The beginning of the end for interchange and bank payment systems
NFC has been out there and few are adopting it. Now we learn that iOS 7 has BLE (Bluetooth Low Energy) which is a low battery usage Bluetooth. Next Apple and Paypal are planning to use this new protocol for payments.
Apple has included what is coming to be known as “beacon” technology in its new iOS 7 mobile operating system, which rolls out Sept. 18. Called iBeacon, it uses Bluetooth Low Energy wireless technology, like PayPal Beacon, and can be incorporated into apps. Stores plug in sensors that constantly look for iBeacon-enabled apps. When sensors detect an app, they notify store systems that then send retailer messages, such as coupons, through BLE to the app.
Here is where it gets interesting, and Minority Report … ish.
PayPal, however, may be the first company to create a mobile payments method that is easier to use than credit cards. With PayPal Beacon, all a consumer needs to do is have her smartphone—with the PayPal app onboard and Bluetooth turned on—in her pocket or purse. A small PayPal Beacon device in-store senses when a consumer with the PayPal app—open or closed—enters the store. It prompts the customer to check in; a customer also can set her app to automatically check in. After the customer checks in, her picture and name pop up on the retailer’s point-of-sale system. When a sales associate at the store totals a bill on a cash register or or a card-reading terminal, the customer gives verbal confirmation to the associate, who matches the customer with the picture of the customer on the POS screen and concludes the transaction.
Relevance to Bankwatch:
There is just something that feels right about iBeacon and why it is better than NFC. Lower power consumption, but much more importantly, increased capability. NFC knows where you are and that you are there within a few inches. BLE knows when you enter the store. This opens up a magnitude of possibilities for the store and for anyone who can get consumers attention.
BLE is different:
When BLE is applied to a payment system there’s a lot of potential for more sophisticated interactions between the payee and the merchant’s computer systems. For example, if you enter a store that’s equipped with a BLE-powered iBeacon device, you would be carrying your smartphone into a sea full of radio waves. iBeacon would immediately know that your phone is within a very short range of the beacon itself.
In other words iPhone and smartphone apps can work with store apps to interact and bring a world of consumer and store benefit including advertising, special offers, loyalty, other ideas that smart people will develop. This will be based on the knowledge that you, the customer, have arrived in the store, and what you may have told the from before.
Payments will not be about cards and merchant terminals in that future. Read further into that and bank revenue from merchant discount is highly vulnerable. Payments will increasingly be through alternatives to merchant terminals that bypass interchange. This future will make bank payment systems irrelevant.
Dive in with your thoughts!