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Assessing Mobile and Point-of-Sale

The trends we’ve discussed may be interesting to many, but what can these developments mean for your mobile selling and payments? What exactly is point-of-sale (POS) and how is it a potential opportunity for your mobile profits?

Mobile point-of-sale payments can allow more immediate purchases and impulse buying with related proximity hardware, including smartphones and other mobile devices. Enabled mobile devices can offer rich-media consumer experiences and a suite of new selling tools for merchants.

A POS Shopping Scenario

For example, imagine yourself as a consumer using the convenience of point-of-sale services. Your smartphone notifies you of a nearby store with an offer for an item that you’ve been eager to buy (say, that anniversary present that’s, ahem, “been on your mind” recently). You like the Internet product reviews and recommendations you’ve read on your smartphone, and you’ve prudently saved the offer in your mobile “wallet.” You make your way to the physical store, find the item, and pay for it using a payment method stored on your phone. Upon the successful payment, the offer is applied, customer loyalty accumulated, and a purchase receipt automatically stored in your mobile wallet (not to mention a spousal deed well done).

If you take advantage of mobile point-of-sale features as a merchant, you can use mobile device screens for a number of marketing and payment functionalities.

Pre-transaction features can help your customers locate a physical store, find products, get coupons, review financing terms, and learn about warranties.

During the transaction, your customers can pay with convenience, custom services, and confidence.

Once the transaction is completed, you can continue to control the mobile device screen and the customer experience to confirm the purchase, check the receipt, provide customer notifications, manage returns, supply refunds, handle product recalls, ensure loyalty awards, update payment method preferences, and cross- or up-sell merchandise to encourage additional shopping.

POS Success Factors

Why does this new mobile technology matter? Because mobile point-of-sale payments can create greater buying and checkout options for you and your customers. To be effective, however, a point-of-sale service should reflect much of the following:

  • The consumer experience should be intuitive and the payment means clear and valuable.
  • The point-of-sale service should work across multiple mobile devices, reach a meaningful demographic of consumers, and be available at the places where consumers shop the most.
  • Merchants must realize the point-of-sale service value through lower costs of sales or higher customer conversion rates and tie payments to the best pre- and post-transaction customer experiences.
  • The technology must be scalable, with easy-to-integrate message formats, and simple for consumers to access, regardless of their carrier or mobile device.

True, the new technology has to prove it’s compelling enough to change current consumer behavior. And yet there are significant numbers of smart spenders and mobile shopping trendsetters to justify providing them with more point-of-sale coupons, discounts, local store referrals, and checkout and payment options.

Despite the newness and still-evolving state of point-of-sale operations, there should soon be better mobile capabilities for consumers and fresher profits for you by adopting the tools.

A Closer Look at POS

Let’s take a closer look at such point-of-sale payments with proximity hardware, and then you can judge the value and potential for yourself.

In point–of-sale and proximity hardware operations, there are at least three criteria through which consumers and merchants may interact:

  • Payments
  • Credential storage
  • Coupon exchanges

Regarding payments, the mobile market over the next year or two should help determine whether most consumers will remain committed to paying “remotely” via the Web or if they will increasingly adopt point-of-sale payments with their smartphones.

Mobile credential storage and exchange criteria will likely include means for finer customer personal identification, social networking and buying possibilities, and location-based marketing.

Personal identification tools will allow merchants to better note returning and repeat customers as well as various loyalty-program members as they enter an offline store.

More social networking and buying possibilities will enable your customers to solicit product opinions among their extended interest groups like those on Facebook, Twitter, YouTube, Yelp, Google+, and other social interaction websites.

The mobile merchant’s basic ability to push (or pull) offer coupons and provide various notifications for their point-of-sale customers is also helping determine the merits of this system and its potential broad adoption.

As you might have guessed, there are also several competing standards for point-of-sale features and technologies, with varying strengths and weaknesses.

Let’s define a couple of the major terms: near-field communication and contactless payments.

Near-field communication (NFC) payments allow simplified transactions, data exchanges, and connections between NFC-equipped devices with a simple touch. A smartphone or tablet with an NFC chip can make a credit card payment or serve as a keycard or ID card, such as at an ATM terminal, as shown in Figure 4.1. NFC devices can also read NFC transponder tags on retail displays, such as posters or signs, to find more product information as well as present a marketing audio message or video clip. NFC can also share contacts, photos, music, apps, or pair Bluetooth devices.

Figure 4.1

Figure 4.1 In this depiction of a near-field communication action, a customer uses his NFC-equipped smartphone for identification to access his bank account at an ATM terminal.

Contactless payment systems—sometimes called “touch and go” or “wave and pay” operations—involve credit cards and debit cards, key fobs, smartcards, or other devices that use radio-frequency identification (RFID) for making secure payments. An embedded chip and antenna enable consumers to wave their card or fob over a reader at the point-of-sale.

In some cases, a consumer can obtain a “contactless sticker” chip from a commercial provider that adheres to a smartphone and links to a money account for making direct payments. The provider, in turn, equips merchants in given areas with payment devices that work with its chip.

Technically, contactless stickers are a subset of NFC technology, as they share the same RFID protocol. Most payment readers now integrating the NFC/RFID part do so at a significant additional cost.

From a replacement point of view, the cost is not prohibitive. However, the merchant must upgrade infrastructure to align with the Visa or MasterCard requirement of online Dynamic Data Authentication. This puts the burden of the upgrade on the merchant, not the acquirer. In this sense, adopting contactless payments can be an expensive proposition for some merchants.

Near-field communication is the early front-runner among the competing standards, but there are certainly some worthy challengers. We compare them in Table 4.1.

Table 4.1 Comparing Point-of-Sale Standards


Consumer experience

Merchant experience

Opportunity for large scale adoption

Near-field communication

Likely among the most popular early adoptions

Can be expensive hardware

Effective up to 2” from store payment readers and 12” from transit pass readers

Contactless payments sticker

It’s “on” the smartphone

Can be expensive hardware

Early iterations are promising


Need an app

Mostly inexpensive hardware

Works on all smartphones

Bar code scan at point-of-sale

Need an app

Need point-of-sale hardware

Some limit on the quality of the mobile device’s screen display matched with the bar code reader’s ability to adapt from the glass reflection

Bar code scan for in-app purchase

Need an app (but generally a good experience)

Software integration only

Limited use cases

Software solutions

Need an app

Software integration only

Limited use cases

Credit card at point-of-sale

Same as card

Same as card

Not differentiated

Hands-free: No need for a smartphone, just a phone number and PIN

No smartphone required

Requires some integration

Works on most PIN pads

NFC payments may offer convenience and a smoother consumer experience, but so far not many merchants are onboard with this innovative payment technology.

Most experienced mobile merchants are familiar with NFC, thanks to the growing number of contactless payment readers being deployed and the National Retail Federation’s effort to promote NFC awareness through industry white papers.

However, a large number of merchants have yet to be convinced that the expense of adopting this novel technology will have a clear return on their investment.

Most industry forecasters see NFC becoming available on major smartphones by late 2011, with the tool being adopted only for other mobile devices and by mainstream merchants about mid-to-late 2012.

POS Purchasing from End to End

Looking at point-of-sale capability in the following scenario shows how mobile can play a key and comprehensive role in making such purchases successful, as shown in Figure 4.2.

  1. Jane drives into the parking lot of her local Safeway supermarket on a hot Tuesday afternoon. Before she enters the store, Safeway sends her a “Buy 1, Get 1 Free” mobile coupon for her favorite ice cream.
  2. Jane continues into the store and shops for the items on her list. Knowing her interest in red wine, Safeway also sends her a “$2.00 off” mobile coupon for a new brand that the store has begun to stock.
  3. Jane proceeds to checkout and, again via her smartphone, pays for her goods at the point-of-sale using her bank as the payment method.
  4. While still at the checkout station, Jane, a regular Starbucks customer, receives a mobile offer from the nearby coffee shop and uses her phone to buy an ice-cold Frapuccino for just $3.00.
  5. Once Jane exits Safeway and loads her groceries into her car, she drives over to Starbucks, where the coffee treat is ready for her to pick up.
Figure 4.2

Figure 4.2 In this point-of-sale shopping scenario, Jane uses her smartphone to receive instant mobile coupons and buy from several local stores at once.

POS Steps Using a Smartphone

The following explains what a similar point-of-sale scenario looks like in a typical shopping and checkout flow on a customer’s smartphone, as noted in the steps below and shown in Figure 4.3 on the next page.

Figure 4.3

Figure 4.3 This sample point-of-sale shopping and payment flow on a smartphone reveals a seamless end-to-end experience, from scanning a product bar code to locating a store for pick-up to completing a payment. (Note: The PayPal screens depicted are suggestions only, and not part of a current live POS checkout flow.)

You’ll see that in just a few steps a customer can do everything to complete a POS purchase on his smartphone, from choosing a payment method to scanning a product bar code to locating and picking up a purchased item at a physical store.

For example, say that David is shopping in a physical store and has access to payment methods via a smartphone. Here are steps he may take to complete a POS purchase:

  1. David shops for a desired item, makes a selection, and scans the product bar code with his smartphone.
  2. David views the product scan results for local stores and their product inventory and prices.
  3. David then locates a preferred store nearby via the GPS function on his smartphone, and selects the product for purchase and in-store pick-up.
  4. David selects to process the purchase on his smartphone.
  5. David then chooses a payment method (via a credit card, bank, or other).
  6. Once at the store, David picks up his product (already paid for via mobile phone) and, on the way out, swipes the electronic receipt on his smartphone at the store’s security reader.

As you can see, the entire product shopping, purchasing, and pick-up cycle takes place with a smartphone all in the palm of a person’s hand. This unprecedented consumer buying power and convenience means a host of new marketing opportunities for mobile merchants.

With mobile tools, you can control the mobile point-of-sale customer buying experience from end to end. This means that in a single, synchronized, uninterrupted mobile screen flow, you can display your mobile website or app marketing pages, product catalog, bar code data, payment details, physical store location information, checkout confirmation, and receipt on any customer’s smartphone or other mobile device.

In the end, however easily and precisely your product pitches find and entice your mobile customer, the entire mobile point-of-sale buying experience occurs where and when the customer decides—and that’s part of any quality customer service, online or offline.

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