Last week was a great week for those of us that watch potential changes to the commerce user experience, particularly as it relates to payment. Many eagerly watched Apple’s announcement last Monday to see what commerce capabilities (if any) would be included in whatever new hardware was announced. Of the few outward hardware changes introduced, Touch ID appears to be a convenient way to automate purchases from iTunes and/or the app store. Expecting this to eventually extend to 3rd party applications as well seems reasonable. Not having to remember a password in order to log into our favorite banking application would be a welcome feature to many of us.
To understand what is really interesting about Touch ID, you have to go back to June, when Apple quietly introduced iBeacon, a new feature in iOS7 that leverages the capabilities of Bluetooth Low Energy (BLE). It should also be noted that the latest version of Android also supports connection to BLE-enabled devices via Bluetooth Smart. It seems reasonable to expect Apple to eventually combine Touch ID and iBeacon into services and features that could eventually be used in a multitude of real-world applications.
Meanwhile PayPal announced PayPal Beacon – also using BLE – to help redefine the shopping experience. PayPal essentially is proposing to use BLE as a more accurate form of “indoor-GPS” that doesn’t rely on cloud connectivity operationally. This doesn’t necessarily enable a new payment scheme or require an overhaul of the existing shopping experience, but it certainly has the ability to improve current geo-fencing, store check-in, loyalty, and high-granularity targeting by an order of magnitude.
BLE and the “Shopping Experience”
BLE, also known as Bluetooth Smart, provides a low-power way to communicate wirelessly. Many phones already support BLE and it can be used to transfer data between two compliant devices. As a customer walks into a store, and even as they walk around larger stores where goods of different types are displayed, BLE can help determine the approximate location of the mobile device (and its owner) within the store. This functionality on the shopper’s mobile device would still require a manual or automatic opt-in for privacy reasons, but once the customer was “checked-in,” the merchant could use BLE as the transport to send the customer targeted offers based on past purchases, offer her a store credit card with a hefty promotional discount, and more. In larger stores, as the customer moves from one counter to another, those offers might change to fit whatever merchandise the customer is near.
Once the customer is ready to check out, because they are already checked-in at the merchant’s location, and assuming the customer has set up payment either through a service like PayPal or via a mobile wallet on their smartphone, that information can be accessed by store clerks who can automate the payment process.
Pros and cons of BLE
As with any implementation, there are a number of benefits and challenges with this approach:
- Many recent smartphones are already compatible with BLE (including iPhone)
- No specific pairing (standard Bluetooth) or joining access points (Wi-Fi) is required
- Bluetooth 4.0 is designed to be low-power, so even with constant use, there is minimal battery impact
- Works without cloud connectivity (unlike 3G, WiFi etc)
- Works indoors (unlike GPS)
- Merchants must install BLE infrastructure (most currently do not have it)
- Merchants (or 3rd parties) must change mobile apps to incorporate support for BLE
- BLE allows for approximate pinpointing location in store, but is not granular enough to bypass individual authentication
- When used for payment using a linked cloud wallet, merchant will be paying card-not-present rates
It is important to recognize that BLE / beaconing may further revolutionize the shopping experience. It is a positive incremental step in a low-friction secure commerce and payment experience. That said, it is not a ubiquitous solution for any and all commerce and payment operations.
Where Does this Leave NFC?
It’s human nature to want to pick winners and losers. This industry frequently creates news, confusion, and uncertainty by viewing all incremental technology as replacements for existing technology, ignoring the fact that technologies often coexist or even complement each other.
BLE supports functionality that NFC does not (location pinpointing, data transfer over more than a few inches, etc.). Similarly, NFC supports functionality that BLE can’t (authentication in a specific location, support for card-present fees etc).
This industry, and consumers by extension, would be well served by resisting the desire to horse race every emerging technology in blogs like this one. Instead we can spend our time trying to figure out how to create richer, lower-friction, and exciting consumer experiences by leveraging emerging technology.
As part of VeriFone I look forward to helping our customers figure out how use all available solutions including NFC, BLE, Barcode, EMV, etc. to create the optimal customer for the customer’s specific environment.
Follow Erik on Twitter: @ErikVlugt