Mobile Payment Experiment: Can An iPhone Replace Your Wallet?

Mar 28 2014, 3:28pm CDT | by

Today, it seems like everything is going digital—but we still pay for most things the old fashion way. Humans made $15 trillion in retail transactions in 2013–$1 trillion of that was via e-commerce, $14 trillion was spent in physical stores and paid for with cash and credit cards.

More of that $14 billion chunk will slide to the digital side as smartphones continue to spread across the market. Research firm Gartner estimates that mobile payments will top $720 billion a year by 2017, up from $235 billion last year. Several tech giants are strategizing ways to capture the billions of transaction fees and troves of valuable consumer data at stake as money goes mobile. Apple, Amazon, Google,  PayPal (Ebay), Visa and MasterCard–they all want win the digital wallet.

It’s a tough task. Payments in the real world are messier than online. You must you convince the buyers and the sellers to use your product, install your systems into millions of contently changing locations, and you must educate both employees and customers how to use your software and systems. Even if you do all this, you must convince the customers to pay with their phones. Old habits die hard. You must prove that paying with a phone is better than cash and cards. As PayPal President David Marcus told me back in January: “It has to be the experience you have online today… You’ll get what you want really fast, pay really fast and get out. And the merchant will know more stuff about you, and that will make your experience better.”

To see how has digital payments have progressed in the real world, I conducted a little experiment–I left my wallet at home to see how far I could get with just an iPhone. Inspiration came from my colleague Kashmir Hill who, last May, embarked on the more ambitious, difficult and inspired experiment of living solely on Bitcoin for a week. (I thought about running this mobile payment experiment for a week, but figured everyone would grow bored reading about me constantly buying pizza and coffee.)

Armed with my driver’s license, Forbes ID and health insurance card (you never know) I embarked on my wallet-less day. Note: Android phones let you pay for things with Google Wallet (it works at Walgreens, Avis, REI and Marriott) but since iPhones don’t have near field communication capabilities, the Google option was off limits to me.

Morning Commute:

My first challenge was getting to work. New York subways and buses require metro cards, it was too far to walk and no one wants to see me on a bike. The answer: Uber. I opened the app, tapped my location and five minutes later was riding down Fifth Avenue in style.

Breakfast:

My regular coffee shop previously used technology from payment start-up Square that let you pay via Smartphone while leaving the phone in your pocket. But the coffee shop had disabled it. The reason? People were not tipping the baristas. The shop still offered the Square card reader–the owner told me that customers tended enter tips as they signed the Square check-out screen. I did not have any credit cards on me, so off to Starbucks I went.

As I wrote previously, Starbucks has the most successful app currently in the mobile payment game. About 10 million customers pay for their lattes with the app, making more than 5 million transactions per week. The app lets you pay with your phone, but it also enables customers to refill their Starbucks loyalty accounts with a few finger taps, offers instant discounts for free coffee or food and links to directly to Starbucks’ rewards program. I opened the Starbucks app, scanned the barcode on my phone in the laser reader to pay for a coffee and muffin—collecting my Starbucks loyalty points in the process—and was soon on my way.

Lunch:

My Uber ride to Forbes was more expensive than my usual subway ride. Looking to save money, I searched for deals on the PayPal wallet app and found a dozy—free lunch Thursdays at a coffee shop called the Bean. It’s a PayPal promotion to encourage people to download their mobile app and to use it regularly. After checking into the Bean with PayPal I was given a grilled chicken sandwich, a large M&M cookie, and a bag of chips and a bottle of water— all free, no purchase necessary. Now that’s a solid perk.

I still wanted to test the Square app. I searched for local vendors (PayPal had many more options than Square did) and stopped at Argo Tea on my walk back to Forbes. I checked in with the Square app and walked out with a green tea. The cashier had been excited when I paid with Square, saying he always wanted to check someone out with the wireless feature: “You’re only like the second guy to ever pay this way.”

Snack:

I was hungry again by 3 pm. I searched the payment apps for a place to grab some food–most options where pizza, crepes and more coffee shops. Trying to be a little healthier and less caffeinated I chose Jamba Juice. PayPal has an order-ahead feature do I pre-ordered a juice and picked it 10 minutes later, bypassing the long, afternoon rush line. Here, the digital wallet offered a real advantage over cash.

Drinks:

I was meeting a buddy who was in town from Florida and needed a bar that took mobile money. Again, it was PayPal that had the most options. We met at the Gotham Bar and Grill. The joint offered PayPal’s “See Bill” option—the app generated a four number code that our bartender entered into his payment systems and each time we ordered a round the bill on my phone updated in real time. Once I checked-in with the app, I got a surprise–PayPal bought us a round of champagne to thank us for using the app./>/>

When drinks were done I hit “checkout” on my iPhone, added a tip and walked out of the bar. Simple as that. There was no need to flag down the bartender and wait for him to return with my bill. Meanwhile, instead of wasting time closing me out, the bartender could sell more drinks to more customers–better service for clients, more revenue for the bar and more tips for him. Here too, digital money trumped the real thing.

Dinner

Looking for something easy, I pulled out PayPal app and preordered two slices of pizza just as I had done earlier with the juice.

Commute Home:

Not wanting to walk 75 blocks uptown, I splurged for another Uber.

So what is the state of mobile payments?

Pros: Good for basic food like pizza, coffee, and sandwiches; cool features like wireless pay, order ahead, deals and “see bill” all trump credit cards and cash; geek appeal.

Cons: Very few options to chose from (and this was in New York City); huge hole in public transportation and taxi cabs; no access to pharmacies, grocery stores, newsstands or clothing shops; beside Starbucks there was no way to use reward cards and perks.

Verdict: Mobile payments offer a few cool perks, but the gaps and shortcomings are massive–don’t lose your wallet just yet.

Source: Forbes Apple

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

The Best Black Friday iPad Deals
The Best Black Friday iPad Deals
The Apple iPad Black Friday 2014 Deals started to sell.
 
 
Amazon Black Friday 2014 Sale has Started
Amazon Black Friday 2014 Sale has Started
The Amazon Black Friday 2014 sale is officially here. Earlier than ever Amazon offers Black Friday 2014 deals.
 
 
iPhone 6 Plus Delivery Time Reduced
iPhone 6 Plus Delivery Time Reduced
The shipping estimation of the 16GB iPhone 6 Plus has been down to 7-10 days
 
 
Best Buy Reveals Pre-Black Friday Offers for Apple Devices
Best Buy Reveals Pre-Black Friday Offers for Apple Devices
The iPad Air is being sold at a discount of $80-$100
 
 
 

Latest from the Network

'Planet of the Apes ' left Andy Serkis in 'agony'
Las Vegas, Nov 22 (IANS) Actor Andy Serkis says his film "Planet of the Apes" left him in "agony". Serkis played the chimpanzee in the 2011 sci-fi movie and its sequel, 2013's "Dawn of the Planet of the Apes". He...
Read more on Celebrity Balla
 
Obama defends his immigration reform plan
Las Vegas, Nov 22 (IANS/EFE) US President Barack Obama has defended his immigration reform plans, which could protect five million undocumented immigrants from deportation. Obama was welcomed in Las Vegas Friday with...
Read more on Politics Balla
 
Chris Hemsworth says tattoos are a pain
Chris Hemsworth says his tattoos are often ''a pain'' when he's filming. The 'Thor' star, who was crowned the Sexiest Man Alive by PEOPLE magazine earlier this week, has a few sentimental designs inked on his body, but...
Read more on Celebrity Balla
 
Queen Latifah's show has been axed
Queen Latifah's talk show has been cancelled. The 44-year-old actress's self-titled series, 'The Queen Latifah Show,' which launched in 2013, has been axed after two seasons. The 'Dilemma' star confirmed her ''...
Read more on Celebrity Balla
 
Kelsey Grammer is 'so proud' of daughter
Kelsey Grammer is ''so proud'' his daughter has been named Miss Golden Globe 2015. Greer Grammer will assist hosts Amy Poehler and Tina Fey on stage during the 72nd annual awards ceremony at the Beverly Hilton Hotel in...
Read more on Celebrity Balla
 
Jordan's Muslim Brotherhood demands leader's release
Amman, Nov 22 (IANS) Jordan's Muslim Brotherhood has demanded the release of its detained leader Zaki Bani Rsheid. In a statement Friday, the group said that the security forces had arrested its deputy head Zaki Bani...
Read more on Politics Balla
 
Israel and Palestine agree on Gaza reconstruction: UN official
United Nations, Nov 22 (IANS) An agreement has been reached between Israel, Palestine and the United Nations (UN) under which nearly 25,000 homeowners in Gaza can access materials to repair their damaged homes starting...
Read more on Politics Balla
 
Ed Sheeran likes Primark pants
Las Vegas, Nov 22 (IANS) Singer Ed Sheeran says since people don't see underpants thats why he prefers Primark. The 23-year-old doesn't see any point in splashing out on something that is "only meant to keep your junk...
Read more on Celebrity Balla
 
Lebanon won't celebrate independence day, owing to presidential vacancy
Beirut, Nov 22 (IANS) Lebanon has cancelled all official plans to celebrate its independence day, according to media reports. The decision was taken owing to the current vacancy in the country's presidency, Xinhua...
Read more on Politics Balla
 
Davis Cup final: Monfils upsets Federer, brings France level
Lille, Nov 22 (IANS/EFE) Gael Monfils of France stunned Swiss great Roger Federer 6-1, 6-4, 6-3 Friday to even up the Davis Cup final, after Stanislas Wawrinka had beaten Jo-Wilfried Tsonga to give Switzerland the lead...
Read more on Sport Balla