Rich Ottenhof is still amazed at the difference one piece of technology can make. Three months ago, the owner of Coffeeco Espresso Bars in Kingston replaced his credit and debit card machines with Square, an app that processes and tracks payments via an iPhone or iPad, and it’s already making an impact on how he runs his company.
Transactions are cheaper – he was paying 3.9 per cent, on average, for credit card purchases; he now he pays 2.79 per cent – and they’re faster to process, too. It also tracks, in real time, what’s being ordered so he can make changes to his menu on the fly, and it keeps records of every sale, which he can quickly e-mail to his bookkeeper come tax time. “We’ve had this since the day it launched,” he says, “and I already can’t imagine recommending someone do it another way.”
Square is in its infancy in Canada, but this type of phone- and tablet-based technology – called a mobile payment system – is quickly transforming the way people do business. In the future, customers might not need to carry credit cards and checkout counters could even become a thing of the past.
Studies show that a world free of plastic is envisaged. A 2012 Pew Research Centre survey polled more than 1,000 technology and mobile payment experts and found that 65 per cent of respondents think that most consumers won’t be carrying cash or credit cards by 2020. Boston-based research firm Yankee Group predicts mobile transactions will hit the $1-trillion mark by 2015.
For now, the technology is already changing the way consumers, businesses and staff operate. Until he started using Square, Mr. Ottenhof’s employees did things the usual way – they’d write down orders, print off receipts and press a few buttons on the cash register to put through a drink.
With the Square cash register, each order is graphically represented on a screen. The staff member simply pushes one button on an iPad and the order is processed. Customers swipe their cards using a special device that plugs into the iPad’s headphone jack. The device can instantly tell whether the card is a debit or credit. The entire transaction process, says Mr. Ottenhof, is about 25-per-cent faster than it used to be. It’s also helping his baker – Coffeeco makes all of its baked goods in-house – be more efficient with her time thanks to a daily summary of what’s been sold. “We can tell how many Danishes or biscotti we’ve sold and that’s immediate feedback for our baker,” he says. “You can see what’s popular and increase it.”
Mr. Ottenhof has tapped into just a small part of what mobile payment systems can do. In the United States and Canada, Starbucks users can pay in almost an instant, and without fumbling for plastic, by flashing a bar code on their phone that is connected to their credit card. Other stores can send consumers coupons directly to their phones that they can then use at a nearby store.
(Square also has a mobile wallet option – though not yet in Canada – where users don’t need their credit cards at all. Payment is made through a phone.)
Sucharita Mulpuru-Kodali, vice-president and principal analyst with Forrester Research in New York, says shoppers will be able buy a piece of clothing in the not-to-distant future by swiping their phone over a tag. Customers will also be able to buy food at a sporting event without ever having to get out of their seats.
By making it easier to buy items, larger companies will be able to cut back on staff, while smaller operations that don’t have a big sales staff will be able to compete with major players, she says.
It will still be a while before mobile payments become the norm. Windsor Holden, the Britain-based research director for Juniper Research, says it will only really take off once near-field communication (NFC), a technology that connects smartphones to other mobile devices, is used more widely.
NFC allows customers to swipe their phone over a reader, just as you would a credit card. The reader can be placed anywhere. For example, there might be one at the front of a store. A consumer would swipe her phone when she walks in and then receive discounts while shopping.
The main problem with this technology is that the masses aren’t yet clamouring for a credit card-less world. “People get a credit card when they’re 18. They’ve been accustomed to plastic for years,” Mr. Holden says. “Now you’re asking people to pay in a whole different way? There’s a lot of education that needs to be done for the consumer and the retailer.”
However, while it may be a while before we leave our wallets at home, many businesses are starting to see the value of a mobile commerce economy. A number of stores, he says, now offer free WiFi so people can browse for products online that may not be in the store or to make use of Web-only coupons. “It gives companies a way to drive sales and spend more time engaging the consumer,” Mr. Holden says. “That’s quite powerful.”
Mr. Ottenhof can’t wait for the technology to improve and for some of Square’s U.S.-only features to make their way to Canada. Soon, Square will allow his customers to store their loyalty card information in their phones so they don’t have to bring an extra card with them when they pick up their coffee. “That’s what’s coming next,” he says, excitedly.
What exactly happens after that is anyone’s guess, but he makes sure to point out that, as long as mobile technology helps his business run more smoothly, he’ll be quick to sign on. “I’m going to scramble and make sure I’m able to process these payments from Day 1.”