07/19/2013 11:47 am ET Updated Sep 18, 2013

The Future of Mobile Payments and What It Means For Retail

According to market analysis and fellow mobile blogger, Horace Dediu, smartphones are the fastest and most ubiquitous consumer devices in the history of consumption. Well beyond the staggering consumption is the ubiquity of these devices. Where keys, purses and wallets are left at home, in the car or in gym lockers, our mobile devices remain closely tethered to us nearly all the time.

With the omnipresence of smartphones in our daily lives, it is hard to understand why so many retailers have lagged behind. Retailers seem so staunchly committed to transact business the same way they have for decades: a large (expensive) central cash register accepting cash, checks or credit/debit cards only.

This is all about to change -- and, in fact, quietly has been right under our noses.

A recent report from Business Insider highlights how the "old dream of the digital wallet is coming true in a very mobile-led fashion." According to the report, by the end of 2012 an estimated 7.9 million U.S. consumers adopted a near-field communications (NFC) compatible system -- which includes QR codes, Google Wallet, Visa Wallet, MasterCard's PayPass, and other apps used to process a payment -- while credit card readers such as Square, I Love Velvet and PayPal have seen over $10 billion worth in mobile payments in 2012. Another recent report from Gartner predicts the value of mobile payment transactions globally will surpass $235 billion this year, representing a 44 percent increase from 2011.

For those few retailers who braved mobile for transactions have gone the vast spoils. Starbucks has launched headlong into mobile as a means of conducting in-store payment. Since launch, the coffee retail giant has driven the bulk of the $500 million worth of mobile transactions that took place across North America last year.

Furthermore, Apple recently announced it would begin selling Square's mobile registers at its retail locations starting on July 9. Apple's move to offer Square in stores signals a dramatic shift away from the central, single point of sale paradigm and towards distributed, low-cost mobile-based transactions.

Since last year, a vast array of mobile payment options have come to market including iOS's Passbook, Samsung Wallet and Google Wallet. All offer advanced and comprehensive shopping experiences by storing digital coupons, loyalty cards, event and travel tickets in one convenient, secure location. Passbook, in particular, offers several other features -- including geo-fencing technology to ensure ads, promotions and deals are increasingly tailored towards individuals at the right time and location -- that makes it much more powerful and reliable than the decades-old physical rewards or credit card solutions.

With the arrival of the much-anticipated and long-overdue movement to mobile point-of-sale (POS) systems, it is crucial for retailers and their developers to:

  • Focus on user experience: Build a highly usable yet robust and flexible user interface to ensure the consumer receives all the convenience of this innovation without experiencing any disruption, limitation or added complexity to getting the products they desire.
  • Security, Security, Security: It goes without saying that security must always be the number one, two and three concern when managing financial transactions. Smartphones present a huge opportunity to actually increase security, as a pocket computer can do so much more than a simple magnetic strip.

Looking at the amount of buzz and studies surrounding the imminent growth of mobile payments, it is clear consumers are eager for faster, more convenient and far more secure POS options. It will be those retailers that focus on the delivery of rapid, dependable and well-designed mobile POS solutions that will reap the lion's share by providing consumers with a much more innovative, beneficial and overall easier checkout process.