By Brad Perkins, Contributing Editor
Cash may still be king, but another portable payment system has its eyes on the throne: Mobile. As a result, convenience stores operators are keeping their eyes on the progress of this inevitable transition, looking for the best time and best solution to adapt before they’re left behind.
Mobile payment is already here. Some 25% of smartphone users use mobile wallet technology, according to an April 2015 Blackhawk Network study. And that number is expected to grow.
“We aren’t going to be completely cashless, even though the way we pay is going to change,” said Daniel Burrus, CEO of Burrus Research Associates, which monitors global advancements in technology. “People still like cash. However, the payment systems are changing really fast and rapidly going to mobile.”
The reasons for that are two-fold: convenience and security. Customers like the convenience of being able to pay in a number of different ways, as well as the security of not handing over a credit card number that could potentially be hacked.
“Because of hacking and the increasing ability for hackers to get in and steal data and credit card information, it almost seems that no one is safe,” Burrus said.
But applications like Apple Pay, Google Wallet and PayPal use technology that ensure that credit card numbers tied to the accounts are not broadcast, reducing the risk of hackers obtaining the information. They’re becoming increasingly popular with consumers across all industries, and retailers are beginning to take notice.
FIRST TO MARKET
Last year, Chevron introduced Apple Pay integration at 3,000 Chevron- and Texaco-branded stores in the U.S., citing a desire to add technology to its transactions to improve the customer experience.
“Offering Apple Pay as a method to pay at our branded stations further solidifies our commitment to delivering high-quality products and services in a secure and convenient manner,” said Glenn Johnson, general manager for Chevron’s Americas Products Marketing Sales and Services.
Others are integrating mobile payments into existing rewards programs.
Flash Foods, a 171-store chain in Georgia and northeast Florida, developed its own mobile application in October 2013 to enhance the value of its loyalty program while building in mobile payment options and marketing to younger customers.
“Being able to offer GoBlue mobile added value to our existing loyalty program and GoBlue program,” said Jenny Bullard, chief information officer for Jones Co., which owns Flash Foods. “It was also part of the strategy to market our GoBlue payment process to the Millennial demographic customer base using the mobile pay offering. Today all stores are accepting our GoBlue mobile payment.”
Mobile payments are as much a marketing tool as they are a convenience, and rolling them out doesn’t have to be a challenge. But there is a choice c-stores and other businesses must make—whether to use established payment systems on their own or incorporate them into an existing program.
Chevron focused on Apple Pay inside the store and is currently working to add pay-at-the-pump capabilities.
“Customers can now pay for fuel and other goods and services inside our convenience stores and we continue to work with Apple to bring Apple Pay to the pump and are piloting near field communication (NFC) payments at two Chevron locations,” said Yolanda Byeman, Chevron’s loyalty operations manager. “Apple has described Apple Pay as the most secure payment solution available. It uses Device Account Numbers rather than storing credit card numbers and keeps all payment information in a dedicated chip on the iPhone. All payments are verified using Touch ID, which helps prevent unauthorized purchases from being made from a stolen or lost device.”
While it is very secure, it is also only available on one platform, which prevents non-Apple customers from using it. In addition to choosing other mobile wallet tools like Google Wallet and PayPal, integrating payment technology into an existing program can connect a wider segment of mobile-using customers.
TYING IN DEVICES
For that reason, Flash Foods chose to build an app to keep its brand imagery, while offering mobile payments.
“This allowed us to tie in other features such as the ability to use customers’ mobile devices for earning, redeeming points using our loyalty program and the ability to offer targeted mobile coupons to loyalty customers based on their previous purchases,” Bullard said. “And with our program the data is ours; we can analyze that data to better market to our customers. With Apple Pay or Google Wallet that is not the case.”
Because it is integrated with Flash Foods’ loyalty program, Flash Foods doesn’t pay interchange fees, which allows the company to provide fuel discounts to members. And though the company did invest in developing the application and upgrading point-of-sale software to accept payments, it did not need to invest in new hardware in stores or at pumps because the app uses an authorization code keyed into the pin pad on the pump or in-store.
The code is for one-time use and available for only five minutes, ensuring the highest level of security, as no credit card numbers or customer information are transmitted, as with Apple Pay and other mobile payment systems. Payments are processed using ZipLine (formerly known as National Payment Card), which offers similar secured banking to Apple Pay.
Because it’s integrated with the customer’s rewards card, discounts at the pump or in-store are automatic.
Choosing the process can depend on what the store is looking for. Where Chevron wanted to offer a convenience payment system, Flash Foods’ goal was to reduce credit card fees and build the brand.
“Understand what you want to accomplish with the offering of mobile payments,” Bullard said. “There are several offers in the industry today, but many of these still use traditional credit cards, resulting in no reduced interchange fees and in some cases adding cost. Our goal was to reduce fees associated with taking credit cards and be able to pass those savings on to our customers, thus further building a relationship with our consumers and promoting our Flash Foods brand.”
No matter what stores choose, industry and retail experts both agree that mobile payments are the next wave. They may not displace cash or credit cards soon, but they are worth investing in because of the ability to deter hacking and theft.
“My advice is to move quickly to accepting mobile payments,” Burrus said. “The payment systems are changing really fast and rapidly going to mobile.”