Payment Plan


Mobile wallets are ready to hit the market, but whether consumers and retailers will embrace the new payment method remains to be seen

As outgoing NACS chairman in 2006, Scott Hartman, president and CEO of Rutter's, told the crowd of more than 22,500 at that year's NACS Show that technology would play an increasingly important role in the convenience store industry, even predicting cell phones would soon replace customers' wallets.

Did he get this vision from a crystal ball? Reading tea leaves? No, nothing so mystical. His observations came from a trip to Asia, which has often been the fertile ground where the seeds of technological advances have been sown.

"Clearly, technology will play an ever-increasing role in our stores and it is already in Asia. The cell phone you have today is nothing like the ones they are using in Japan and Korea, but you will see them here soon," Hartman told fellow industry insiders in his 2006 closing speech. "Cell phones are a customer's electronic wallet. A personal scanner, a personal navigation system and a personal locator, the cell phone will be the payment replacement for the plastic credit card."

Eight months later, in a presentation to the New England Convenience Store Association, Hartman reiterated his belief in advanced technology in the c-store arena. "Technology will be a key differentiator for customers and employees," he said in June 2007, adding that technology was out in front in Asian countries. He hinted it was only a matter of time before the United States caught up with the rest of the world.

"The world is a happening place and the U.S. has plenty to learn from international operators," Hartman said then.

Now, five years later, Hartman's views of the future are coming true. This past spring, Google gave the world a sneak peak at its newest feature, Google Wallet. True to what Hartman saw in Asia, Google Wallet aims to be the next big thing in commerce — or e-commerce. In unveiling the innovation in May, Google explained that the app will transform a phone into a wallet and be an opportunity to strengthen customer relationships by offering a faster, easier shopping experience.

"With Citi, MasterCard, First Data and Sprint, we're building an open commerce ecosystem that, for the first time, will make it possible for you to pay with an NFC (near-field communication) wallet and redeem consumer promotions all in one tap while shopping offline," Stephanie Tielnius, vice president, commerce and payments at Google, said at the time.

Google Wallet initially underwent field testing with select retailers (Subway and Walgreens) in New York and San Francisco. The Silicon Valley giant was expected to make the app available to customers this summer.

Google is not the only provider testing the mobile wallet waters. AT&T Mobility, T-Mobile USA and Verizon Wireless are teaming up on Isis, another version of a mobile wallet. It made news in July when the four major payment networks — Visa, MasterCard, Discover and American Express — joined the effort.

"Since the formation of Isis in [November 2010], we have been committed to building a mobile commerce platform that aligns and advances the interests of consumers, merchants and banks," Isis CEO Michael Abbott said in a statement. "By working with the nation's payment networks…we significantly advance the vision of an open and secure platform that provides banks and merchants with a new and highly relevant way to connect with consumers."

Isis has tapped Austin, Texas and Salt Lake City as its initial test markets. A full rollout is penciled in for the first half of 2012.


When mobile wallet platforms roll out to Main Street U.S.A., Hartman said Rutter's will be waiting. "Yes, we would be very interested in mobile wallet payments," he said. However, he noted that the rollout could face some technical challenges in the c-store channel.

"There are a lot of different angles they are coming from in terms of how they will interact with retailers," he explained. "Providers need to get in the mindset of how the payment system can work with different POS (point-of-sale systems). I would love to work with some companies to see if this is achievable."

Technology-wise, convenience is probably the most complex industry to try to make mobile wallets work, according to Hartman. "For example, in our stores on one end you have grocery, the other fast-feeder and outside you have a gas station. That's three industries in one concept."

He said mobile wallets may work better in a quick-service restaurant or big-box retailer. However, because they are designed typically for smaller transactions, providers should have convenience stores in their sights "Because of the types of payments they are targeting, our industry should be the No. 1 focus," Hartman said. "Most of our transactions are small transactions and that is what they are looking for. They will not be $5,000 payments, but geared more toward $3, $5 and $10 purchases."

Despite his faith in the fact that mobile wallets are the way of the future, Hartman said he doesn't think many convenience store operators are readying their POS systems just yet, and may not until the mobile wallet option is a little more refined.

"It's not so much a wait-and-see approach, but retailers may be looking for a clearer way to interact with and have the ability to support our POS systems," he added.

Proving this point, customers at Tedeschi Food Shops may not find Google Wallet when it spreads across the country. "The mobile payments market in the states is immature," said Douglas New, CIO at the New England convenience store operator.

That is not to say Tedeschi is not keeping an eye on the possibility. "We're interested in it, but we're not going to consider investing in the technology until there are at least some standards to review."

It's a similar story on the West Coast. When asked about the possibility of mobile wallet capabilities at Chevron ExtraMile locations, Colin Parfitt, vice president of Americas West at Chevron, said the company is watching the developments and thinking about how it can be incorporated into pay-at-the pump technologies. However, when it comes to being one of the first retailers on the mobile wallet scene, Chevron ExtraMile will take a pass — preferring to be a follower on this.

Mobile wallet providers may have obstacles to overcome on the other side of the retail equation, too. According to a Retrevo Pulse study conducted in June, 53 percent of the respondents said they were not interested in a phone with a mobile wallet.

"We found that consumers are not as enthusiastic as some providers might like them to be," said Andy Eisner, director of community and content at Retrevo. "A very large number of respondents said they were not interested or did not know enough about mobile wallets. It sends the message to providers that they have a little bit of work ahead of them to overcome consumer resistance."

Retrevo Pulse is an ongoing study of tech industry trends. The company decided to tackle the issue of a mobile wallet this spring because the innovation has been generating a lot of buzz lately. "Everybody is looking like they want to get into the game," Eisner said. "This has the potential to be big. It is a very important change to the way people pay for things and the way merchants market to them."

How big and when the technology will hit its stride remains to be seen. "New smartphones are so popular and mobile payments are an easy feature to include in the phones. We think the time is right for NFC; it's just a question of whether people will warm up to it," he added.

Aside from not knowing enough about mobile wallets, respondents in the study indicated trust could be a major hurdle. "The study found the biggest consumer concerns are privacy and security," Eisner said. "They think, if it's so easy to use, wouldn't it be easy for someone to steal your account information? Consumers are still a bit weary. People are a little more cautious when money is involved."

Mobile wallet providers could go a long way winning over consumers if they offered something more, he said. "Just providing an alternative payment method is not enough for the consumer. You need additional features, even incentives, to make mobile wallets cool," Eisner said.

For example, the mobile version should replace everything in a traditional wallet from the bus pass to the library card. Also, he said, they could be used by merchants to personalize service.

Surprisingly, Retrevo found that when it does come to trusting a mobile wallet provider, most respondents said they would favor Google (36 percent) and Apple (33 percent) before credit card companies like Visa, MasterCard or American Express (32 percent).

"Google Wallet is set to roll out in San Francisco and New York, so you could see it catching on within a month. Europe and Asia are already using mobile wallets. The big question is whether consumers will adopt it," Eisner said.

Hartman, for one, sees a bright future for mobile wallets.

"I still believe it is an important technology. If you look back at smartphones, iPhones have only been around for about four years and look how far we've come since," he said. "The thought that people will not be carrying around plastic in their wallets in 10 years is not a stretch."

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