Marketing in the New Cardless Society

If you walk into a Starbucks today, people are paying not with just their cards and cash anymore, but their phones, too. Consumers – at least in most parts of the world – are still getting used to the idea that their phones can function as debit or credit cards, but attitudes toward mobile money is going to change rapidly in the next few years.

The transition to mobile payments is by no means a bad thing, though. This presents unprecedented opportunities for card issuers as the marriage of mobile and payment technologies open a huge array of new location-based service options to reward loyalty, prevent fraud and create powerful partnerships.This has big implications for marketers. But as we move toward the reality of a cardless society, this new dynamic means card issuers must rethink branding, tracking, loyalty and monetization options that will no longer be possible without a physical card.

Many businesses are adapting to that new reality. For example, in January 2013, ATM maker Diebold debuted an ATM that allows consumers to scan their phones to withdraw cash, completely forgoing cards. Millennials, too, are putting pressure on companies to go digital. As online natives, they’re more accustomed to digital activities and more likely to adopt new digital payment forms such as mobile applications like LevelUp, which reward loyalty and change marketing dynamics. PayPal is moving into the mobile space, too, alongside Google and Twitter co-founder Jack Dorsey’s Square. With digital technology, financial institutions will lose traditional customer touchpoints such as direct mailings, disclosures and the delivery of third party merchant account. Brand and image will be relegated to the screen, rather than a card, so there will be a need to deliver value in real-time in order to connect with consumers.

Card issuers will need to work hard to make sure their brand doesn’t get eclipsed by the device delivering it. With no physical presence in a wallet, businesses can turn to digital services to differentiate. The organizations that establish an early presence with applications that touch a large number of consumers will have a significant competitive advantage over the next decade, especially when it comes to delivering location-based services. Through mobile payments, organizations can create campaigns that are truly relevant to a consumer’s location.

For example, if a family visits a college, the card issuer can offer real-time discounts on that brand of college merchandise. This location could also indicate that the consumers may be interested in a student credit card account. By working with retailers and other merchants to capitalize on location intelligence campaigns, card issuers can delight consumers as they walk in the door by offering a real-time discount on that specific merchant’s products. Coupling these campaigns with geo-fencing empowers consumers to disable location-based services when they’re not wanted, too. Not only that, when card issuers partner with other businesses, it’s possible to monitor activity for fraud more effectively. If an issuer’s card or service is used to pay at a a destination that isn’t recognized as an authorized retailer, financial institutions can analyze the transaction for potential theft or fraud.

When I was 15 or 16 I needed my mom to create a PayPal account using her credit card, so I could bid on something on eBay. Like many parents her age at the time, my mom held an unwavering fear of using her credit card online, likely fuelled by pre-2004 horror stories of people being duped into releasing their information to online scams.

Nearly ten years later those fears have completely diminished for the average consumer, regardless of age. We’re in the age of mobile commerce and today two Canadian companies have bridged the gap between online and offline payment for merchants. Along with Shopify’s announcement this morning, PayPal Canada announced an agreement with restaurant technology provider TouchBistro to allow customers to use their smartphone to check-in and pay with PayPal at cafés and restaurants at the POS.

The two competitors are both unveiling products in a space they envision to take off, one that hasn’t been taken advantage of by online retail solution providers. Why only offer merchants online stores when Shopify and PayPal can allow those stores to streamline operations?

Shopify is targeting its 65,000 merchants, as about one third of them also operate brick-and-mortar locations. It’ll cost merchants an additional $49 per month, while the hardware costs range from $19 for a credit-card reader to $499 for the whole nine yards. That includes a cash drawer, a bar code scanner, a receipt printer and aforementioned credit card reader.

“…the future of retail isn’t online versus in-store, it’s a seamless combination of both. Shopify has transitioned from simply powering online sales to powering all commerce: online, offline, third party payment gateway, and everything in between,” said Adam McNamara, Shopify's vice president of product.Shopify appears ready to initially bring in higher revenues from its offerings than PayPal. But PayPal may be the one who benefits most down the road.

PayPal is not only targeting a different clientele, but is executing a pilot program using TouchBistro for select restaurant locations in Toronto. TouchBistro provides a popular POS app used by over 1,000 restaurantss, cafes and food trucks. It is currently the top-grossing food and beverage app in 18 countries on the App Store. Using the PayPal mobile app, customers can check-in to these cafés or restaurants (even before they arrive) and pay using their PayPal account, where their name and profile picture shows up for cashiers.

They’ve even convinced popular startup coffee spot Jimmy’s Café, near Project RHINO, to accept PayPal mobile payments at their TouchBistro iPad POS. Unlike Shopify’s new offering, PayPal is betting on a hardware-independent approach.

"We're collaborating globally with existing POS providers so that businesses don't have to rip or install new hardware to deliver unique and useful mobile payment experiences for their customers,” said PayPal Canada’s Darrell MacMullin. “We're thrilled to work with TouchBistro…for our five million active PayPal users in Canada.”

Matthew Braga of the Financial Post wrote today that the iPad, which both Shopify and PayPal are using as the basis of their POS systems, “has quickly become a point-of-sale industry mainstay amongst hospitality and retail clients.”

While traditional debit and credit terminals offered by banks offer scant analytical insight, the iPad systems promise more comprehensive options for “measuring sales analytics, maintaining customer databases, managing inventory and processing non-traditional forms of payment (such as devices using near-field communication or digital wallets).”

Braga wrote that the two companies are certainly targeting different audiences: Shopify is targeting its merchant customers who are already using its services, while PayPal is going after individual consumers.We’ll be sure to keep an eye on both these companies over the next six months as time will tell who ends up ahead of the other.

Read the full products at http://austpay.com/!