Mark Logan ordered lunch at Mildred’s Coffeehouse & Bistro in Kansas City’s Crossroads Arts District and stepped to the register to pay.
No cash. No check. No plastic.
Logan paid with his smartphone. He had previously loaded it with his debit card information, using a mobile application called Square Wallet, and snapped his own picture.
To make the payment, Square Wallet sent Logan’s picture to the iPad that Mildred’s uses for a register. The iPad tied his tab to his photo.
The barista, seeing Logan, tapped his photo from among several customers on the screen and told Logan the payment was going through. A second tap – technology took care of the rest.
“This is dead easy,” said Logan, whose receipt popped up on his phone.
So why don’t more of us pay with our phones?
Mostly, we don’t know we can. A recent survey of smartphone users found that half had never heard of the idea of a digital wallet, let alone downloaded and used one.
And few stores or restaurants take them.
All the same, you may be using one soon. Money is making a dash from pockets to smartphones thanks to digital wallets like Lemon, Isis, LevelUp and others.
The Carlisle & Gallagher Consulting Group forecasts that within five years, half of smartphone owners will prefer to pay for their gas, food, gadgets and other consumer goods with phones and mobile wallets.
That’s a big leap, and a lot needs to happen for that to prove true.
Several technologies are competing to migrate money to smartphones and they don’t mesh. By one count, perhaps 280 digital wallets or more have sprung up or are in development around those various technologies. Some retailers, notably Starbucks, have built their own apps for mobile payments.
It leaves consumers and retailers both guessing which digital wallet the other will be using. Unless they match, it will be back to cash, check or plastic.
Security concerns pose another hurdle: Shoppers instinctively don’t trust their money to what they don’t know.
We are comfortable with credit cards and debit cards. They’re reliable and accepted almost everywhere. Mobile payments have caught on faster in some countries with poor payment systems.
But consumers in Japan also pay with their cellphones more than Americans do, said Ray Ledford, who lives in Japan but spends half his time in the United States on work.
“Anytime you’re there you’ll see somebody using it during the day,” Ledford said during a recent visit to Kansas City. “I don’t see that here.”
If the digital wallet is really going to catch on here, it has to do more than pay the tab. Advocates say successful digital wallets will need to help consumers save money, become savvier managers of their payment choices, earn discounts and coupons and increase their value as customers.
Besides helping him buy coffee, Logan would like his phone to hold not only his money but also his driver’s license, proof of car insurance, and the other items normally stuffed inside billfolds.
“I’d love to stop carrying around a physical wallet,” he said.
Smartphones already have wormed their way into shopping.
We use them in store aisles to check prices elsewhere. They allow us to read online product reviews while looking at the product. And who hasn’t snapped a photo and texted it to a spouse or partner for some quick feedback?
Now phones can pay, too, using one of several competing technologies. If that’s news to you, don’t feel bad. It even catches some store clerks off guard.
When and where he can, Jared Jennings shops with the Google Wallet on his cellphone. As the clerk rings up the total, Jennings waves his phone near the machine where others would swipe their credit cards. Instantly, the payment is made.
“How’d you do that?” is what Jennings said he hears often enough. “Usually, it’s a great point of conversation.”
Other digital wallet users recount similar stories because the technology is rarely used even when available.
Google Wallet relies on something called near field communication technology, or NFC. It’s embedded on a computer chip in some smartphones.
As the name suggests, near field communication sends the payment information only a short distance to the register’s reader. The customer then gets a receipt, through email if he chooses.
Microchip payments are routine in Europe, where credit cards rely on embedded chips instead of the magnetic strips found on American credit cards.
Chips are coming here. They’re more secure, said Carl Bradbury, Commerce Bank’s director of consumer card products. He said Commerce is moving to them.
“They can’t be counterfeited.”
The added security means companies that sell register equipment to stores are including NFC technology, anticipating widespread use of those chips.
NFC technology does face one big roadblock: Smartphones are everywhere, but few come with NFC chips. No iPhone does; Apple Inc. hasn’t put an NFC chip into any of its phones so far.
But Apple’s not a problem for the Square Wallet, because it uses a different technology.
It relies on GPS positioning and “geofencing” technology to find the Square Wallets of customers who come in, or happen to be nearby the store’s Square-powered register. The payment changes hands through the Internet – on the cloud, as they say – rather than through direct communication between the register and phone.
The geofence around the store’s register, however, can be bigger than the store. Bryan Merker learned this a few weeks ago when he fired up Square at Beignet in Kansas City’s City Market where he is the chef and owner.
“Someone’s sitting in the coffeehouse next to us or they’re wandering around. I know they’re in the market,” he said.
He knows because their photos pop up on his iPad register but they aren’t in his shop.
There are yet more mobile payment technologies. One called radio frequency identification, or RFID, works somewhat like NFC but has a longer range.
Another technology compacts the customer’s credit or debit card payment information into a bar code specific to that transaction. The code pops up on the customer’s phone and the clerk scans it to complete the payment.
The craziness right now comes from all the different ways mobile payment technologies are being pitched to consumers.
Be prepared for an onslaught of offers.
During a six-month stretch last year, a team of mobile strategy analysts at Citigroup counted 16 mobile payment announcements a day. Not all were new wallets, but it impressed upon the analysts how fast the field was moving.
“You can’t do this 200 different ways,” said Dom Morea, senior vice president of advanced solutions and innovation at First Data. The company provides retailers with the technology to accept various kinds of payments.
“That will likely skinny down to some handful.”