Magazine article American Banker

Mobile Fails College Exam; Students Call Payment Technology Immature

Magazine article American Banker

Mobile Fails College Exam; Students Call Payment Technology Immature

Article excerpt

Byline: Jeremy Quittner

Much like the story of the emperor's new clothes, mobile payments may be a case where the young see one thing and their elders another.

College students who won the top slot in a contest sponsored by the National Retail Federation Foundation and American Express Co. have determined that in a retail environment, mobile payments is not ready for prime time.

"Basically, the students did the research, and they found it is too early in the adoption process for the industry," said Jerry O'Brien, executive director at the Kohl Center for Retailing Excellence at the University of Wisconsin, Madison and leader of the winning student team. The students also concluded that mobile payments would be critical in the coming years, but that retailers should wait until consumer technology bears the burden of the infrastructure and the cost, not the retailer.

"The students believe the technology for the smartphone will very soon enable them to [make payments] without a big input of cash from the retailer" to implement the new technology, O'Brien added.

The students were part of a winning team presenting their findings at the Jacob K. Javits Convention Center in New York on Jan. 10, during the National Retail Federation's 100th annual Convention and Expo. The competition is in its fourth year.

The competition pits six university teams against one another. In a twist, the students don't compete as teams from their own universities, but as mash-ups - one person from each university is chosen to compete with one person from every other university. They collaborate virtually, using tools such as Web conferencing, and compete against five other teams chosen in the same way. They play executive roles in finance, store operations and design, e-commerce, and information technology, among others, to formulate their case studies.

"This is similar to the global way that retail operates today," said Katherine T. Mance, executive director of the NRF Foundation. Executives, buyers and suppliers collaborate virtually today as well, she said.

The case study was based on the creation of an imaginary national department store chain, called Clements, whose sales had begun to languish and whose buyers were aging. The chain has 1,006 locations and net sales of $16.9 billion. Its e-commerce customers presented a growing opportunity: an average basket size of $80, 60 million unique users and 2009 sales of $360 million. The students designed a mobile application for its tech-savvy customers to let them check information about products and inventory, create shopping lists, find store locations and hours, register for loyalty programs and other tasks, including social media interactions.

But notably missing from the mobile app was a payments function.

At the point of sale, mobile payments systems are typically planned around the use of a near-field communication chip for contactless payments, but "the cost for [NFC] technology is very high, and it is too early to enter the market," the students said in their presentation.

Upgrades would cost about $200 per terminal, the students noted. …

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