PAYMENT

////////////// FEBRUARY 2015 //// A CHAOTIC MOON STUDIOS PUBLICATION //////////////

CHAOS THEORY February 20152

ONCE THE APPLE WATCH IS IN MARKET, YOU WON’T EVEN HAVE TO PULL YOUR PHONE OUT TO BUY THAT CUP OF COFFEE, YOU’LL JUST TOUCH YOUR WRIST AND GO.

ARLY IN MY CAREER AT CHAOTIC MOON

IN 2012 AND 2013, I ARCHITECTED AND

DESIGNED THE ANDROID VERSION OF THE

STARBUCKS MOBILE PAYMENT APP. STARBUCKS

WAS ONE OF THE FIRST RESTAURANTS TO ADOPT

MOBILE PAY, AND IS STILL AMONG THE MOST POP-

ULAR. THE APP HANDLES UP TO SEVEN MILLION

TRANSACTIONS EVERY WEEK.

The way we designed it, in the exciting early days of mobile pay, you had to pre-fill your Starbucks account with money through your debit/credit card and could then use that balance to make in-store purchases. Starbucks loved the pre-pay system because they were making money whether any goods or services were provided or not. They are lucky enough to have a large cult following that is willing and able to pay the price.

As Starbucks CEO Howard Schultz was recently quoted as saying, “someday soon there will be no more ‘mobile commerce,’ it will just be commerce.” Mobile pay was a $204 billion market in 2014 and is

estimated to rise to a more than $600 billion market by 2018. Because of that, brick-and-mortar retailers and tech giants are in a historic, high-stakes battle for consumers’ wallets.

Right now there are three major players in the fight. Google Wallet has its strengths but, like many Google products, a rush to market limits their success. The real battle is between Apple Pay and CurrentC, an app spearheaded by Wal-Mart but cosponsored by many other corporations includ-ing Best Buy, Target, 7-11, and Southwest Airlines, who together represent nearly a trillion dollars in yearly business. These major corporations are actively rejecting Apple Pay, which will, I predict, end up being a big mistake for them. CurrentC works off the Starbucks model that I helped design in 2012. But unlike Starbucks, most of the compa-nies behind the app aren’t selling an addictive drug.

Also, there are basic technological reasons that limit CurrentC’s value offering. Unlike Apple Pay, CurrentC is a prepaid system where the user loads the mobile app with cash, either directly or by link-ing to a checking or savings account, working only with prepaid store cards linked directly to your bank account. It’s core offering is centered around retail-ers trying to get rid of credit-card fees rather than actually supplying convenience to their customers.

With CurrentC, you have to unlock your phone, open an app, point your phone at a scanner, and wait. Apple Pay, on the other hand, is strictly touch-and-go, using the NFC chip in the smart-phone. Apple Pay is currently restricted to Apple products, although it will eventually be added to Android platforms. Once the Apple Watch is in market, you won’t even have to pull your phone out to buy that cup of coffee, you’ll just touch your wrist and go. No cash, no paper receipts, no problem.

Additionally, Apple is apparently assuming the liability for fraudulent purchases, though there will be much less fraud than in CurrentC, considering Apple Pay is much more secure. More tellingly, all major U.S. banks and the big three credit card companies have signed on with Apple Pay and have reportedly agreed to pay Apple 15 cents per trans-action in exchange for the better security offered by the Apple Pay solution. “I think without a doubt, Apple has a unique place in the mobile ecosystem, with hardware, software, and services,” say James Anderson, Senior Vice President of Emerging Payments at MasterCard, told PC World magazine last year.

MOBILE PAY WAS A $204 BILLION MARKET IN 2014 AND IS ESTIMATED TO RISE TO A MORE THAN $600 BILLION MARKET BY 2018.

By Ben McCrawCCOChaotic Moon Studios

MOBILE PAYMENT MELEE

“SOMEDAY SOON THERE WILL BE NO MORE ‘MOBILE COMMERCE,’ IT WILL JUST BE COMMERCE.”

Howard SchultzCEOStarbucks

E

It should be clear that NFC is the future of mobile payment and QR codes are quickly becoming a thing of the past. So you’d think that CurrentC would be dead before it starts. But it will be able to skirt by for a while on the old paradigm, pressing its advantage in collective offers and rewards program, kind of like frequent-flier miles for mobile pay. Customers have an obvious attraction to discounts and deals, but the technological barriers will kill CurrentC sooner rather than later.

In the end, it’s about convenience. Consumers want a single method of payment, not a piece-meal approach based on where they happen to be shopping that day. Through intelligently designed hardware/software integration Apple has dominated music, movies, books, the PC, and mobile com-munications, and are now working on enterprise, wearable, and e-commerce POS. There’s no ques-tion in my mind Apple is the future of mobile pay, not some cheap Best Buy incentives program.

Ed Catmull writes in Creativity, Inc. that “The future is not a destination – it is a direction.” Apple is building that future and retailers can decide whether they want to be part of it or wrestle for second place.

“THE FUTURE IS NOT A DESTINATION – IT IS A DIRECTION.”

Ed CatmullPRESIDENTPixar Animation Studios

CHAOS THEORY IS A CHAOTIC MOON STUDIOS PUBLICATION. WE ARE

A CREATIVE TECHNOLOGY STUDIO IN AUSTIN, TX OBSESSED WITH

CREATING INNOVATIVE USER-CENTERED DESIGN AND DEVELOPING

INTELLIGENT CUSTOM SOFTWARE FOR THE WORLD’S BIGGEST AND

BEST BRANDS. TO ENGAGE US ABOUT A POTENTIAL PROJECT, SEND

AN EMAIL TO HELLO@CHAOTICMOON.COM