Accelerating Mobile Wallet Adoption By Fixing What's Broken

GPS is not suited for granular location positioning, especially in such places as shopping malls or High Street. That's where Bluetooth and Apple's iBeacon shine. That allows to indeed automatically present the appropriate loyalty card (and coupons). As for CNP, emulated mag stripe plus PIN would still be in the same category as "petrochemical derivative"+ PIN in the USA (as far as I am aware). For the best UX, both payment and loyalty shall be presented at the same time via single mobile "interaction".

@AlexanderP:

TY for your comment. In general, I agree with you that it's quite difficult to get smartphone GPS work while indoors. However, anecdotally, my experience with iPhone has been different: (i) Several years ago, I've personally seen the GPS of an old iPhone 3G model work fine indoors. Therefore, I tend to believe that Passbook - which was launched on GPS in the more recent iPhone 4 / iOS 5 era - would work "as advertised" (ii) US-based friends and relatives report widespread use of Apple Passbook in American malls and airports in the last 12 months.

I just noticed that the page reached by clicking my Apple Passbook hyperlink has changed drastically since I last saw it a few days ago, probably after the recent launch of iOS 7. The new page makes only a passing mention of Passbook. When I Googled for "Apple Passbook", I reached this article, according to which "Passbook adds iBeacon support (in iOS 7)". This could very well take Passbook's location sensitivity to the next level, as you've suggested. Incidentally, the same story also says, "consumers have made it clear that the future of mobile wallets does not lie in the payments, but rather in the non-payment aspects of your wallet." Looks like I'm not alone!

I agree that a single interaction for both loyalty and payment will enhance UX. However, that presupposes a mobile loyalty-cum-payment program, which seems to involve a very big leap in business model. Many years after Starbucks Card was launched and has reportedly became a hit, I don't know any joint programs like that, neither on plastic nor mobile, not even from the "usual suspects" like PAYBACK or NECTAR.

Ketharaman, great thoughts!

As for non-payments, I agree 101%. Google "ISIS SmartTap"...

As for Starbucks' card success, it's all about simplicity. Consumers adopt things they can easily understand and relate to. Compare "your 10th coffee is on the the house" to "you can exchange Nectar points for exciting blah-blah-blah".

@ap - I think the "free coffee" is for every 15 "visits" (which I think it a combination of Starbucks Card use, time and location - ie you can't just do 15 individual purchases within a short timespan in a single Starbucks location).

Also - the Starbucks experience would be better if they allowed redemption through the Application instead of sending Cardboard Vouchers through the post(!).

With regards to iBeacons - I think Apple will need to open out the technology to push it beyond iOS and into the marketplace at large - an exciting concept but it needs mass adoption for it to work.  Another point that seems to have been overlooked about the iPhone 5S is the fact the A7 clearly has an embedded Secure Element as part of the SoC(!).

I guess that goes to show that I am not a regular Starbucks customer.

As for eSE - great point (Samsung has one, i.e. eSE, too), but will Apple offer access to it. Well, they are not planning (yet) to offer open access even to the fingerprint sensor... Also, it is EMV-compliant SE?.. I doubt it...

Well we are purely speculating aren't we - I would imagine that they are smart enough to have thought through some eventualities - for example - if they cannot convince the market to adopt iBeacons then the device should have the capability to implement NFC Payments with Biometrics (as per the recent patent).

@AlexanderP: TY for your comment. My remark about NECTAR was about mobile app, regardless of whether its loyalty program is in itself popular or not when compared to Starbucks'.

@MattS: Postcard for redeeming rewards is indeed counterintuitive. Are you sure there's no version issue? According to this FAQ, over a year ago, Starbucks seems to have killed the postcard and started giving 1 free drink after 12 drinks.

As an aside, even assuming it's 1 free drink for every 15 drinks, the cost of this reward works out to 6.67% discount. Compared to that, Starbucks incurs less than 2% MDF / MSC for accepting network cards. Therefore, avoiding interchange fees of open-loop cards can't be Starbucks' goal of introducing its loyalty program, as someone seemed to suggest on Finextra recently.

Great point re rates "elasticity". We have great solution for retail, but it's based on CNP. Yet, additional benefits (and instant ubiquity potential) easily outweigh the typical 0.6% difference between CP and CNP for most retailers.

I can only comment on my user experience. iPhone 4S with iOS 7 and the Starbucks App still relies on postcard vouchers for free drinks. My friend has an iPhone 5 and he also still has postcards. The client app is not the limiting factor - I would suggest it would be a server-side/back-office shortfall.