Eight years ago, I lost my shorts… and I mean that quite literally, although, to be clear, I was not wearing them at the time. I wrote about the experience (see: I Lost My Shorts, Not My Data), not because I thought anyone would be interested in how I eventually found them, but because losing my shorts (and the wallet in them) helped me to realize how much I relied on the Starbucks app. With no wallet or cash for 24 hours, the Starbucks app was a lifesaver: a source of limitless coffee and snacks. And that (the app, although the coffee helped) gave me hope, and some heady expectations, for the future of mobile payments.
Eight years later, I still rely on the Starbucks app and, like many other people, have failed to make the leap to a broader mobile payment experience. Part of this is simply lethargy on my part. I have cash and a credit card in my pocket, so why add more options? But far more of the blame lies with the dysfunctional union of mobile and banking in the U.S. (what other countries still expect customers to sign for credit card transactions?), combined with the wrong set of players trying to drive the market forward. As a result, I still carry cash for smaller transactions.
By contrast, my colleague in China pointed out that while he does have some cash in his wallet, they are the same bank notes that have been there for the past six months. Every transaction he makes is paid for via WeChat Pay or Alipay, the prevalent mobile cash solutions available in China. And he’s not alone; market estimates put mobile transactions at $12.8 trillion (yes, trillion) U.S. dollars in China in the first 10 months of 2017. The U.S. had a paltry estimate of $49 billion for all of 2017, according to eMarketer, and we suspect that is a generous number.
There are, in my mind, two key reasons why these Chinese payment solutions have become so prevalent, while the U.S. payment services have floundered. First, the services are completely independent of the smartphone’s operating system and hardware, so retailers and other vendors don’t need to support different apps for different hardware. But more importantly, the system is simple, based on QR codes that the vendor or customer can scan.
If that sounds familiar, it should: it’s the basis of the Starbucks payment solution that most people use. And because the mobile payment solution is based on QR codes, pretty much any vendor from the smallest to the largest can adopt it quickly and easily. Small vendors can accept payments using their own smartphones and the relevant app, scanning the QR code with the device’s camera. Large retailers can adopt the same type of solution that Starbucks uses, leveraging the barcode scanner to read the payment code on the customer’s phone – just as many of them do today for loyalty cards.
Perhaps what has really slowed down U.S. adoption is that the companies driving most of the payment schemes are smartphone vendors, all intent on building walls around their various ecosystems in an attempt to keep the customers from straying. But the problem is that most customers recognize the walls for what they are, and are reluctant to engage further into any one system. Google Pay should – to an extent – solve this problem, but even within the realms of its larger Android garden there can be obstacles. A case in point, when I tried to set up Pay, it turned out that my (very new) Android-based smartphone could not pass the Google security sniff test due to the way the OEM had modified the underlying Android. Rejected from mobile payments, I wandered down to my local Starbucks, launched my favorite app and bought myself another coffee.