Monday Mar 02, 2015

Payment Consolidation

What do you get when you add the following pairs?  Samsung+LoopPay, Google+Softcard, PayPal+Paydiant?  Answer: Viable ApplePay competitors.

First everyone and his brother had a mobile payment solution, then a select few rose to the top and got acquired.  The cycle goes like this: innovation, consolidation, standardization.  In this case, there's room for multiple standards, but not too many.  When the music stops, somebody will inevitably be left without a chair.  Today I feel like that's Samsung.

Google wants to play by established rules, but for the longest time telcos weren't letting them in the game.  Their recent agreement with the backers of Softcard now level's the playing field.  I think their ultimate strategy is the obvious one: advertising.  Being part of offline transactions gives them access to the customer's eyes and intentions.  Combine that with their existing online efforts and you have omni-channel marketing.

Approaching from a different angle, Apple is constantly looking for ways to remove the friction in everyday lives.  Their focus is on the user experience of payments, making sure its as smooth and simple as possible.  This either drives sales of existing devices or creates new markets.  With ApplyPay they'll sell more iPhones and create a new market by eventually charging fees (that consumers won't see directly).  They managed to dodge the telcos and get the backing of the banks, but that's no surprise given their track record in other industries. 

On the other hand, PayPal is more aligned with the merchants so their acquisition of the MCX technology-provider makes lots of sense. Their goal is to offer an alternative to swipe fees that satisfies both consumers and merchants.  Their work with Discover, beacons, and their Square-like fob are seeing some success with smaller retailers.  The ability to create orders and do person-to-person payments also sets them apart.

Then there's Samsung, the smartphone manufacturer.  LoopPay has very cool technology that transmits the card data to an existing magstripe reader through the air.  So for terminals that don't support NFC, the consumer can still put the phone within 3 inches of the magstripe terminal and send the card data.  That means that generally every existing merchant can already accept SamsungPay.  But there are two issues.  First, I'm not confident this system works 100% of the time.  And second, its predicated on dying, insecure technology.  Clearly Samsung isn't worried about either of those issues.

All these moves coupled with the occasional security breach makes this space very exciting.  Sit back and enjoy the ride.

Monday Feb 02, 2015

Payments in the Retail Industry

Last week I delivered a webinar for some of our Oracle Retail User Group (ORUG) members on payments in retail.  With NFC, EMV, and the many emerging payment solutions on the market, its important to keep current.  The deck is below, and a brief overview is after that.

Slide 2- The basics of credit card fees.  With a $100 purchase, the merchant actually gets $98 after fees taken by the issuing back, card network, and acquiring bank. Card fees are one of the most expensive costs for retailers.

Slide 3- The big emerging payment solutions are Google Wallet, PayPal, SoftCard, ApplePay, and MCX/CurrentC.  Google and Softcard is straightforward NFC with coupons and loyalty.  ApplePay is focused simply on payment.  PayPal is trying to extend online payments to the offline world, and MCX is trying minimize costs for retailers.

Slide 4- There are tons of smaller, emerging payment schemes including solutions from Final, Plastc, SimplyTapp, and Dwolla among others.

Slide 5- Krebs has a nice list of the types of fraud in the industry.  There are lots of opportunities for thieves.

Slide 6- Data breaches occur in many industries, not just retail.  Its a widespread problem.

Slide 7- Every retailer needs a Response Plan so they are prepared when a breach is discovered.

Slide 8- EMV is a step in the right direction, but it doesn't solve all the issues.  With base EMV, card numbers are still in the clear so memory scraper malware, the cause of several recent breaches, would still capture account numbers.  Also, retailers should be aware the when EMV is rolled out, fraud tends to migrate online.

Slide 9- There are three advanced solutions that help combat online fraud, but none of them is in widespread use due to additional friction and costs.

Slide 10- The liability shift is coming soon, so retailers need to understand what it entails.

Slide 11- The card issuer configures the card to determine the cardholder validation method, which can be online PIN, offline PIN, signature, and none.  Unfortunately, some banks are choosing signature, which isn't the most secure.

Slide 12- The process of using an EMV card is slightly different than magstripe, so lots of training will need required.

Slide 13- Some advice for retailers when they implement EMV.

Keep your eye on this space as it continues to change.

Thursday Dec 18, 2014

Evolution of Image Recognition

Remember the first time you tried Shazam on the iPhone? I was blown away. Even with ambient noise the thing was accurate.  Then I recall John Yopp, our head of research, say we should create a fashion Shazam that identifies clothing for people. When you see a cool tie at lunchtime, snap a picture and buy your own.  Wait a second, songs are one thing but fashion would be impossible.  Patterns, shadows, creases -- it would never work.

Then I came across GetFugu and Google Goggles, which both made good attempts are recognizing products.  Amazon's Flow was also very good, but it heavily leveraged optical character recognition to get hints about the product.  I suppose that fine when shopping in stores, but it wasn't the real world scenario I was looking for.  (Flow has undergone many upgrades over the years and now it can create a shopping list.)  Pounce was pretty good at marrying traditional advertising with digital, allowing the user to snap a picture of a product in a circular/flyer then see the product on the Website.

In a Customer Advisory Board meeting, one of my customers showed me a very cool app for recognizing sneakers.  NetShoes, a Brazilian e-commerce company, released an app that I found to be very accurate.  (I went around the conference snapping pictures of people's sneakers.  Luckily it was the last day so most were wearing comfortable shoes for the plane ride home.)  I later contacted the engineers and found there was a pretty exhaustive process for training the application to recognize the objects, but it could be used for almost anything given some degree of context.

Five years or so after my first experience with Shazam, I think we're getting closer.  Companies like Slyce are investing heavily in the technology necessary.  But we've still got a ways to go.  I downloaded and tried Neiman Marcus' implementation of Slyce and tested a few handbags.  Close but no cigar.

Monday May 26, 2014

Why Haven’t NFC Payments Taken Off?

With the EMV 2015 milestone approaching rapidly, there’s been renewed interest in smartcards, those credit cards with an embedded computer chip.  Back in 1996 I was working for a vendor helping Visa introduce a stored-value smartcard to the US.  Visa Cash was debuted at the 1996 Olympics in Atlanta, and I firmly believed it was the beginning of a cashless society.  (I later worked on MasterCard’s system called Mondex, from the UK, which debuted the following year in Manhattan).

But since you don’t have a Visa Cash card in your wallet, it’s obvious the project never took off.  It was convenient for consumers, faster for merchants, and more cost-effective for banks, so why did it fail?  All emerging payment systems suffer from the chicken-and-egg dilemma.  Consumers won’t carry the cards if few merchants accept them, and merchants won’t install the terminals if few consumers have cards.

Today’s emerging payment providers are in a similar pickle.  There has to be enough value for all three constituents – consumers, merchants, banks – to change the status quo.  And it’s not enough to exceed the value, it’s got to be a leap in value, because people generally resist change.  ATMs and transit cards are great examples of this, and airline kiosks and self-checkout systems are to a lesser extent.

Although Google Wallet and ISIS, the two leading NFC payment platforms in the US, have shown strong commitment, there’s been very little traction.  Yes, I can load my credit card number into my phone then tap to pay, but what was the incremental value over swiping my old card?  For it to be a leap in value, it has to offer more than just payment, which I can do very easily today.  The other two ingredients are thought to be loyalty programs and digital coupons, but neither Google nor ISIS really did them well.

Of course a large portion of the mobile phone market doesn’t even support NFC thanks to Apple, and since it’s not in their best interest that situation is unlikely to change.  Another issue is getting access to the “secure element,” the chip inside the phone where accounts numbers can be held securely.  Telco providers and handset manufacturers own that area, and they’re not willing to share with banks.  (Host Card Emulation, which has been endorsed by MasterCard and Visa, might be a solution.)

Square recently gave up on its wallet, and MCX (the group of retailers trying to create a mobile payment platform) is very slow out of the gate.  That leaves PayPal and a slew of smaller companies trying to introduce easier ways to pay.

But is it really so cumbersome to carry and swipe (soon to insert) a credit card?  Aren’t there more important problems to solve in the retail customer experience?  Maybe Apple will come up with some novel way to use iBeacons and fingerprint identification to make payments, but for now I think we need to focus on upgrading to Chip-and-PIN and tightening security.  In the meantime, NFC payments will continue to struggle.

Monday Mar 03, 2014

Two Really Cool Approaches to Payment

As if the oodles of emerging payment schemes weren't enough, two more approaches have arrived on scene.  Aside from enabling your phone to make payments, they are very unique and well worth some consideration.  The first solution is called LoopPay, and its creators claim it works on 90% of existing payment terminals without any new hardware.  Install the wallet on your phone and plug-in either the fob or charge case, then tap on any existing payment terminal to pay using your credit or debit card.  Now think about that.  How's it done?

No, they're not using NFC or bluetooth to communicate with the terminal.  That would involve additional or updated hardware, and I said this works with existing terminals.  Are they using sound like ShopKick?  Nope.  QRcodes?  Good guess, but no.  Think about it from the terminal's perspective.  The only way to enter card data is the keyboard or the magstripe.  Wait for it.  Yes, the phone via the fob emits a magnetic field that contains the track data.  Its pushing the track data into the magstripe head of the terminal.  From the terminal's perspective, we have a traditional, card-present transaction.

Here's the rub: like I said, it only works on 90% of the terminals, and in real-world tests maybe even less.  Its a tough sell for banks and retailers to say "works most of the time" to their customers.  Obviously there are security concerns as well, but I'm assuming they are able to vary the track data just as EMV would, so its at least as secure...maybe.  But then again, I'm still not convinced that tapping my phone is any more efficient than swiping inserting my card.

The second approach is a bit more traditional.  If you'll recall, Google Wallet only worked on certain phones when it was first released.  iPhones were out because they don't support NFC, and only select carriers were supported with Android.  That's because the wallet made use of the secure element, a place were crypto algorithms are run and data can be secured.  The secure element can be built into the phone, but most of the time its in the SIM chip that's owned by the telcos.  And as Google found out, if the telcos don't allow access to the secure element, you can't do NFC payment.

That's where SimplyTapp enters the scene.  They're advancing Host Card Emulation (HCE), a method by which you can do NFC payments using a secure element that resides in the cloud instead of the phone.  Android has included HCE in their latest version, KitKat, so now all NFC-capable phones are ready for NFC payments.  The big news here is that banks are now free to create payment schemes without getting approval from the telcos.  Both MasterCard and Visa recently endorsed HCE so I'd expect existing banking applications to begin adding the ability to pay soon.

So where does that leave us?  The telcos continue to want a piece of mobile payments via Isis; Google gets access to more handsets; banks are well positioned to support their own mobile payments; MCX continues to focus on reducing merchant fees; and Apple is the wildcard.

Tuesday Mar 12, 2013

Shopping with Google Glass

ConAgra Foods, makers of Healthy Choice and Marie Callender's meals, created the video below to show what the future of shopping may look like from behind Google Glass.  This is clearly not possible today but is within the realm of possibility for the near future.

I was annoyed they chose to follow two people instead of just one.  I assume they did it to illustrate the conversation between the women, but it distracts from the overall shopping theme.  If the conversation was that important, it would have been better to ask for product advice.  I was more impressed with the voice response than the augmented reality aspects.  Being able to direct commands to Glass vs people in the room is tough -- usually you need to preface commands with a keyword or press a button.

Being able to overlay text on products is pretty tough as well.  Today you'd need to use a barcode or marker of some sort because image recognition is just too unreliable, especially when all the products look similar.  At best you can count the number of facing items and possibly recognize the brands.

Checkout was certainly fast!  Surprised they didn't have to blink Morse Code for their PINs.  All in all I thought most of what they accomplished would have worked well on their smartphones without Glass.  It certainly has me thinking about the future.

Would have been funny to see one of the women run into an endcap because spam blocked her vision.  Maybe next time.

Wednesday Feb 13, 2013

What's Next from Apple?

Apple has had a profound impact on the retail industry with its amazing stores, mobile POS, and devices that allow people to shop on-the-go.  So it makes sense to monitor the boys in Cupertino so we don't get blindsided.  This week two big rumors were revealed that might give us some hints of what's to come.  First, Bloomberg is reporting Apple has a team working on a smart-watch, a wearable device that has some of the iPhone's features.  I find it hard to believe they can pack enough battery into a wristwatch for it to be anything iPhone-like, but perhaps its just a conduit for alerts from a bluetooth connected iPhone.

This "iWatch" concept has me thinking about even faster payments at the POS.  No need to whip out that phone, as perhaps the iWatch will  transmit payment credentials.  This could be the second step toward the wearable computer, the first being Google Glass.  The future may bring real-time product previews and offers magically popping up in your field of vision.  (BTW, our Retail Applied Research team has been working on iPad-based augmented reality for delivering contextual reports to store managers as they walk the aisles.)

The second rumor is that Apple is looking to buy a high-end television manufacturer.  The potential for Apple to apply what it learned from the music industry could really change the way in which we consume TV.  And of course, Apple would be well positioned to optimize Second Screen Commerce, allowing viewers to easily buy what they see. PayPal has teamed with Tivo to allow viewers to buy from ads, but a true Apple TV might just allow purchases from sitcoms.  The Big Bang Theory meets QVC.

I just hope the iWatch isn't waterproof, because the shower is my only remaining refuge.

Tuesday Jan 22, 2013

Picking a Winner for Payments

Probably the most common question I get asked is, "which emerging payment system is best?"  Its a good question, and unfortunately, my crystal ball is a bit cloudy.  Remember, it took credit cards a while before they got traction.  Some of the same things I hear today ("we don't need a new payment scheme," and "it compromises my privacy") I'm hearing in reference to emerging payments.  And just as those complaints eventually quieted, the same thing will happen and people will adopt new ways of paying.  One thing I can say confidently is that the payment landscape will change over the next 3-5 years.

Is NFC dead on arrival? No. I'm not going to count Google, AT&T, Verizon, T-Mobile, and MasterCard out this early in the game. They are behind thanks to a lack of NFC support in iPhones, but they are still viable solutions.  With retailers needing to upgrade their POS terminals to accept EMV cards, now is a great time to also install NFC capabilities.  Once there are more NFC readers out there, more and more innovation will occur around them.

PayPal is definitely in the lead since they are able to leverage their e-commerce base of users.  Their lack of reliance on NFC has worked in their favor, at least in the short-term.  Of course if NFC takes off, I'm sure PayPal can add that technology as well.  Their flexibility and reach are strong points.

Google and Isis have great systems, but since they are limited to Android devices they are not serving enough of the market.  That, of course, will improve over time. While all three (Google, Isis, PayPal) are addressing consumer convenience, none are really addressing transaction costs for merchants.  That's where MCX, the retailer led mobile wallet, could shine. Since they are not on the forefront, they have the luxury of watching the market and picking the best ideas.

At the recent NRF conference, MCX representatives said they are planning to use barcodes for payments in order to support all mobile phones.  They are also focused on lowering transaction costs for merchants as well as protecting customer data, something that differentiates them.  The approach sounds right, but they are far behind in development unless they acquire or partner to gain access to an existing wallet.  Best potential of all the solutions, but furthest behind.

I suppose I could put all my retirement savings into one stock, but I'd rather spread the risk across many.  By the same token, there's no reason for retailers to pick winners at this early stage.  The best advice is to get into the game and try supporting one of the new wallets. In many cases, there's funding available to help offset costs.  This invaluable experience will prepare you to take advantage when winners are more apparent.

Monday Oct 29, 2012

Isis Finally Rolls Out

Google has rolled their wallet out for several chains; I see the NFC readers in Walgreen's when I'm sent their for milk.  But Isis has been relatively quiet until now.  As of last week they have finally launched in their two test cities: Austin, and Salt Lake City.  Below are the supported carriers and phones as of now, but more phones will be added later.

  • AT&T supports: HTC One™ X, LG Escape™, Samsung Galaxy Exhilarate™, Samsung Galaxy S® III, Samsung Galaxy Rugby Pro™
  • T-Mobile supports: Samsung Galaxy S® II, Samsung Galaxy S® III, Samsung Galaxy S® Relay 4G
  • Verizon supports: Droid Incredible 4G LTE.

Of course iPhone owners have no wallet since Apple didn't included an NFC chip.

To start using Isis, you have to take your NFC-capable phone to your carrier's store to get the SIM replaced with a more sophisticated one that has a secure element configured for Isis.  The "secure element" is the cryptographic logic that secures mobile payments.  Carriers like the secure element in the SIM while non-carriers (like Google) prefer the secure element in the phone's electronics. (I'm not entirely sure if you could support both Isis and Google Wallet on the same phone.  Anybody know?)

Then you can download the Isis app from Google Play and load your cards.  Most credit cards are supported, and there's a process to verify the credit cards are valid.  Then you can select from the list of participating retailers to "follow."  Selecting a retailer allows that retailer to give you offers via the app.

The app is well done and easy to use.  You can select a default payment type and also switch between them easily.  When the phone is tapped on the reader, there are two exchanges of information.  The payment information is transferred, and then the Isis "SmartTap" information which includes optional loyalty number and digital coupons.  Of course the value of mobile wallets comes from the ease of handling all three data types (i.e. payment, loyalty, offers).

There are several advertisements for Isis running now, and my favorite is below.

Wednesday Oct 03, 2012

The State of the Internet -- Retail Edition

Over at Business Insider, there's a great presentation on the State of the Internet done in the Mary Meeker style.  Its 138 slides so I took the liberty of condensing it down to the 15 slides that directly apply to the retail industry.  However, I strongly recommend looking at the entire deck when you have time.  And while you're at it, Business Insider just launched a retail portal that's dedicated to retail industry content.  Please check it out as well.  My take-aways are below after the slide show.

[Source: Business Insider]

Here are a few things I took away from the statistics:

  1. Facebook and Twitter are in their infancy.  While all retailers should have social programs, search is still the driver and therefore should receive the lions share of investment.  Facebook referrals are up 92% year-over-year, but Google still does 80% of the referrals.
  2. E-commerce continues to grow at breakneck speed, but in-store commerce is still king. Stores are not showrooms yet.  And social commerce pure-plays like Gilt and Groupon are tiny but worthy of some attention.
  3. There are more smartphones than PCs on the internet, and the disparity will continue to grow. PC growth will be flat and Tablet use will continue to grow. Mobile accounts for 12% of all internet traffic.
  4. A quarter of smartphone sales come from China, so anyone with a presence there better have a strong mobile strategy.
  5. 38% of people have used their smartphone to make a purchase, and many use their smartphones inside stores.  Smartphones are a critical consumer tool for shopping.
  6. Mobile is starting to drive significant traffic to e-commerce sites, especially tablets.  Tablet strategies are crucial for retailers.
  7. Mobile payments from the likes of Paypal and Square are growing quickly.  It will be interesting to see how NFC plays in this area.
  8. Mobile operating systems are losing market share to iOS and Android.  I wonder in Microsoft can finally make a dent?

The internet is being dominated by mobile devices, and retailers had better have a strong mobile strategy to meet consumer demand.

Wednesday Sep 12, 2012

No NFC for the iPhone, and here's why

I, like many others in the retail industry, was hoping the iPhone 5 would include an NFC chip that enabled a mobile wallet.  In previous postings I've discussed the possible business case and the foreshadowing of Passbook, but it wasn't meant to be.  A few weeks ago I was considering all the rumors, and it suddenly occurred to me that it wasn't in Apple's best interest to support an NFC chip.  Yes they have patents in this area, but perhaps they are more defensive than indicating new development.

Steve Jobs wanted to always win, but more importantly he didn't want others to win at his expense.  It drove him nuts that Windows was more successful than MacOS, and clearly he was bothered by Samsung and other handset manufacturers copying the iPhone.  But he was most angry at Google for their stewardship of Android.

If the iPhone 5 had an NFC chip, who would benefit most?  Google Wallet is far and away the leader in NFC-based payments via mobile phones in the US.  Even without Steve at the helm, Apple isn't going to do anything to help Google.  Plus Apple doesn't like to do things in an open way -- then they lose control.  For example, you don't see iPhones with expandable memory, replaceable batteries, or USB connectors.  Adding a standards-based NFC chip just isn't in their nature.

So I don't think Apple is holding back on the NFC chip for the 5S or 6.  It just isn't going to happen unless they can figure out how to prevent others from benefiting from it.

All the other handset manufacturers will use NFC as a differentiator, which may be enough to keep Google and Isis afloat, and of course Square and PayPal aren't betting on NFC anyway.  This isn't the end of alternative payments, its just a major speed bump.

Monday Jun 11, 2012

Comparing Isis, Google, and Paypal

Back in 2010 I was sure NFC would make great strides, but here we are two years later and NFC doesn't seem to be sticking. The obvious reason being the chicken-and-egg problem.  Retailers don't want to install the terminals until the phones support NFC, and vice-versa. So consumers continue to sit on the sidelines waiting for either side to blink and make the necessary investment.  In the meantime, EMV is looking for a way to sneak into the US with the help of the card brands.

There are currently three major solutions that are battling in the marketplace.  All three know that replacing mag-stripe alone is not sufficient to move consumers.  Long-term it's the offers and loyalty programs combined with tendering that make NFC attractive.

NFC solutions cross lots of barriers, so a strong partner system is required.  The solutions need to include the carriers, card brands, banks, handset manufacturers, POS terminals, and most of all lots of merchants.  Lots of coordination is necessary to make the solution seamless to the consumer.

Google Wallet

Google's problem has always been that only the Nexus phone has an NFC chip that supports their wallet.  There are a couple of additional phones out there now, but adoption is still slow.  They acquired Zavers a while back to incorporate digital coupons, but the the bulk of their users continue to be non-NFC.  They have taken an open approach by not specifying particular payment brands.  Google is piloting in San Francisco and New York, supporting both MasterCard PayPass and stored value. I suppose the other card brands may eventually follow.  There's no cost for consumers or merchants -- Google will make money via targeted ads.


Not long after Google announced its wallet, AT&T, Verizon, and T-Mobile announced a joint venture called Isis.  They are in the unique position of owning the SIM in the phones they issue.  At first it seemed Isis was a vehicle for the carriers to compete with the existing card brands, but Isis later switched to a generic wallet that supports the major card brands.  Isis reportedly charges issuers a $5 fee per customer per year.  Isis will pilot this summer in Salt Lake City and Austin.


PayPal, the clear winner in the online payment space beyond traditional credit cards, is trying to move into physical stores.  After negotiations with Google to provide a wallet broke off, PayPal decided to avoid NFC altogether, at least for now, and focus on payments without any physical card or phone.  By avoiding NFC, consumers don't need an NFC-enabled phone and merchants don't need a new reader.  Consumers must enter their phone number and PIN in the merchant's existing device, or they can enter their PIN in the PayPal inStore app running on their phone, then show the merchant a unique barcode which authorizes payment.

Paypal is free for consumers and charges a fee for merchants.  Its not clear, at least to me, how PayPal handles fraudulent transactions and whether the consumer is protected.

The wildcard is, of course, Apple.  Their mobile technologies set the standard, so incorporating NFC chips would certainly accelerate adoption of many payment solutions.  Their announcement today of the iOS Passbook is a step in the right direction, but stops short of handling payments.

For those retailers that have invested in modern terminals, it seems the best strategy is to support all the emerging solutions and let the consumers choose the winner.

Thursday Jan 26, 2012

Navigating the Store

Here's an update on my 2010 posting Going Inside the Store.  Has you phone ever displayed a message saying you'd get better map results if you enabled WiFi?  That's because companies like Skyhook, Apple, and Google send people to public places to correlate WiFi signal strength with locations.  Then they use the information to more accurately determine your location, which is especially important when line-of-sight to the GPS satellites is not possible.

Retailers like Home Depot, IKEA, and Macy's have provided store floor plans to Google so that Android maps actually extend from the streets to the aisles, making it easier to navigate big-box stores.  Similar efforts are ongoing for airports, malls, and arenas.  Wouldn't it be nice for the mapping on your phone to take you directly to your seat in the stadium, your gate in the airport, and a product on the shelf?

Here's a short video showing how you can navigate inside an IKEA store using your phone.

Monday Dec 05, 2011

2012 Predictions for Retail - Part 1

2012 is less than a month away, so this is the time of year we start seeing annual predictions.Susan Reda at Stores just published her take and I know IDC and Gartner have also released theirs.  Many of last year's predictions could easily move forward to this year's:  we'll continue to see lots of new alternative payment types, more engineered systems, better social analytics, more 2-D barcodes, greater adoption of cloud, and improved f-commerce.

In past years we've seen the rise of Apple, Google, Facebook, and Amazon but 2012 will mark a year of war between these juggernauts on the retail battlefield.  They will fight over NFC, tablets, digital content, and most importantly, trust from consumers.  Retailers must keep a close eye on all four companies.

1. Mobile Loyalty

Often, loyalty cards are just a way for retailers to give away margin in the hopes that consumers will select them as their preferred store.  But strong programs involve a trade-off: consumers get discounts, and in return retailers get to learn more about their customers (and serve them better), and have the opportunity to influence their behavior.  The loyalty card was a blunt instrument that worked well for the consumer, but didn't deliver for most retailers.

The concept of geo-fencing has been around a while, but there are few retailers that have really adopted it. The smartphone, with geo-fencing enabled, needs to become the consumer's loyalty card where retailers can incent, learn from, and communicate with customers.  In 2012, geo-fencing will take off and deliver value for both consumers and retailers.  Look for new loyalty programs built around smartphones.

2. Facebook Levels Off, Google+ Stalls, Groupon Withers, Amazon on Fire

To put Facebook's 800 million users in perspective, that the same number of people that were using the internet in 2004 worldwide, which incidentally is when Facebook got its start.  Only India and China have bigger populations. That kind of growth just can't continue, nor do I think engagement can increase. The novelty is wearing off, so while there are lots of users, I believe the engagement of those users will wane.

Some of those users will feel more at home with Google+, but I seriously doubt many will close their Facebook accounts and make a permanent move.  Google+ may continue to grow is user base, but users will spend more time on Facebook.  Google will continue to dip its toes in retail with more small stores, a possible free-shipping program (similar to Amazon Prime), and of course Google Wallet and Google Offers.  Other than Wallet, these efforts will go nowhere.

The potency of Groupon offers will dilute with all the "me-toos" that pop up, and retailers will learn that their exchange of profits for new, disloyal customers isn't sustainable.  Not taking $5.75 billion from Google will down in history as a huge mistake.

Amazon's success with the Kindle will translate into more Prime customers and greater loyalty.  The trend for shoppers to skip Google searches and go directly to will continue, and Amazon will get more aggressive with books, movies, and music. Look for Amazon to acquire in the digital content area.  Also, expect Amazon to have another AWS hiccup that gives retailers pause about using the cloud, but overall AWS usage continues to grow.

3. Apple Payments

With all the news about alternate payments, this isn't a stretch at all.  Apple will finally release the iPhone 5 with NFC support and start to leverage their iTunes customer base for payments in non-Apple stores. I don't see how this will be financially viable with both Apple and credit cards taking a cut of each sale, so look for Apple to push customers toward ACH (debit/checking) as PayPal does.  Look for Apple to start a loyalty program to incent consumers to use the new payment vehicle.

While we're on the subject of Apple, I'm betting they will release a new Apple TV product in 2012.  Retailers should care because it will eventually allow viewers to "click on commercials" to get more details on products and sales.

4. Mobile Self-Checkout

Self-checkout, especially at grocery stores, has been around for a while.  Some love it, and some don't.  Smartphones now make it possible to simulate an e-commerce experience in the physical store.  As you add items to your physical cart, you can scan them into your transaction, then pay and walk out the store.  No need to stand in line at all.

Retailers are already putting mobile POS in the hands of its associates, so its not a huge step to expose that functionality directory to customers.  As Apple leads the way, look for grocery chains to quickly add the capability followed by home improvement stores.

More predictions in my next post.

Thursday Nov 10, 2011

Transparent Technology from Amazon

Amazon has been making some interesting moves again, this time in the augmented humanity area.  Augmented humanity is about helping humans overcome their shortcomings using technology.  Putting a powerful smartphone in your pocket helps you in many ways like navigating streets, communicating with far off friends, and accessing information.  But the interface for smartphones is somewhat limiting and unnatural, so companies have been looking for ways to make the technology more transparent and therefore easier to use.

When Apple helped us drop the stylus, we took a giant leap forward in simplicity.  Using touchscreens with intuitive gestures was part of the iPhone's original appeal.  People don't want to know that technology is there -- they just want the benefits.  So what's the next leap beyond the touchscreen to make smartphones even easier to use?

Two natural ways we interact with the world around us is by using sight and voice.  Google and Apple have been using both in their mobile platforms for limited uses cases.  Nobody actually wants to type a text message, so why not just speak it?  Any if you want more information about a book, why not just snap a picture of the cover?  That's much more accurate than trying to key the title and/or author.

So what's Amazon been doing?  First, Amazon released a new iPhone app called Flow that allows iPhone users to see information about products in context.  Yes, its an augmented reality app that uses the phone's camera to view products, and overlays data about the products on the screen.  For the most part it requires the barcode to be visible to correctly identify the product, but I believe it can also recognize certain logos as well.  Download the app and try it out but don't expect perfection.  Its good enough to demonstrate the concept, but its far from accurate enough.  (MobileBeat did a pretty good review.)  Extrapolate to the future and we might just have a heads-up display in our eyeglasses.

The second interesting area is voice response, for which Siri is getting lots of attention.  Amazon may have purchased a voice recognition company called Yap, although the deal is not confirmed.  But it would make perfect sense, especially with the Kindle Fire in Amazon's lineup.

I believe over the next 3-5 years the way in which we interact with smartphones will mature, and they will become more transparent yet more important to our daily lives.  This will, of course, impact the way we shop, making information more readily accessible than it already is.  Amazon seems to be positioning itself to be at the forefront of this trend, so we should be watching them carefully.


David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.

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