Just when the American consumer ran out of cash and maxed out all credit cards technology offers a new way of buying that makes it easier and faster to buy; your own Smartphone. The practice used by Japanese consumers since 2007 to pay at fast food restaurants and implemented in Africa as a secure way of transferring funds between bank accounts has finally made it to America in the hands of the master in marketing and coffee houses Starbucks.
The technology is innovative and definitely convenient. Starbucks, who started to implement it this month, says that more than one third of its customers use smart phones. “We’re providing them with the fastest way to pay,” said Brady Brewer, vice president for the Starbucks card and brand loyalty in a statement in The New York Times. By turning cell phones into credit cards near field communication (NFC) allows customers to pay for their lattes at the 8,000 Starbucks stores nationwide plus an additional 1,000 stores inside Target.
However, this new method of payment comes with a couple of drawbacks that would make it hard for the average consumer to fully accept and adopt it as their preferred method of payment in the near future. First, the use of a Smartphone to pay for habitual purchases could immediately increase the risk of overspending and promote impulsive purchases. Even though the Starbucks Card Mobile is not directly linked to your bank account, at least for now, the easy access to funds would suggest that more lattes will be purchased since for many paying with their phone would become fashion and virtually painless to their pockets. We will have to wait and see the purchasing patterns of those customers who chose to pay using their smart phones.
Another drawback is the risk of your phone being stolen or your account being hacked. Not only you would have to worry about excessive international calls and the hassle of replacing your phone, but now you would also have to worry about your Starbucks account being used for unauthorized purchases. Will Starbucks protect your purchases as most credit card issuers do? And what safety measures will the company use to protect the application from hackers?
From the marketing standpoint is a great idea to please consumers while also allowing the company to track consumer behavior more easily and to establish a new way to stay in touch with clients. NFC will definitely be part of our future, but as many other technological advances it will take years before a significant number of consumers adopt the technology. In 1997 Mobil Oil Corp. introduced Speed Pass with a similar technology that connected to bank accounts and credit cards as well with very little success. Despite great efforts by Visa and MasterCard it took decades for consumers to replace cash with plastic and it will also take time now to make consumers change from plastic to wireless.
Norberto Munoz
A Marketing Dose.
Sources:
http://www.starbucks.com/blog/starbucks-card-mobile-goes-national
http://bits.blogs.nytimes.com/2011/01/18/now-at-starbucks-buy-a-latte-by-waving-your-phone/?ref=starbuckscorporation
Norberto Munoz
A Marketing Dose.
Sources:
http://www.starbucks.com/blog/starbucks-card-mobile-goes-national
http://bits.blogs.nytimes.com/2011/01/18/now-at-starbucks-buy-a-latte-by-waving-your-phone/?ref=starbuckscorporation
Very Insightful post. To tell you the truth I was not aware that this technology had been in use by the Japanese and Africa. It was very interesting to learn this little but of information. I do, however, remember using the Speed Pass, which I used when I had the Mobil card. Unfortunately once I close the account it was such a hassle to change the card that I just stopped using it all together. As far as Startbucks goes, leave it to them to attempt to make the "Starbucks' experience" more enjoyable.
ReplyDeleteSpot on! From a security standpoint, there are many potential breaches that have been surely unaccounted for since mobile payment technology has taken on so massively and with such momentum. In fact, just last week, on NPR there was a panel discussing the high risk potential within mobile phone operating systems.
ReplyDeleteI agree completely with you article. I think is a really cool idea what the are trying to do in order to make the purchasing experience more interactive and fashionable. But at the same time it worries me because it gives access to a whole new world of possibilities to people who don't necessarily have the best interest on our bank accounts. I guess we will have to wait and see what updates this payment innovation brings.
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