On Wednesday 26th of January 2011, Michael Degnan (of SapientNitro and Engagement Banking fame) and myself headed down to the Starbucks at One Penn Plaza in New York City with the objective of recording our experience of processing a mobile payment using the Starbucks App for the iPhone.
The App links your phone to your pre-paid Starbucks card to process payments using a stacked linear barcode (PDF417) on the screen, which can be scanned by a small reader connected to the cash register. The experience was, in a word, engaging...
Check out the video:
So here are my observations. Firstly, this is very simple. It is at least as fast as getting cash out of my wallet to pay, receiving change and then putting my wallet back in my pocket, in fact, probably faster. The whole transaction you see here took just moments.
The second observation is that the Starbucks Barista was well versed in the new payment technology and was not phased at all by either the request for us to film the payment, or the payment itself. You can see the Barista adjusting the phone so the scanner quickly picked up the QR code off the screen. No fuss, efficient and simple.
The final observation is that this is far superior to a current interaction using cash or a card for a number of reasons. This gives us a glimpse of what the cashless society will be like; it isn't risky, it isn't subject to fraud or theft, it is safe, secure and fast. The App is super easy to use, which encourages you to use it again. Personally, I doubt that I will ever pay for a Starbucks using cash again. The only issue could be data connectivity problems. However, with Gilder's Law (bandwidth grows at least three times faster than computer power) in effect, this is an ever reducing issue.
But one of the key benefits of this transaction was the transaction visibility. I know what my balance is. I can see my payment history at the touch of a button. I see the balance updated in real-time, and I don't have to carry around paper receipts. This is far superior than my check book, debit card or credit card from an interaction perspective. I know exactly where I am in respect to my balance available, and the transactions I've made. Jack Dorsey, one of the founders of Twitter, figured out this differentiation already and has built a great receipt capability into the Square platform that he launched last year.
"I made the purchase at 8:47 this morning and the receipt was immediately emailed to me in the form of a link to a Square page. On this page is a receipt featuring the logo of the vendor, their email address, and their Twitter handle. Below that, it shows the amount and the exact time of purchase. And below that is a Google Map of where the transaction was made and your signature."
What A Square Receipt Actually Looks Like, MG Siegler, via Washington Post, Dec 1, 2009
So what does Starbucks Mobile Payments mean for the future?
For those of you who still doubt the power of NFC and mobile payments to change behavior around cash and cheques (checks) watch this video again. The benefits of mobile payments are plenty:
1. Safe (more secure than plastic or cash)
2. Speed
3. Easier than cash (less fuss)
4. Great feedback on transactions
5. Better deals -- Starbucks give a 50 cent discount using the card
The modality shift will happen far quicker than banks, card issuers and others can comprehend. This is extremely dangerous ground for retail banks still enamored with transactional banking based on cheques/checks, cash and card transactions.
Banks beware -- if by July this year you are still issuing plastic cards, or still opening checking accounts -- you are about to be in a world of hurt!