Guest Column | May 9, 2014

The Top 5 Alternative Payment Methods VARs Should Keep An Eye On

By Russ Harty, SVP Key Account and Partner Channels, Cayan

Restaurant And Hospitality IT News for VARs

It seems like every day, a new and “improved” form of payment comes into play. In fact, more than 190 mobile commerce applications populate the payments landscape today. But which solutions should VARs recommend to their customers? What benefits does each provide? While some new payment options hold definitive value for businesses today, others merit a wait-and-see approach.

Here’s a breakdown the top five alternative payment methods that VARs should keep an eye on right now:

Near Field Communication: Near field communication (NFC) is a way for smartphones and other connected devices to communicate with each other at close range (within 20 centimeters) using radio waves. NFC is a functionality available on Android, Blackberry, and Windows smartphones, and more. Given that 65 percent of smartphone owners worldwide have Androids, this can be an appealing option for businesses. In addition, NFC powers value-added mobile wallet programs like Isis, which include loyalty features that incentivize consumers to choose one business over its competitor. NFC is also simple to use: customers don’t even need to open an app in some instances, and many Android devices released in the last few years come already NFC-enabled. However, this leaves out a significant portion of the smartphone market, and since iPhone users are bigger spenders, that’s a significant group of consumers left in the dust.

iBeacon: iBeacon runs on Bluetooth low energy technology (also known as BLE), and it’s Apple’s answer to NFC, featuring a much larger range of 50 meters. Similar to NFC, BLE-enabled devices within close proximity are able to “talk” to each other. Additionally, if Beacons (small, wireless sensors that are BLE-enabled) are placed strategically throughout an establishment, they can automatically transmit data to customers’ iPhones or iPads using Bluetooth technology. iBeacon is still a relatively new technology, so there aren’t a whole lot of products that use it on the market. It’s also a very closed system, one closely controlled by Apple. However, iBeacon does offer some unique opportunities for early adopters. TouchID’s fingerprint-scanning capabilities, for example, allow for super-secure transactions, protecting businesses and their users from fraud. In addition, location-specific triggers allow users to receive offers specific to products they are looking at in real time. Major chains such as Macy’s already use iBeacon technology to provide participating customers with deals right when they step through the door. Given that consumers are now more likely to have their smartphones on-hand than their credit cards, and that millennials in particular are more likely to own an iPhone, iBeacon is a great option for many of today’s small businesses trying to reach a young, tech-savvy clientele.

QR Codes: Quick Reponse, or QR codes, are two-dimensional bar codes that can be scanned using a smartphone or tablet’s camera. To date, QR codes have been used for many purposes. They’ve been featured on physical ads, like subway banners and posters, allowing consumers to scan the QR code with their phones and access a wide range of content. QR codes can also be used as a simple, relatively low-tech driver of mobile payments. Mobile wallets based on QR codes can link credit or debit cards to a smartphone or can be attached to a prepaid account. Retailers can then scan the code to receive payment. Because QR codes have been in use for a long time, they have a higher level of awareness than options like NFC or BLE. In fact, 83 percent of North Americans say they are familiar with them. Still, to make QR code-based payment options work, consumers must download an app and businesses must update their POS systems to accept them, and the codes often lack proper security, making them more susceptible to fraud. QR codes are a viable mobile payment option for businesses, but with competitors in the space using iBeacon and NFC technology, it’s difficult for merchants to pick which option their customers are most likely to adopt. QR codes can be a simple, familiar way for businesses to get customers to try out mobile payments. With the right security precautions, they offer an easy way to engage with customers via the transaction.

EMV: In the U.S., most credit cards use a magnetic stripe; we’re one of the few countries that hasn’t moved to EMV, a far more secure way to pay with cards. EMV is a worldwide standard for smart card payments and the devices that accept them. The technology significantly reduces card fraud through a three-step process of card authentication, cardholder verification, and transaction authorization. Unlike traditional credit cards, EMV cards have an embedded chip in addition to the traditional magnetic strip. This, combined with a PIN or signature, adds significant layers of security. EMV is a great way to combat the rampant credit card fraud that the U.S. suffers from. Though it may not be the “coolest” of the new payment solutions, it is very secure and allows consumers to continue using cards to pay, so it’s familiar and provides a relatively low barrier to entry. Moreover, as of October 2015, all businesses not accepting EMV payments will be liable for fraudulent activity.

Alternative Currencies: Compared to the other payment methods described above, alternative digital currencies like Bitcoin are both the most hyped and the least proven. Bitcoin, a peer-to-peer digital currency that can be traded anonymously, has grown increasingly visible — and controversial — in the last year, and questions surrounding its security and volatility continue to swirl. Bitcoin usage is on the rise as large, well-known companies like Lord & Taylor, Virgin Galactic and OkCupid test out the payment method, hoping its pop culture appeal will give them an opportunity to stand out. While now is an uncertain time for small businesses to invest in Bitcoin as a payments solution, it is a good time for VARs to educate themselves about the possibilities the cryptocurrency offers, and definitely an area to keep an eye on.

It’s up to resellers to help their business customers stay up-to-date on the latest innovations in payments and to guide them in separating the wheat from the chaff so they can achieve their business objectives with the help of technology. While all of the new payment methods described above have pros and cons, each provides unique opportunities to engage with customers and add value around the transaction. The key for VARs is to provide business owners with a payment acceptance solution that can process many different types of payment methods, as well as loyalty and rewards programs. This will go a long way toward ensuring a positive customer experience while also protecting businesses from any blowback from the heated battle for dominance in payment technologies.