Commerce Weekly: Mainstream mobile payment a decade out?

Don't toss out your leather wallet just yet, Wal-Mart is innovating, and Project Oscar is a go.

Here are a few stories that caught my attention this week in the commerce space.

Gimmick to mainstream — the difference a decade can make

With Square teaming up with Starbucks, PayPal partnering with major chains like Home Depot and McDonald’s, and all the hype and speculation around the new iPhone having or not having NFC to facilitate payments for Passbook, mobile payments are getting a lot of ink. But when will mobile payments be fully mainstream? Not for at least 10 years, writes Christina Bonnington this week at Wired. Bonnington points to slow adoption and infrastructure holdups as the major bottlenecks:

“Forrester Research estimates only one-fourth of U.S. consumers will own an NFC-enabled phone by 2016, with 100 million shipping in 2012. Until a solid majority of consumers own such devices, merchants have little incentive to create an infrastructure as receptive to smartphone payments as it is to cash and credit cards.”

Bonnington notes that credit card companies are pushing for merchants to upgrade their systems to accept contactless payments, but as analyst Mark Hung told her, this alone could take up to a decade. Bonnington points out that even after that happens, mainstream mobile payments will still face obstacles similar to those that credit card payments face now: competing platforms that force consumers to carry multiple credit cards to accommodate merchants who accept MasterCard and Visa but not Discover, for instance. Imagine a merchant accepting PayPal and whatever Apple develops but not Google Wallet or Isis. Adding to the chaos, processing fee distribution between banks and hardware/software developers will need to be sorted out, she says, as will agreements on how data gathered via mobile payment will be handled.

In a similar vein, Chris Ziegler at The Verge also argued this week that mobile payments are not ripe for the mainstream and pointed to the ultimate hurdle: consumer frustration and distrust. Ziegler shares a personal experience that highlights the cumulative result of the issues Bonnington noted together with the unreliability of cellular networks: even mobile payments in stores that are set up to accept them don’t always work. Until mobile payments become as reliable and ubiquitous as cash and credit cards, he argues, they’ll remain a gimmick.

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Wal-Mart tests mobile checkout, cashes in with new search engine

Wal-Mart joined the likes of JC Penney the Stop & Shop grocery chain when it began testing a mobile checkout service this week. Chantal Tode at Mobile Commerce Daily reports:

“The new Scan and Go [iPhone app] service is being tested at a single store in Arkansas, according to published reports. While customers will be able to scan items with their iPhone, they will not be able to pay via mobile at this point. … The mobile checkout service is currently being tested by employees at the Arkansas store and has not been rolled out to shoppers yet. Users will be able to transfer a list of items they have scanned to a self-checkout kiosk and then pay in one step.”

The motivation behind the new service, Tode reports, is to shorten customer wait times in line and to reduce the checkout area footprint.

Wal-Mart also reported this week that Polaris, the search engine it custom built for its website, is now fully rolled out in the U.S. Nidhi Subbaraman at Fast Company took a close look at how the search engine works:

“One of the ways Polaris is designed to augment the search experience is by treating search terms as categories. So, a search for ‘garden furniture’ may not serve up results with the word ‘garden’ in it, but would offer up suggestions and options for hardy and rainproof, garden-friendly furniture.

Another interesting feature of the search engine is that a product’s popularity on social media sites plays a role in its resulting search display. Sri Subramaniam, VP at WalmartLabs, told Subbaraman “[t]his ‘product popularity score’ is essentially like a Google page rank.” Right now, Subbaraman reports, the search engine integrates with product placements and “Likes” on Facebook, but “[a] product’s popularity on other social sites like Twitter or Pinterest could also one day feed into Polaris’s radar.”

So far, the search engine has proven successful for Wal-Mart — according to a post at Reuters, Wal-Mart reports a 10-15% increase in search conversion (the number of customers who make a purchase after searching on the site) since the rollout of Polaris began a few months ago.

Project Oscar gets a thumbs up

The European Commission approved a mobile wallet scheme this week that it began investigating in April as a potential monopoly. The joint venture by Everything Everywhere, O2 and Vodafone, called Project Oscar, was called into question by UK mobile phone network Three when it was shut out of the venture and by wallet competitors Google and PayPal.

According to the BBC, the Project Oscar founders plan to “release a unified smartphone-based service offering an alternative to cash, credit cards and loyalty cards,” and intend to “create a new company and begin hiring staff ‘as quickly as possible,’” though no launch date for the new wallet has been set.

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