Evolution vs Innovation in Mobile Payments

Innovation is sometimes hard for people to accept. The reason is simple really, game-changing innovation often requires people to change their behaviour, and behavioural changes are very difficult. Evolution is much more stressful. Evolutionary events in technology typically get adopted much faster as people can easily see a simple use case where whatever change is required, solved some small nagging thing that makes their life easier.

The widespread deployment of mobile payments by Starbucks is an example of an evolution that, I think, portends a wave of digitization that could come in a hurry. If you don’t need a wallet in 24 months, look back on this week and see if it was the start of something that was much bigger than it now seems.

If you haven’t heard, Starbuck announced that they were rolling out a mobile payment option leveraging an iPhone (or BlackBerry) application that allows customers to manage their Starbucks Card from their phone as well as pay for their purchases by having the barista or cashier scan a picture of their card off the screen of the mobile device.

Is it really that much more functional than taking a picture of the back of your Starbucks Card? No. Are the other features of the app incredibly compelling? No. A saved “Starbucks near me” Google Maps search and digital photo of your card has about as much functionality. Sure you can check the card balance and top it off via Paypal, but that’s not game changing.

The evolutionary step is not in the app… it’s in the acceptance of paying with a mobile device at a retail outlet. And not just “acceptance” but acceptance in such numbers that Starbucks feels it’s worth rolling out nation-wide. Starbucks took the first step, to prove the concept. If there isn’t 25-50 other retails stores with (effectively) the exact same features in place within the year… then marketing agencys are even more clueless about mobile than it appears.

2011 is the year near-field communications (NFC) will arrive in mobile devices — but not the year people will start using it in any great numbers. NFC is a short-range (like, 4 inches) wireless communications technology. It’s billed as the next big thing for enabling consumer to use their mobile device for retail transactions. Unfortunately, it requires a change in behaviour for people — you need to trust a non-physical payment mechanism. Sure, you say, but the Starbucks Card app is also a non-physical payment mechanism since the cashier scans the screen of your phone. While technically this is true, conceptually it’s easier for people to think about “if my screen isn’t showing a picture of my card, it can’t be used for purchases” and therefore know that as long as someone doesn’t take a photo of their phone screen while using their app, their card, money, and security are safe.

It doesn’t require the leap of faith that is needed to believe that when a device SAYS that the NFC transmissions are not happening, they actually aren’t. People can use something they trust (their eyes) to validate the screen is not showing a card image but we have no built-in detector for if our phone is wirelessly transmitting payment information or not.

This is why the Starbucks Card app has been, and will be successful and copied many times over. People only have to get comfortable with having a digital card, not a new trust system (their eyes still work fine for that).

When we look 10 years forward, will we even be doing more than saying “yes” to confirm a purchase with a cashier, while a scan of our voice and body validates it’s actually us? No wallet, no wireless (aside from voice, which is wireless…) communications, just a simple “yes”. That seems somewhat far-fetched (incidentally, that’s how it worked in the 1800’s – cash or a tab based on the cashier scanning the person, with his/her eyes). However, if you break down all the steps between now and then in terms of technology evolutions and breakdown the minor behavioural changes needed to accept that way of paying, each individual one won’t seem so scary.

Introducing change is easier when we look at evolutionary changes not large innovations. Starbucks is taking a great step forward, how many more are needed before we ditch our wallet? How many more before we aggregate all our payments through one system (vs. multiple credit cards and reward cards)? It’s impossible to know, but I think this is (or will be) the first true example of mass acceptance of mobile payments, and from now on, the evolutions will be fast and furious.

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3 Responses to Evolution vs Innovation in Mobile Payments

  1. Rob says:

    Love it Jeff. One small step 🙂

  2. Ryan says:

    Great article.

    I know too many people who are scared of anything having their personal info. And if slow evolutionary steps is what it takes for people to move into the digital world, I’ll take it.

    I’d love to see some sort of evolutionary step by one of the major CC vendors. I hate having a dozen cards for different stores.

    Though, I will always be one to push the world into innovation rather than evolution.

  3. Jeff Bacon says:

    If someone would wrap up a bunch of the evolutionary ideas into one app, it may help jumpstart things too. Many of the small apps just take one idea and do it vs pulling a few good ones togeather and coming up with something that actually provides a competitive advantage that can’t be replicated in a couple weeks.

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