Time to Leave Your Wallet at Home?

Mobile Pay is the future, and the future is here.

This weekend I ran to Whole Foods Market to grab a few things, but this time I didn’t swipe my Capital One credit card. I reached for my iPhone 6 plus, scanned my thumb on the home button, and wham! I was done.

The whole process can feel surreal, like something from a futuristic movie.

In many outlets you may notice signs that say “We accept Google Wallet and Apple Pay.” Those retailers have upgraded their purchase terminals with NFC, Near Field Communications.  With NFC you can check out with a phone or watch by holding your device within 7 or so inches of the terminal. The data transmitted over NFC is secure, and both Google and Apple require a thumbprint or PIN to authenticate the transaction.

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As more banks and retails stores sign on, mobile payments are destined to become the way we shop at major retail outlets.

But think about that statement – major retail outlets. In New Orleans we have a handful of large companies adopting mobile payments – Walgreens, Whole Foods and Winn-Dixie come to mind.  But what about the mom-and-pop stores that line Magazine Street? When will you be able to wave your phone at that bar on Frenchmen Street and pay your long-standing tab?

For those companies I’m here to tell you that the barrier to entry is smaller than you think. 

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Retailers currently pay a fee for every debit or credit card transaction that equals a percentage of the total sale. When a card is not physically present – like for online payments – that fee is typically higher. However, with Apple Pay the fee to the retailer is inline with rates when a card is present (generally around 2 percent of a transaction). Mobile or online purchases made through Apple Pay online or with apps still charge the higher rate.

If you’ve purchased something from a small business or new entrepreneur, you have likely already experienced Square – a card reader that plugs into the headphone jack of a mobile phone or tablet. Square is one of the latest ways smaller merchants have been able to enjoy the benefits of being able to accept credit and debit cards, without the typically high monthly costs or minimums that some card-swiping companies require. Square plans to take the next step and offer a new card reader that also processes mobile payments, such as Apple Pay, later this year.

The convenience of mobile pay is an obvious draw for shoppers, but this form of payment can also be more secure, allowing customers to avoid handing over a card that contains a wealth of information. Instead, shoppers use a unique and one-time-only “token” to complete the transaction safely. This way, a shopper doesn’t pass along any information that could be used for identity theft or captured in a large breach like we’ve seen at retailers such as Target and The Home Depot. An Apple Pay token, or unique transaction id, transmits all of the information for a single purchase without using the credit or debit card number.  This makes the transaction much more unique and less traceable.  It also means the actual number is never presented to the retailer.

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But what does mobile pay mean for retailers? Possibly, bigger sales. It turns out that iPhone users are typically good spenders. According to a digital analytics benchmark by IBM in 2014, iPhone users are three times more likely to purchase mobile goods, and spend close to $21 more per online order.  If similar online purchasing statistics apply to mobile payments, Apple Pay is clearly where retailers want to be.



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