PayWave/Visa’s NFC vs Paypal’s Beacon vs Apple’s iBeacon – How will mobile payments emerge?

September 25, 2013

in Accelerating Innovation, Mobility, Pocket Strategies, Smart Retail, Strategic Foresight

iBeaconHow will mobile really deal with payments? Who will wrestle control? The number of initiatives around mobile payments are growing. I’ll ignore the mPesa type of example here for now. The primary smartphone contrast today is between NFC (PayWave/Visa), Beacon (PayPal) and iBeacon (Apple) which isn’t even a payments system yet. Although Apple is hinting at their direction with the iPhone 5S a fingerprint reader and iTunes payments. Will iPhone 5S purchasers get a new Apple Store (physical and App) experience? Only time will tell.  This post is not a prediction that BluetoothLE will win, it merely means to help explore what it might mean. As a contrast see this: 

“I absolutely do not see BLE as a replacement for NFC,” he said. “I see them as complementary and not competitive. BLE is primarily a location positioning technology that can also deliver content within a confined geographic area. NFC is a physical object engagement technology. Both have distinct use-cases that do not conflict. I do think BLE has a future. Like NFC, tag management and cost will be a big issue connected with its deployment.”  via Taking stock of Apple’s iBeacon | MobilePaymentsToday.com.

Behind the advances is Bluetooth LE for low energy. Compared to NFC it is significantly better at managing proximity and doesn’t require a “physical-touch” on the in-store payment device to complete a transaction. This may or may not be good. I tend to find it more appealing. Systems using this latest form of bluetooth can thus “wake” or “notify” a mobile device and shift messages and activity based on location over a larger area. This means a single node or beacon can provide different messaging. For example one on a register could also be providing promotional offers to passing shoppers 150ft away. Similarly, multiple beacons can be installed inside a large store creating a network of different experiences. (see Estimote).

There are two big challenges.

1. How do retailers bring this in to their stores and integrate it with their current POS and customer management systems?

2. How will it work on the mobile device from both user experience  and a more technical perspective?

I’d like to focus on point two for the rest of this this post.

For the User:

How will these interruptions, vibrations in your pocket, and localized content offers actually play out? Example given the proximity sensitivity you could be in an apartment store some 100ft from a display, and you could get a shopping recommendation – eg go and look. It can even give you a pointer as where to walk or head (how do we handle the floor above? :) ). When you are at the display it may provide special pricing or it could offer other product matches in other parts of the store that you might like. This experience could be completely customized to you. There are many nuances in this transaction. Imagine it suggests that you buy it for a Facebook friend for their birthday, or some other form of gift reminder. Think about all the other reasons you may be in a store. Helping your partner shop. How could this technology help you surprise them with a special choice for finding something? The list will just grow. However the extensions are even greater. Having picked up the new sweater you could just pick up a bag and confirm you purchase and walk out of the store. The electronic check at the door matching you and your paid for items invisibly.

In a large department store users won’t want a proliferation of apps competing for their attention. Retailers also want to manage the experience from start to finish. A big context differentiator for any system is “time”. How long will a customer be in the store? Is it a quick in/out collection or payment? Do they know what they want and is it a fast transaction? If a question of speed is there an opportunity to “add” extras to this transaction? What if the customer just came in to browse? Or they had never shopped there before?  Could a customer actually be acting as a proxy for someone else? Context and time will play a big role in any solution.

The other interesting thing about iBeacon is it works both ways. Your smartphone can also be a beacon. So the small retailer, or the market stall, or street vendor could use their mobile device as a beacon to “bring extra business to them” and then ring up the sale on the same device or even on your device. Similarly, it can create new relationships and potentially bring that small entrepreneur a world full of data and new opportunities. Many smart phone carrying owners may hate this thought. So let’s refine it with a filter. Imagine now walking down the street in a market full of vendors and only getting relevant things from those that have a Yelp rating over 4.6 or some personalized filters. That may be more like shopping for treasure.

The Technology Challenge:

The issue is will Apple iBeacon (like technologies) be embedded into the operating system (Apple’s iBeacon, Google/Android Copy? Google is also following with a Bluetooth LE strategy.) to capture payments or will these features facilitate payments for more traditional payment solutions?  Will Apple promote more innovation in payment Apps so solutions are more OTT (over the top) like PayPal’s Beacon App or current banking apps?  My guess is Apple will facilitate OTT apps while perfecting their own and may roll this technology out in different ways.  There are t0o many variables and different experiences for innovation not to go broader. When studying this evolution both the large retail opportunity and the individual are important. I suspect the individual is underserved in this area (globally) and I could write a whole post on that.

The challenge and risk for everyone developing a payment system is how does it relate to the operating system? For example, consider the parallels with VoIP services. Mobile operators had SMS, then consumers came along and bought smartphones; added data and embraced everything from What’sApp to SnapChat. All these services are OTT meaning the carrier doesn’t benefit or participate in them. Then there is FaceTime or iMessage which is both effectively OTT but also embedded into the iOS operating system which adds convenience – easy to use and the sheer utility may be hard to copy (thus challenges the Apps). Carriers/Mobile operators hate OTT plays and have also plotted for years to get in on the payments bandwagon.  Banks too see the threat of mobile and like mobile operators they are already using regulations and other strong arm tactics to protect their position in many countries.

The larger question is can iOS or Android become our banking / payment transaction friend? That may rest on both economics and trust. Concurrently, do emerging solutions reduce or eliminate fraud while making payments easy? With large app stores, both Google and Apple are already in our pockets although the outcome won’t be decided very quickly.  Like iMessage it may come in a few years. In the meantime there will be a proliferation of apps and hardware. Those making “iBeacon” like hardware will also want to be reasonably universal unless they want a proprietary solution like Paypal is proposing. Today, we can’t even dream up all the use cases. We should keep looking at the world in many different ways considering how a multiplicity of Bluetooth LE nodes might change how we interact with an environment.

I originally started looking at this post reading how PayPal Beacon works as an add-on to traditional POS systems. It does indeed present a quicker more friction free payment case. This may make a real service difference in high volume outlets. Example a Starbucks or McDonalds. Yet chains that size can also create their own iBeacon apps and take additional control over the experience and I suspect that’s more likely.

The trillion dollar question over the next 2 to 3 years is which payment system is going to win? What new approaches will emerge? Will cash continue? Do Visa or American Express continue as plastic become Apps? Will PayPal be the new solution on mobile or will Apple or Google block their way?  As a point of reference the following snip points to why PayPal Beacon thinks they are better than other solutions (Estimote, Roximity Beacons, Adomaly, NFC, geolocation, etc.)

PayPal Beacon is better than… Because…

  • Geofencing Drains battery life, less accurate, requires pre-selecting a limited number of locations, relies on Wi-Fi or cellular network
  • iBeacon iOS only, privacy concerns (one way communication means the server tracks you)
  • General Phone can communicate to the cloud/PayPal without a signal (great for thick concrete walls, Victorian buildings)
  • NFC Requires you to pull out phone to pay (slower to tap a phone), requires NFC-enabled phone
  • Regular Bluetooth Drains battery
  • Credit Card Requires you to take out credit card to pay (slower to swipe card)

via Beacon – PayPal.

 

  • Leif Sikorski

    When it comes to payments the low range of NFC is a huge advantage. People were already scared that NFC could be tricked by people nearby, they will be even more scared if there comes a technology with a bigger range. Another advantage of NFC is it’s low cost and small size. It fits into sticker, it’s already in all new Visa and Mastercard creditcards, tickets use it (at least here), and it costs way less than a Dollar/Euro. There might be some usecases where BT has advantages, but there are also many where NFC is much better.

  • http://henshall.com/ Stuart Henshall

    I like your point on how people react and interface with the technology. I’m intrigued by how BT can change this. I’m not convinced that NFC really changes the relationship between buyer and seller in new ways. The big benefit of BT is it can engage the customer from the time the customer enters the premises. Quite probably both techs coexist and may well evolve in new ways together.

  • http://henshall.com/ Stuart Henshall

    Leif, I remain increasingly unconvinced. I think the “scares” and concerns people have over all with these technologies is a problem. As for cost I’m not even sure about that anymore. I suspect they will continue to develop in parallel.

  • Chocol Hu

    thats looks very well.
    http://www.jaalee.com/beacon_en.html

  • Stanry Tan

    I am speaking from Singapore.
    2-3yrs back Cold Storage supermarket implemented Beacon technology on their push trolley. The trolley comes with a TV screen.
    I was pushing the cart to the aisle, suddenly there is a voice narrator from the TV speaker at the front of the cart, I continuous scrolling slowly through the stretch of the aisle before introduction ended, another different promotion voice cut in. That puzzled me initially. By the way, I try to reverse a little to finished where I was left, but the whole promo voice start all over again. There was some interruption between the 2 beacon stations if you were to stand in between the 2, as I experience radio interruptions, my cart trying to catch both signal.
    As you know supermarket racks are full of items, there was an aisle I passes by, there comes another voice, the voice did mentioned on certain item on promotion, but I can’t catch the name also because I am trying to search high and low for the item on the rack. So I try to walk passed that section and come back again, but my cart didn’t catch the signal. That leaves me frustrated and annoyed.
    I find the iBeacon/Beacon concept don’t work as intended in real life. Can u imagine, everyone going into the shop, pointing their devices to the product they are interested hopefully to hear something or e-coupon and find out there were no voice or e-coupon? Or customer all bring out their phone on the air trying to catch some sort of e-coupon? I say they are Weirdo…weirdo….
    Maybe you can’t have individual product implementation using iBeacon, but rather as a whole. A person walk into a shop, and it list all the item on promo.

  • Stanry Tan

    With regards to payment via iBeacon, I still think a queue is still required. Let’s look at practicality, as a shop owner, you don’t want everyone who shop at your shop walking out the shop with your shop items claiming they have paid for the items without you verifying.(Issue no 1)

    What if customer buy lots of items, they still need a carrying bag from cashier counter, don’t they need to queue for it?(Issue no 2)

    When everyone is checking out their payment how are they properly register their product for payment? (Issue no 3)

    If everyone is bringing your item out from your shop, is there anything for the shop owner to verify that? Then don’t the customer still need to queue and bring out their phone ?(Issue no 4)

    What if the person click on wrong shop and made the wrong payment to? Who are they going to get the refund from?( It is because the customer might have came from other shop where he might want to make the payment but never proceed. )(Issue no 5)

    A theft could mimic the payment screen and claim he had paid the payment. (Issue no 6)

  • Stanry Tan

    As of NFC touch less terminal has been widely available at mos of the retail store in Singapore. MasterCard Paypass and Visa Paywave payment terminal are widely available in Singapore with MasterCard Paypass has gone one step further to allow NFC smartphone for payment.

    There are more and more Visa Paywave and MasterCard Paypass issued by the banks here. There are almost no additional cost to shops or learning curve to any party involved in the transactions.

    But for NFC smartphone users, it is more convenient, you don’t need to bring out your wallet going through all the cards. As human habits, we all mostly carry the phone on hand. Just tap on touch less terminal and there you go and no signature. Cashier verified your items and payment, shop owner has peace of mind letting u go out off shop of no payment. It is much better than conventional card payment, because I received instant email notification once I made payment through NFC smartphone.

    Not only NFC is using current available system, there is no additional cost of upgrade to the company. The bus system and subway of Singapore. It is just that the government has not enabled NFC payment through NFC smartphone yet.

    In Singapore, we can check balance and top up our Transportation card from our NFC smartphone. The technology is so ready for wider implementation. I can make payment on vending machine too.

    For Paypal Beacon or Apple iBeacon, it is more suitable for online ordering and request item to deliver to your home than bringing the item home immediately. Verification and checking are the main hurdle and obstacle.

  • http://henshall.com/ Stuart Henshall

    Hi Stanry, really appreciate your comments. As a buyer there is a real benefit of getting a electronic receipt immediately. This is something traditional retail has been very slow to do. Even the banks have been slow to do this with ATM transactions etc. It is finally happening. As to tapping / NFC it makes huge sense in subways and in other queuing systems where the only choice is “access” or “fill-up my car” etc. I’ll comment on your other posts separately.

  • http://henshall.com/ Stuart Henshall

    There are many self-checkout systems already available. Most of them are still quite clumsy and often many of us would prefer to use the staffed checkout. I think your argument is that the smartphone can’t be the scanner, the register, and the payment collector. Of course it can. The question is in what environments does this make sense. I also believe it is too easy to forget that you know exactly who is in the store and where they are. If I’m in Home Depot I have a relationship even if I am using their register and scanner while using my smartphone in-store.

  • http://henshall.com/ Stuart Henshall

    I love this example. It’s a disaster and it doesn’t add to the experience. My current story would be the frustration I get every time I now am anywhere near a Starbucks. I went to post the mail and the local starbucks shows up on my phone. I have no interest in starbucks at that time. The coverage area is overextended and it then isn’t a convenience, or context aware. It will piss people off. Plus the last time I went into the store….. My balance was zero and the barista had zero suggestions at that point. So I got my wallet out.

  • Stanry Tan

    Yes. There are one or two supermarket are having trial on self checkout even IKEA store. With some guidance u can still checkout by yourself. There are still staffs nearby to assist.
    You go to through checkout counter for few reasons, transfer your items to carrying bag, your items go through scanners to total up the items as only the POS system recognizes the barcode for price.And the cashier or camera to verified all items were scanned and paid for.
    As such, Beacon or iBeacon of idea skipping queue cannot make sense. I don’t see how it can work, as shop owners you are worried people checking out items without payment.

    Even then using iBeacon or Beacon will not be able to be implemented on. Boarding buses or entering subway train station. It doesn’t give additional advantages to even customer because u still need to take out the phone, turn on screen or unlock the screen then open up the app and choose which item to pay like entering the gate. There are so many steps and clumsy.where else, NFC-enabled smartphone doesn’t required to power up the phone for payment. Just Tap and go. As the nature of NFC relying on the terminal for power up. Easy and Straightforward. Therefore both technologies iBeacon/Beacon and NFC will not be replacing each other, they may coexist to complement each other.

  • http://henshall.com/ Stuart Henshall

    Yes I’m familiar with the same checkout systems in Ikea and they are messy. iBeacon has nothing to do with skipping a queue or any “theft” control. iBeacon can make it easy to launch an app. That app can do all the POS scanning, payment etc that you want. If as a customer I want to do that then perhaps you need to think about the exit check. Many stores already have someone on the door to check a paper receipt. No reason the same can’t be done although more electronically. Is it weight, is it a visual checkout. This is not a cash transaction and this is a known customer no doubt verified by facial recognition etc. You know where he went in the store. You know if there were other people accompanying which increase the risk someone else put something in the basket.

    As for the turnstile in a subway I don’t buy the objection. I understand the potential short-term as you can’t guarantee everyone is enabled. Let’s look at two cases. 1. FastTrack here. That’s the car bridge payment systems. Pass an area get a charge. So why not pass two beacons in a tunnel and get charged. Why can’t that launch the app and the payment? Why do we need to slow for the turnstile. Why do I need to take it out of my pocket to tap. No the turnstile is a pain point.

  • Stanry Tan

    With regards to Checkout checking at exit of the shop by human. There will still be a queue formed, the guard or cashier may still need to confirmed the items on your hands or bags are paid. When inspection or checking in concern, the iBeacon technology can’t eliminate the idea of no queue and freely exit. When during inspection at the exit, the minimum requirement will still be checking the eReceipt payment which u still need to take out the phone again.

    As for the Toll gate or car gantry to expressway, the idea of iBeacon may work if all types of cars have the same charges. There are already some kind of technology there to sense the car IU (Integrated Unit) in Singapore. Where all cars are compulsory in installing this unit by Over head sensor to detect type of cars passerby the Toll. What we have in Singapore, the IU support 2 types of reload card, the chip card and touchless NFC card.

    Hi Stuart, I hope you understand that we are debating and discussion on a subject. The more we put things into perspective the more we discover the good side and the down side of each technologies and the more we can see how to tackle each individual weaknesses to improve the system implementation.

    In fact like u say, iBeacon has its place like when u enter a shopping mall, it shows u what are the promo or discounts at its mall at a glance that eliminate paper flyer. And payment wise, I am not too convincing it can be implemented in big supermarket or small shop where customer buy many items and later required carrying bag. I am not referring eRecieipt as not a reliable proof of purchase. Even then eReceipt can be fake without cross checking with store POS system. A person can act like scanning the item using his phone but he is not. With far distance u can’t really peep his phone that the item has been paid, not like the self checkout counter whereby the 12inch monitor clearly show the items and whenever the item is scanned, the machine created a BEEP sound.

  • http://henshall.com/ Stuart Henshall

    I don’t mind the debate! :) I understand and value the objections you are raising. RE transport. We have fast track lanes and non-fast track lanes. I see no reason why the same can’t be implemented in a subway.

    Let’s make sure we distinguish between a technology iBeacon that can work on a proximity and then enable an app or something deeper at the platform level to respond. iBeacon can’t make charges or manage payment. However it can enable communication with an app on your phone and that app can take pain away.

    I think my point remains that in certain situations making the app the POS device makes sense. Example is a drive though or starbucks. I arrive.. the app is presented complements of my previous history and iBeacon. I let it know what I want. I then get it at the takeout window. Or even go and sit down and it is then brought to me at my table etc. These service delivery examples are indeed easier to see the convenience on. They will train us and set expectations for other activities. Another example I use Fandango. I choose my movie at home. I arrive at the theater with no need to cue I walk straight in. Same with United – unless it is a more complicated flight and destination. I think you should check out http://www.fastcolabs.com/3015233/wearable-tech-payments-watcheswhy-apple-bought-passif One day we may actually have the labels to eliminate your fears.

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