Mobile payment systems final trends paper

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Mobile Payment Systems
Hospitality Sales and Marketing Trends Project
Katie Bain
Elliot Grimley
Julia Hurtley

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Mobile Payments- How do they work and why are they important?
Historical Overview
People carry a lot in their wallets. From identification to credit cards, debit cards, cash, loyalty
cards, membership cards, reward cards, receipts, notes, and photos, our wallets tend to carry
much of the important information we use in everyday life. With mobile wallets, all of this
information and more can be carried in our smartphones. Using mobile wallets, the potential is
there to limit the use of a physical card, and pay for items using the information kept in a
smartphone. The basis of this trend comes from the advances in many different technologies,
all of which combine to allow for a mobile wallet to become a reality for many different
consumers.
NFC, or near field communications technology, allows for the use of a phone for retail
purchases instead of a debit or credit card. GPS technologies allow for companies to track a
customer’s location, providing information about their behavior, and delivering specific offers
based on what consumers are doing and where. Security encryption technology allows for
better protection of passwords and pin numbers, and improvements in malware detection and
protection are providing a level of safety and comfort that is a critical prerequisite to the
widespread adoption of mobile wallets. Cloud storage and computing enables businesses to
generate more information about their customers and connect with their customers in new and
different ways. Analytics combines all the data about consumers and turns it into actionable
intelligence for businesses to deliver value through a mobile wallet feature.
These technologies are coming together to create an environment where the mobile wallet has
the potential to thrive. These technologies create security for the consumer while also
providing incredible amounts of marketing information to businesses. This information can be
used to better target consumers and increase revenue.
Reach and Scope
The reach and scope of mobile payments is widespread. Customers can now pay for a cup of
coffee without even pulling out their wallet or phone. Customers just say their name and their
photo comes up on their screen to make sure that it is theirs. This can be used in the hospitality
field for numerous reasons. Hotels can use it to both pay for the room and confirm identity of
the guest. Hypothetically, mobile wallets could eliminate the need to check identification
although we would recommend still checking physical identification to ensure guest security.
Square makes it easier to pay for things and also makes it easier to keep track of sales and
revenue for a hotel or business. The main goal of Square is to replace cash registers, loyalty

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cards and paper receipts and have it all in one system. This would also benefit the customers
because they could keep track of all of their purchases in one place on their phone or iPad.
Square could have a large cultural impact as it almost eliminates the need for credit cards,
checks and other sources of payment if it catches on and customers use it. There are many
security concerns with Square about information not being secured and being hacked or
accessed by someone other than its primary user.
Outside of hospitality, these mobile payment systems are of huge benefit to small businesses
that don’t want to use a credit card machine because of the hassle andfees. For example, farm
stands that sell various foods could have the square app and accept payments besides just cash
from their customers.
Reported Impacts
Mobile wallets are a new technology; there have been many incredible positive impacts so far
with the utilization of such apps as Google, Square, and Apple. However, not everyone is in
favor of this new technology. A big concern is the hassle that it can cause for consumers; there
are many that think the credit/debit card is easy enough, and that there may be problems with
the reliability of the app. Having an online app take care of money transactions brings a concern
as to whether or not this app is going to be secure enough to protect consumers’ information.
According to Motricity, mobile payments are making a big impact in the business world. ‚A
recent survey by L.E.K. Consulting found that 66% of respondents have used their smartphone
for making purchases and 80% have used them to help decide what to buy. Juniper Research
estimates that the total value of mobile payments for goods and services worldwide will top
three-quarters of a trillion dollars in 2015 (Motricity, 2012).‛
Real Business Examples
Case Studies
Mobile payment systems are still new to the business world, but there are some businesses who
have implemented these technologies for their customers. The two we will look at in depth are
the Blue Glass Café and Starbucks.
This first business to look at when considering mobile payment options is the Blue Glass Café,
which is located in the John Hancock Building in Boston. The café recognized that many of
their customers were highly educated and tech savvy, and they wanted to ‚speed up the ease
and convenience of checkout for their customers.‛ They did research, and selected LevelUp, an
app which allows consumers to pay with their phones to save time and money during the busy

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lunch rushes. This app also has a loyalty system businesses can take advantage of, which tracks
customer information and provides quantifiable customer data, including gender, how often
they eat at the café, and other restaurants they visit around town. The loyalty program has also
proven effective, in that 66% of the customers who used the loyalty program returned to the
café within 14 days. This case study shows how effective it can be for a business to invest in
mobile technology, as the Blue Glass Café has seen cost savings from implementing this new
payment option.
According to the Resident Area Manager, Sean McCaffrey, about 12% of their customers use the
LevelUp system, roughly 60% use debit/credit, and the rest pay in cash. He stated that this has
increased the speed with which they can serve their customers, and that the analytics it
provides in the back end of the system have been invaluable to the company.
The Blue Glass Café addressed the mobile payment trend effectively. They spent the time to
research which of the many available technologies would work best for their business and their
customers. To be more successful, the café might have considered asking for information from
their customers regarding what they are looking for in a mobile payment and loyalty system.
This case study is a clear example of how mobile payment systems are affecting hospitality
marketing. The LevelUp payment system implemented at the Blue Glass Café tracks customer
information, as well as having a built in loyalty program to reward the café’s customers. This
program provides information to the marketing manager that can be used to better understand
the customers and entice them to return more often to the café, as it is much easier to increase
the frequency with which customers visit the business than it is to find new customers. This is a
clear example of how mobile payment systems can work well for a hospitality company,
increasing their return business, reducing credit card costs, and provide information that is
beneficial to hospitality marketers.
The second case study is Starbucks. They partnered with Square to provide the mobile
payment options for their customers. Customers have two options. The first is to show the
barista a QR code linked to their credit card through the Starbucks branded app. The second
option is to access Starbucks through the Square app. Starbucks is partnering very closely with
Square, and are switching the entire back-end payment system over to Square for processing of
credit cards.
Customer reviews of this payment system are mixed. Many say that the app system of showing
a QR code is takes the same amount of time as presenting a regular credit or debit card, and so
they have no benefit for using the mobile payment system. Customers are also discouraged by

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the loyalty system worked into the payment option, as it does not update as often as customers
are used to. The rewards from the loyalty system are not easily used by customers, as they are
mailed to the customer instead of being available through the app. However, over 1 million
customers are using the Starbucks branded payment app, so it has been successful to some
extent.
Starbucks did make some good decisions in pairing with a company who is creative in their
version of the mobile wallet and who is concerned with the customer satisfaction. However, if
they are going to accept mobile payment systems, these systems should make the process of
purchasing coffee and treats easier for the customer, not more difficult and frustrating.
Starbucks should look into the more advanced version of Square which allows for customers to
pay for their coffee by simply giving their name to the cashier.
The more advanced version of this app allows for customers to pay with nothing more than a
conversation with the cashier. Square will list all the businesses near to the customer’s location
who partner with Square as a payment option. The customer selects the business they are at,
and the customer appears on the payment screen for the cashier. The customer then gives their
name to the cashier and identity is confirmed through a picture of the customer which appears
on the POS screen.
This case study provides an important example for hospitality sales and marketing
professionals. When the choice is made to accept a mobile payment system, it is important to
consider how it will make transactions easier for the customer, as well as how the loyalty
system involved will work. If the mobile payment is not going to be done right, then it might
be a good idea to stick with regular versions of payment so as not to anger customers and risk
the loss of business. Marketers must provide an additional benefit to the customers if they are
going to ask them to use a mobile payment system.
Other Industry Applications
There are other applications for this technology in industries outside of hospitality. Mobile
payment systems are obviously important for the retail industry, as clothing companies can use
this system to improve the customer experience and track customer data. This technology is
also used for security purposes. A keycard equipped with NFC (near field communications)
technology can be used in place of a key lock to control access and provide better security.

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Impacts and Competitive Advantages
Interview
The Mobile Wallet Application has made a surge since 2012*, and has continued to surge in
2013. Our generation is the most technologically advanced thus far. This technology brings
more convenience with the gadgets that make life easier to manage, and the software that
allows us to micromanage aspects that would usually require hard copy or hand to hand
transfers i.e. money. In order to get an ‘on the ground’ view of what kind of impact this trend
has in Hospitality I interviewed the General Manager of the St. Paul Hotel, Jeffery Kramer:
Interview: Jeffrey Kramer
Do you consider the St. Paul Hotel technologically advanced or up to date? In many areas, yes,
but in other areas, I would say not ‚advanced‛ but also not behind. We try to stay at the
forefront of technology which you should see when you start. We have things that are very high
tech, but we also have things that could be replaced.
If you do not keep up with technology, would you be interested in mobile wallets? I think that it
is where everything is moving towards. You can do everything else on your phone and
payments are not far behind. I personally think it would be a good thing for many reasons, but
also see negative aspects in it regarding security.
Do you see any future implementing mobile wallet systems? Yes I would think that as the rest
of commerce relies on it, we would be an earlier adapter to the technology.
In the industry, do you think this trend will have any impacts? Yes, there would be many
considerations that would provide both opportunities and threats to the way hotels do business.
Impact on Business
Mobile wallets are impacting the business world in many ways and in different aspects of
business. They are getting customers in and out of businesses faster than ever and customers
now don’t even have to take out their wallets to pay for whatever they are getting. Consumers
can have an application on their smartphone that they can use to pay for their purchases and it
directly takes it out of their bank account or whatever account they have set up for their mobile
wallet.
Some of the leading providers in mobile wallets include Google, Apple, Verizon and AT&T.
They all are very similar, they just vary in who provides them and what accounts they run
through. Google is said to be the leader in providing mobile wallets and they provide the most

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to offer for consumers as of right now. Google uses credit card data in the cloud and then lets
consumers make purchases by tapping their smartphones at the register. They work through
credit card companies such as MasterCard’s Paypass and Visa’s payWave systems.
Mobile wallets are greatly changing the way consumer’s pay for their goods or services and it
also opens the door for many more possibilities. With mobile wallets consumers don’t have to
bring their wallets with all of their credit cards and cash in it. Instead all they need to bring is
their mobile phone and they don’t have to worry about losing their cards or money.
Course Content
This trend agrees with content from the course in many ways. First it has a clear target
audience. Mobile wallets target the group that likes to be constantly up to date with today’s
technology. It also targets those who own a smartphone and people that want the convenience
of paying with their smartphone instead of a physical card or cash.
It also agrees with market opportunity as it creates a lot of opportunity to bring in more
customers and keep your already existing customers loyal. Mobile wallets create many
opportunities for both consumers and the businesses that use them.
Mobile wallets both agree and disagree with interactive marketing. It agrees with it by being
able to provide coupons or deals to customers that use mobile wallets. They can just give the
consumer an alert on their application that they have a coupon and this will drive the consumer
to go to their business. It also disagrees with the interaction because there is less interaction
going on between the consumer and the business. Mobile wallets could greatly reduce the
interaction between the consumer and the employees working at the business.
Mobile wallets agree with marketing information systems because it provides additional
information to that which is provided by POS system. Marketing professionals then can use
information analysis to analyze the information provided from loyalty systems within mobile
wallet to help marketers make better decisions.
Market segmentation also agrees with mobile wallets because it allow for customized
marketing, targeting each person or a small segment of persons based on the information
provided by payment system, specifically loyalty status encouraging repeat customers by
keeping them in contact.

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Competitive Advantage
The competitive advantage provided to a business utilizing mobile payment or wallet systems
cannot be overlooked. Not only do they satisfy a tech-savvy customer base, but they also
receive valuable customer information that marketers can use to improve the effectiveness of
their marketing and loyalty programs. These payment systems also often have a lower fee
attached to them for the use of regularly accepted credit cards such as Visa, MasterCard, and
Discover. Any system which saves the company money for such a low cost provides a
significant advantage over competitors.
Mobile wallets are changing the way businesses are accepting money and creates an aspect that
could both give them an edge over the competition and also opens the door for new
opportunities. It helps the businesses a couple of ways. It gets customers in and out of their
business faster by not having the customer have to take out their wallet, sign any papers, or
swipe their credit card. Instead they just scan their phone and the phone does all of the work.
It also gives businesses an edge by providing another way to pay for their needs. Since today’s
world is big on smartphones and application mobile wallets gives businesses an edge for those
who have smartphones and don’t want to carry around purses or wallets with all of their
money and credit cards in it.
It also opens the door for new possibilities such as the possibility of consumers having an
application where they could place an order for a restaurant and pay for it right on their phone.
There could be a possibility where fast food restaurants and other restaurants offer applications
where consumers pick what they would like on their application and then pay for it with the
application. They then could go and pick it up and not have to worry about waiting in line or
getting the wrong order.

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Bibliography
Agrawal, A. (2011, April 7). Mobile Payment Apps-A Starbucks Case Study. Retrieved from Tech
Cocktail: http://tech.co/mobile-payment-apps-a-starbucks-case-study-2011-04
CardRatings.com. (2012, October 10). Good-bye plastic, hello phone: Mobile Wallets on the rise.
Retrieved from NASDAQ: http://www.nasdaq.com/article/goodbye-plastic-hello-phone-
mobile-wallets-on-the-rise-cm180390
Kessler, S. (2012, August 9). Why did Starbucks Choose Square? Retrieved from Fast Company:
http://www.fastcompany.com/3000291/why-did-starbucks-choose-square
Kraemer, J. (2013, April 23). General Manager. (K. Bain, Interviewer)
McCaffrey, S. (2012, July 19). Mobile Payments Build Sales and Loyalty for Cafe. Retrieved from
Hospitality Technology: http://hospitalitytechnology.edgl.com/case-studies/Mobile-
Payments-Build-Sales-and-Loyalty-for-Cafe-81274
McCaffrey, S. (2013, April 25). Resident Area Manager. (J. Hurtley, Interviewer)
Motricity. (2012, January 31). The Mobile Wallet Revolution: Unlocking Value for Consumers,
Retailers, and Mobile Operators. Bellevue, Washington, United States.

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