No, credit cards aren’t going away any time soon, but consumers are finding it easier and easier to make credit card payments just using their phone. In May we first started hearing about Google Wallet, and I was a little surprised to learn that as of earlier this week one out of every four Starbucks card transactions was made using a mobile phone.

Granted, these are highly caffeinated, urban-dwelling go-getter types, but if that many would rather use their phones than little pieces of plastic, it’s a good indication of people’s readiness for mobile payment. And clearly the card companies, like MasterCard and Visa, are playing along.

How it Works
A clear standard for m-payments is yet to emerge, and currently there are a number of different flavors of m-payment, including the following:

  • A consumer sends a unique identifier code to a merchant’s short code over SMS, and after the consumer’s identity is confirmed, the vendor sends a receipt of payment back over SMS.
  • A consumer initiates a transaction at a website using a home computer or public kiosk at a retail location, and to complete the transaction, the merchant sends a one-time password to the consumer’s phone over SMS. The consumer can be billed through the mobile operator.
  • Using a Near Field Communication (NFC)-equipped phone, a consumer contacts the merchant’s NFC tag on a poster or store to initiate a transaction.
  • A consumer downloads an app from a merchant, and the consumer uses that app to make purchases against a pre-established account with the merchant.

The latter method is exactly how the Starbucks mobile-payment system works, and it’s a win-win: Consumers find it easy to pay and manage their Starbucks accounts (No more guessing how much they have on their cards) and Starbucks doesn’t have to manufacture as many cards or dedicate cashier time to reading card value.

However this shakes out, it’s likely that consumers will soon be looking to do business with companies that, as an added convenience, will let them pay by phone.

Ready or Not, Here They Come!
So, retailers, are you ready to receive mobile payments? You don’t have to be ready for this holiday season, but you’ll probably have to be ready for the next one. And what does it really mean to be ready?

It means you’ll need to be ready to send mobile receipts, and also be able to handle the mobile queries that come up. And if you really want to go the extra mile, it also means you’ll be able to respect each customer’s messaging preferences, sending receipts or other communications over email, and then switching back to mobile just while they’re traveling, for example.

It sounds complex, but it’s not; you know where to find us, if you ever want to talk about it!