On Tuesday (March 22), payment processor First Data rolled out a mobile service that nicely illustrates the problem. A program dubbed mVoucher (for mobile vouchers) is a service to support gift cards, prepaid value cards and coupons for mobile users. The idea is that First Data will track the usage of these cards and coupons on its systems, making sure, for example, that a mobile coupon is only used once per customer. A retailer's system would need do little other than check in with First Data and ask if it's OK to redeem this particular coupon.
Why couldn't most large retailers do it themselves, given that the functionality here is not overly complex? The answer is that they can. So why might they not? Simply put: the POS fear, when mobile is involved.
It's an interesting twist on the age-old FUD (Fear Uncertainty and Doubt) selling tactic. But in this case, the vendor isn't spreading FUD about its products. It's relying on retailers already having FUD about connecting mobile with POS, creating an opportunity for an outsourced service that might not have otherwise existed.
Creating mobile applications that perform all types of wonderful functions is, done with a decent amount of care, relatively safe. The risks come when those apps touch the chain's POS system. When a mobile experiment goes awry, it's not bad, but its damage is limited to that experiment. And mobile users are—for the moment—quite tolerant of these glitches, given the youth of the technology. (Yes, there's an upside to low expectations.) But when such a trial is integrated with POS, a glitch then can threaten disaster, with all payments potentially disrupted.
And yet, until mobile apps are integrated with POS, there's a huge limit on what can happen. Mobile payment, gift card, CRM interactions, one-to-one marketing and authentication—all of which could be revolutionized with mobile—all-but-require POS interactions.
There's no good time or reason to outsource, and different chains will react differently, of course. But we're seeing IT execs who would typically not want to outsource many payment functions that they can easily handle flipping that view when it comes to mobile.
Why? Even if it means higher expenses, the comfort of knowing that the damage of a trial blowup might be somewhat mitigated by external hosting is a big part of it.But there's also the very real hesitation for an early-stage technology to touch POS. They'll have to connect eventually, but a third-party that enables such mobile experimentation without touching the crown jewels is compelling. Senior management who would easily approve such projects will take much longer with potential POS impact.
One way to deal with mobile POS payments is to not deal with it. In other words, sidestep the issue. Starbucks, for example, did a wonderful job with this approach. Months after distributing its mobile application long before it could do anything useful (like obtain coffee), the chain unveiled its mobile payment process.
It's actually quite clever in its simplicity. The hard part of the tender process is handled the old-fashioned way, either through a magstripe swipe in a store or through a standard secure payment form on its site.
Once that's done, all the mobile app does is display the Starbucks Card's barcode and it debits the card. In the same way that a Starbucks Card is nothing more than a way to hold the barcode, its app makes the phone just the same. So it feels like mobile payment, but it doesn't get within light years of touching the sensitive POS system.
Carlos Cherubin, CIO of the 311-store DSW footwear chain, said the fear of the POSing issue is especially prominent with the many chains that are using older POS architectures, true legacy systems. "When you get into customizing those systems, that's where you really add complexity," he said.
"Especially in those shops that don't have a lot of POS capabilities, they may be skittish about messing with their POS systems specifically because it is legacy, because it is so very touchy," Cherubin said.
POS systems are in that small group of IT systems that are so mission-critical, they require extra special care. Few systems can cause so much damage so quickly as a POS outage, something that could temporarily make all sales difficult if not impossible.
Although not nearly as dangerous, Cherubin pointed to the one system that gets even more fear and top-level attention than POS: payroll.
Although a payroll problem doesn't directly impact revenue (indeed, the vast majority of customers will likely never hear about even a relatively prolonged payroll problem), it will directly impact the wallets of a chain's senior execs and every person they work with. Logic doesn't win the day when the CEO's salary doesn't get deposited.