Page 365 - Introduction to Electronic Commerce and Social Commerce

352 11 Electronic Commerce Payment Systems and Order Fulfillment

being funded by over 30 retailers who are its members. Not loyalty card members. A third of all purchases are made with
only will the platform support initiating a purchase by scan- these cards. On initial rollout the mobile version was account-
ning a QR code on the customer’s screen, but it will also ing for over 20% of all transactions. Given the demographic
support initiating a purchase by having the customer user his of their customers this will only increase.
or her phone to scan a QR code on the merchant’s screen.
Compared to device-based wallets, it’s much simpler to Mobile Point of Sale
create and develop a cloud-based wallet. Because these sys-
tems are basically hardware agnostic, the main barriers Up to this point the discussion has all been about supporting
revolve around PCI security compliance, customer authenti- mobile purchases from the customer’s point of view. Mobile
cation, and integration with a settlement system. Of course, payment apps are also used to meet the needs of the mer-
building it is one thing, having merchants adopt it is another. chant during the purchase process. One key area where
While these systems require a barcode and QR code reader mobile payment applications are being employed by mer-
hooked to the backend Web service (not too onerous), these chants is at the point of sale (POS). Instead of taking pay-
transactions are “card not present.” CNP transactions have ments at a traditional POS register or computer that is
higher authorization and settlement fees. Additionally, since stationary, mobile POS (mPOS) devices are used in their
a cloud-based wallet relies on the Web, a merchant will need place. Initially, mPOS systems were designed to run on spe-
uninterrupted and reliable Internet service with consistent cialized hardware and networks, just like their tethered coun-
speed throughout business hours—not a sure bet. terparts. Today, they run on tablets and smart phones and are
cloud-based. The cost of these cloud-based mPOS is sub-
Closed-Loop Systems stantially less. Not only is the hardware less expensive but so
Closely tied to the cloud-based wallets are the closed-loop are the network costs.
payment applications. These systems are much like the Because of their lower costs, mPOS were originally tar-
closed-loop, stored-value or prepaid (gift) cards offered by a geted at small businesses and independent operators such
single retailer. The main difference is that the value is stored doctors, dentists, delivery companies, taxis, and retail kiosks.
in an application on your phone and redeemed with your More recently, these devices are being used in-store by retail-
phone by again having an application barcode or QR code ers of all sizes. They are also being integrated with mobile
scanned by the merchant. In essence it is a cloud-based digi- clienteling applications designed to help sales staff with in-
tal wallet that can only be used with a single retailer (although store, personalized customer support and service.
this isn’t a hard and fast rule). One advantage of the phone is
that you can reload the application at virtually anytime rather Example: Square (squareup.com)
than having the retailer do it in the store. One of the leading vendors of mPOS hardware and software
is Square, Inc. They are a “financial services, merchant ser-
Example: Starbucks Closed-Loop Wallet vices and mobile payment company” that was started in
(starbucks.com) 2008 by Jack Dorsey (also the CEO and founder of Twitter).
One of the better known and most widely used closed-loop Square is probably best known for their Square Magstripe
mobile payments system is the Starbucks Mobile Wallet app Reader, a small square dongle device that plugs into the
that works on Apple and Android smartphones. Because it is headset jack of an iPhone, iPad, or Android and enables a
closed-loop, the app can only be used to do business with merchant to accept payments made with credit cards. There
Starbucks. The card enables Starbucks’ customers to use are actually two parts to the reader. There’s the card swipe
their smartphones to locate stores, buy gift cards online, to device, and there’s the Square Wallet application. The way it
place an order for pickup at a designated local Starbucks, and works for a merchant is the following:
most importantly to use their smart phones to pay for in-store
purchases using an electronic version of the loyalty reward 1. Download the Square app from the Apple App Store or
cards which are basically prepaid stored-value cards. The Google’s Android Market.
electronic version displays a QR code on the smartphone 2. Register with Square, providing U.S.-based bank account,
screen which is scanned by an image reader connected to a U.S. mailing address and Social Security number and the
POS. Each time a purchase is made with the app, the stored business employer id (if there is one). Once the registra-
value of the card is debited and associated Starbuck rewards tion is accepted, Square will send the free card reader.
are increased. The app is also used to automatically reload 3. With the bank registration information, Square will next
the card when the value falls below a customer specified run a test to ensure that your bank account will accept
minimum. deposits from the Square app. After that, funds from card
Automatic reload obviously encourages regular con sump- transactions will be directly deposited to the account
tion, and it’s working (Taylor 2015). Starbucks has 10.4 million within 24 hours of the transaction.