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Catalyst Corner: November/December 2014


Mobile Payment Technology Taking Off

With
the advent of Apple Pay and its integration with the new
iPhone 6 and iPhone 6 Plus, mobile payment technology is ready
to take flight to a new altitude. Smart partnerships with
finance and technology companies like Citigroup Inc., American
Express, and Stripe have laid the groundwork for mobile
payment technology to hit the tipping point. How this new
dynamic will impact pharmacy point-of-sale vendors is an
interesting question.

I
had set aside an article earlier this month analyzing PayPal’s
potential demise due to changes in the mobile payment market,
when news hit two days ago that Walgreens was implementing
Apple Pay in all its stores. That was enough to make me pause
and decide to check into the mobile market dynamic.

The
buzz about mobile payment has reached new heights because of
Apple’s introduction of its new iPhones with the Apple Pay fea
ture
built in, and the fact that they sold more than 10 million of
the phones the first weekend they were available. But mobile
payment is not new.

Back
in mid-2011, Google introduced its Google Wallet, which can be
used on the Android mobile phone operating system thanks to
the introduction of near field communication, or NFC. But in
the three years since Google Wallet’s introduction, its growth
has been slow. Google will not divulge how many downloads of
Google Wallet have been made from the Google Play store, and
the application can only be used in the U.S. market. The
estimated number of downloads sits at less than 20 million,
but the range could be between 10 million and 50 million,
according to Charles Arthur in a Sept. 25 article in The

How
will mobile payment technology impact point-of-sale systems
and their backend integration? Is there an emerging
opportunity to be taken advantage of?

Guardian.
Google indicated to Arthur that the 20 million number is
likely a close estimate. But downloads of Google Wallet
don’t necessarily translate into transactions. Arthur’s
usage analysis in the
Guardian
article
puts the likely user base at about 17 million, or 19% of the
nearly 90 million Android user base in the United States.

The
Ease-of-Use Factor

Arthur
points to usage difficulty as a key contributor to the slow
growth of Google Wallet. Users have to swipe their phone
awake and use a PIN with Google Wallet. Fifteen percent of
the 50,000 reviews of the Google Wallet app give it a
one-star

rating. Another writer, Nicole Arce, in her Sept. 22
Tech
Times

article, notes that the Google Wallet page on the Google
website does not make it clear how to use the application.
With Apple’s proven ability to sway the consumer market,
many observers believe that issues affecting the mobile
payment market to date are about to be resolved. One
industry analyst noted that Apple’s ability to teach
consumers how to use their finger on a phone instead of a
keyboard means they’ll be able to educate consumers how to
use their iPhones to pay for purchases at the more than
200,000 retailers like McDonald’s, 7-Eleven, and Walgreens
that have the capability to conduct the transactions.

The
two models are quite different, explains Arthur in the
Guardian
article. In Google Wallet, the user’s bank and credit cards
are enrolled into the Google system, which becomes the front
end of a transac
tion.
Google then makes the actual payment to the retailer and
charges it back to the user’s card, thus enabling Google to
see every transaction. Google also pays transaction fees to
the credit-card companies, and is reported to lose money on
each transaction. Apple Pay, on the other hand, has the user
store a secured “token” on his or her phone that has been
bank issued. The token is then used for the transac
tion,
with authorization done by the user’s finger
print
on the phone’s touch system. Apple receives a cut of the
transaction, reportedly about 0.15%, according to Arthur. So
the debate about privacy and usability may intensify as the
market continues to grow.

And
the stakes are high, considering that the mobile payment
market is expected to grow from $3.5 bil
lion
in 2014 to $118 billion in 2018, according to eMarketer.

Walgreens,
which was an early Google Wallet partner,
has announced its ability to conduct Apple Pay transactions,
and has gone so far as to create a You-Tube video to show
users how quick the transaction can be — from 20 to 44
seconds, with the latter be
ing
if the customer has to enter his or her loyalty card reward
number on the pinpad. I would encourage you to take a look
at the video, which can be accessed at
https://www.youtube.com/watch?v=r4be9pOuiI0.

Given
the large installed Google Wallet Android base, and the mobile
payment market push provided by the iPhone 6 and iPhone 6
Plus, things are expected to change quickly. Meanwhile,
PayPal, which led the way for millions to feel comfortable
making secure online payments, is struggling to figure out
where it will fit in the emerging market. PayPal has recently
been spun off from EBay in order to have more independence to
move quickly and strategically in the mobile payment market.

How
will mobile payment technology impact point-of-sale systems
and their backend integration? Is there an emerg
ing
opportunity to be taken advantage of? It’s an interesting
question, and one that
ComputerTalk
readers may want to ask themselves before the flight reaches
cruising altitude.
CT

Marsha K. Millonig, R.Ph., M.B.A., is president of Catalyst Enterprises, LLC, in Eagan, Minn. The firm provides consulting, research, and writing services to help healthcare industry players provide services more efficiently and implement new services for future growth. The author can be reached at mmillonig@catalystenterprises.net.