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Life Without A Wallet

As I placed the last of my groceries onto the slowly advancing conveyor belt, I recognized the look of slight irritation on the clerk’s face as the gentleman in front of me pulled out his checkbook, squinting to see the total price.

On the other hand, I had my blue debit card in hand and because once in a while I am still asked for an ID when purchasing a bottle of Cabernet, I had my driver’s license out as well.

When it came my time to pay, however, I recognized the look of moderate dissatisfaction from the woman behind me.

She looked at my debit card like I was about to barter for my groceries with sea shells. Her iPhone was ready to go, and she would only need to wave it at the register to be done with her transaction. I was holding her up with my antiquated plastic money.

This lady, along with millions of younger millennials, is already sold on mobile payments. Her phone is her credit card; it is faster than cash and safer than the plastic card that her bank issued her. Within a couple of years, it will replace plastic cards the way plastic cards replaced paper checks.

How it works – contactless credit cards

Mobile payment platforms such as Apple Pay, Samsung Pay and Android Pay (see a theme here?) essentially allow consumers to give payment details to credit card processors by simply waving a smartphone over a reader and confirming the purchase.

Unlike a magnetic strip credit card, the account information is not stored on the smartphone. Take Apple Pay, for example: payment information is stored on Apple’s secure server and encrypted so that even Apple cannot see the card’s details. When the phone is waved near the reader, Apple sends a request to use the funds with the encrypted account information, and the bank that issued the card decrypts the details. From here, the bank tells Apple to allow the sale.

Just like EMV chip cards (which as of fall 2015 all American banks issue, and is likely already in your wallet), the burden of security for the data is placed on the bank rather than the merchant. The bank assigns a unique transaction number to every single purchase rather than simply using the credit card number. This prevents clever hackers from reading your chip information and using it to purchase a T.V. from Amazon. It is, in fact, safer than swiping your card.

Going all in

While some stores are implementing mobile-only checkout lines, others are testing new extremes. Always competing to be on the cutting edge, some stores in Southern California (although not currently in the Conejo Valley), are beta testing truly top-of-the-line technology for shopping and checkout. In these stores, customers use their smartphones to scan the barcodes of their items as they shop with the store’s custom mobile app. Much like the self-checkout kiosks in most big name grocery stores, shoppers are both consumer and clerk. When finished shopping, the customer simply approves the payment from a pre-loaded credit card and walks out.

After the beta testing is completed, and the kinks worked out (produce sold by weight, loss prevention, etc.), this may very well be how you shop in the near future.

Businesses should be excited

In the early days of plastic cards, businesses passed the nominal 1% or 2% processing fee on to customers. This quickly changed when studies revealed that consumers were likely to spend 12 to 18% more in the store when using a card. Suddenly, they were happy to allow customers to use their card for no fee at all.

While it is still in its infancy, early studies hint increased spending may become even a little higher when using mobile payments. For business, this means bigger returns and happier customers.

Additionally, using apps that are specific to a store allows the business to market directly to the consumer while they shop. I see you purchased a bottle of strawberry jelly. Did you know we have a sale on crunchy peanut butter? It also allows the store to implement a more targeted loyalty program. A notification could be sent to the customer’s phone to entice the pre-purchase of frequently purchased items at a discount. We see you buy a dozen eggs every week. If you pre-purchase nine dozen right now, the 10th dozen is free!

Allowing customers to scan their items as they shop frees up human resources to ensure that the shelves are stocked to specification and that customers are warmly greeted and guided to the products they want. It negates the need to go through the repetition of scanning items and forcing mundane small talk. It allows the store to allocate more of its floor space to marketing or selling products rather than setting a large section aside for registers.

A revolution is coming for point-of-sale purchases. Mobile payment is convenient for both merchant and consumer. It's edgy and attractive for the largest generational consumer group, appealing to their demand for personal experiences.

The countdown to life without a wallet has begun.

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