We definitely live in a world dominated by technology and information. Internet access has become a basic need for most people over the globe and technology has taken over telecommunications, entertainment, social life, commerce and education, among many others. In a few words, every aspect of our lives and every need are being attended with technology inventions.
Every now and then some innovations show potential to really change the way we work, relax or shop and do business. Right now, the idea of people paying in stores, restaurants or for their phone bills using solely their smartphones is starting to materialize.
Accordingly, PayPal has become one of the pioneers with BlingNation, an application for the iPhone and iPad that let customers pay for their purchases using these devices, after attaching a small Bling chip to their phone. Additionally, Starbucks has made available a new version of its Starbucks card application, which generates a barcode on the display that is then scanned at checkout in order to pay for your morning coffee. The payment method is already available in their outlets inside Target stores, and in their locations in Seattle, Northern California and more recently over 300 stores in NYC-Long Island area.
But, is this new payment way a trend that will just dissipate in time or will it become a steady way to pay for your purchases? Will it extend to every type of store and retailer or will it just be available on some establishments? Will it replace credit cards? These are not easy to answer questions; however it is interesting to check out some facts.
First of all, smartphones are a phenomenon that has attracted the attention of millions of U.S. consumers and the number of people buying any of the many “smart” devices offered in the market is increasing. In this regard, The Nielsen Company estimates that by the end of 2011 smartphones will overtake feature phones in the U.S. One in two Americans will have a smartphone by Christmas of that year, compared to just one in 10 in the summer of 2008.
According to The Nielsen Company, this acceleration responds to the increased application availability, better native features and the declining prices for smartphone devices.
Another issue to look at is how smartphone users are using their devices. Below is a chart developed by The Nielsen Company that provides insight about this topic.
According to the graph, smartphones are mostly used for entertainment purposes (games). However, smartphones users show also a lot of interest for functional features such as maps, navigation and search in the web (50%), banking and finance (28%), Dining/Restaurant (25%), Shipping/Retail (21%) and Food/Drink (19%). It reflects that the adoption of an application for paying for your shopping with your iPhone or Blackberry, among others, is highly certain.
However, there are still a number of issues to overcome. The readers have an estimated cost of $200; therefore, a retailer such as Sears Holdings with 3,900 stores and approximately a dozen readers per location will have to invest in 46,800 readers, resulting in $9.4 million.
Additionally, the concern about how secure will be the system and the possibility of frauds and thefts is always present. In fact, some sources claim that researchers at Cambridge unearthed a design defect in the Chip and Pin system over a year ago, which enables a fraudster to make unauthorized payments using any valid (or cloned) Chip and Pin card, without needing either a Pin or a signature.
So, will smartphones mean the end of credit cards? In my opinion this new technology brings a situation in which everybody wins (except for credit cards companies, obviously!). However, time along with factors such as the security of the new system, costs and the receptivity of consumers will tell.
I agree with you Anibal. Security concerns and implementation costs may slow down a little bit at first the spread of this new technology but it is evidently a very efficient way of creating exchange transactions. Companies like PayPal and Starbucks, that jump into the implementation bandwagon early on, despite the concerns mentioned before enjoy the benefit of being ahead of the curve in comparison with many of its competitors. They offer consumers more creative alternatives to enjoy their product, make the product easier to attain, and in a way are providing their clients with a new shopping experience.
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