had not recharged her pre-paid account, it reminds us that when well intended technology fails, it can impact not just the user, but everyone in the queue behind that user – i.e. the customer experience Starbucks works so hard to maintain was crushed by their reliance on a POS-centric, debit-based system. You know what would have been great? If her Starbucks app would have reloaded automatically through a direct-to-bill charge. And, as long as you’re doing that anyway, why do you need a separate debit account and a card reader at the POS? You don’t. You grab your coffee, step out of line, hit the pay button, and move on. That’s mobility. The intrusion of the POS foils the plan.

2) Optimize Loyalty Rewards
My wife is brilliant. No, seriously…it’s well documented. Anyway, among the amazing things she does is that she optimizes loyalty points better than anyone you’ve ever met. We collect Southwest Airlines miles so we can fly our whole family to Disney World for free once a year. She discovered that many of the stores we buy from online, like Diapers.com, have a deal with Southwest; shop there through the Southwest site and double or triple your mileage points. If you use the Southwest credit card, you get even more points. She gets points on her points. But how many people work the system so well? You shouldn’t have to be doubly board certified to figure it out. If mobile wallets can figure this out for people automatically, they become a lot more valuable.

That said, the real message for mobile operators here is to map out whatever loyalty and affinity deals the credit card companies offer and match them or beat them. When my mobile wallet tells me what the best way for me to pay might be in any given scenario, based on discounts, points, and other factors, a direct-t0-bill charge (or debit in a pre-paid scenario) should win 90 percent of the time. If I get to the point where the best deal is almost always coming from the mobile operator, it just becomes a no-brainer.

Now, in an upcoming rant, we’ll have to talk about the pitfalls, like bills that don’t make sense; bad dispute processes; and taking on the credit card industry’s customer care burden on top of the already nightmarish mobile care onus. Ultimately, though, those are good problems to have, because facing them would mean mobile operators are getting the user adoption piece of mobile payment right.

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About Edward Finegold 122 Articles
Ed is now Director, Strategy for NetCracker. Previously, for 15 years he was a reporter, analyst and consultant focused on the OSS/BSS industry and a regular contributor to BillingViews.

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