If this approach works—it's already been tested with much smaller merchants—the potential is for payment cards to be associated with anything that the full-blown digital wallets have promised: giftcards, loyalty programs, stored value, etc. The processor handling the cloud magic is First Data and the lead vendor is RetailMeNot. The key question, though: Is funneling all of these goodies through a single processor going to fare better than doing it through a single phone (Google Wallet), a single card (Visa), a single payment type (PayPal) or the carrier (ISIS)? Even Apple's payment-less digital wallet hasn't generated nearly the buzz that a typical Apple rollout does.
The way RetailMeNot will work with the 10 chains in January is not necessarily the same way it handled the small merchant trial of the program, which happened this past March at the SXSW show in Austin.
The small merchant trial had shoppers hitting the RetailMeNot site and choosing from a list of coupons, which they then associated with one or more payment cards. When a shopper entered his or her payment-card data on the RetailMeNot site, a secure card capture widget from CardSpring actually handled that process and then routed the information to First Data. First Data then turned the data into a token—it's TransArmor package—and it was sent back, said Sarah Owen, a First Data product vice president.
This approach has its pros and cons. From the perspective of RetailMeNot—and any retailer that tries something similar—it provides a much easier PCI approach, because the data is theoretically never available to RetailMeNot.
On the con side is the fact that if the alliances break up—for example, if First Data and RetailMeNot chose to not work together anymore—it might be difficult for RetailMeNot to access all the card data. So all the coupons associated with all those customer cards might not be known. It's the quintessential tradeoff: Gain more PCI security by giving up control of the data.
Another issue—at least for the initial launch next year—is the limitations on the types of offers the system can make. A top priority for RetailMeNot is to make this process as close to effortless as possible for store associates. If that can be achieved—and it seems quite doable—it would mean no associate training and no initial POS hardware or software changes.
"It's our desire to make this as seamless as possible. We don't plan to have the associate do any authentication," said Matt Howitt, RetailMeNot's VP of Engineering. "The associate's workflow has to remain unchanged. The challenge is to increase the intelligence of the processing network."
To accomplish that, RetailMeNot will sharply limit the types of coupons that can be used.To accomplish that, RetailMeNot will sharply limit the types of coupons that can be used, at least initially, to things like 20 percent off anything purchased from a specific retailer or free shipping. What would not initially work would be coupons that, for example, require buying three of a specific product from among certain flavors.
That would be problematic, because all First Data now knows from a purchase is the total amount due. By the summer of 2013, though, First Data expects to be able to do much more: At that point, it will have details transmitted of every SKU purchased right along with the price and the card data, First Data's Owen said.
To get to that stage of detailed, item-level basket information transmissions, Owen said, will require upgrades from various POS manufacturers. "That's the next level of engagement with the consumer," she said. "If you get the data, it's pretty easy to see what is in that data. But we need to do updates to how we capture that information, changes to the ecosystem."
If this trial, slated for early next year, works it has impressive potential. The program will use a customer identifier number, in addition to the payment-card data, so if the card has to be changed that can happen easily and without threatening any associated coupons or other purchase history data.
If the consumer uses that card consistently, could the processor award CRM points to various retailers? If someone gifts money to a shopper, it would automatically reduce the next purchase by that amount. That could be a nice surprise.
Speaking of surprises, there's also a security fraud risk. With no physical—or even phone-displayed—coupon, associates need to trust that the reduced amount is correct. If the system is hacked the store would have almost no way to detect any irregularity until days, if not weeks, later—when things don't balance.
This requires the integrity of both connections—from RetailMeNot to First Data and from First Data back to the retailer—be sacrosanct. If a thief can fake either connection, there's an apparent absence of checks and balances in the store. But that's what a trial is all about.
The idea of moving the coordination of data types away from the phone to some version of the cloud—we still love Burger King's mobile payment approach, which married QR codes and the cloud—has more potential than almost anything being discussed today. If the SKU-level details are indeed integrated by next summer, that just might be the ballgame.