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Mobile Self-Checkout Breaks Out for POS Payments

Thanks to the hard work of many (Google, Citi, Sprint, MasterCard, etc.), NFC-based mobile payments are finally a reality in the United States ––and I’m super excited about… mobile self-checkout.

I don’t have anything against NFC mobile payments, but the payments industry is already almost a decade into this “next big thing” and is still, quite frankly, arguing about the business model.

If the business model could be sorted out, mobile devices with securely embedded payment card data would still be used… in the same card-centric checkout flow that credit and debit cards are today. You know the one. Grab my stuff, get in line, wait in line, pay at the point of sale by presenting my card, perhaps sign to authorize, wait for my receipt, and then leave.

The exact same thing, by the way, seems likely to happen with one of these new NFC mobile wallets. You’ll have your super flexible, offer-optimized mobile wallet –– and be waiting behind somebody with a purse full of coupons and their debit card or, worse, their checkbook. You’ll be way cooler, but you’ll still be waiting in line. Such is life.

Self-checkout has been also been around for about a decade –– mainly at the grocery store –– but only recently has it all of a sudden gone mobile. And I can feel the magic in the air. Almost like a lightning strike nearby…

First off, Americans love self-checkout. If you’ve never been to Home Depot on a Saturday, you really should go. A recent study by IHL Services, a retail industry research group, found that use of self-service kiosks is growing 10% a year and that nearly 50% of Americans want stores to offer self-checkout. In the grocery vertical, when self-checkout is implemented, sources say approximately 35% of purchases are completed this way.

Mobile changes self-checkout pretty much the same way it changes everything else. It puts the consumer in the driver’s seat (doing all the work by the way) and gives them the freedom to take action when they want, where they want. In this case, it eliminates the requirement to wait in the line –– and therefore eliminates the idea that there even have to be lines. How crazy is it for me to use self-checkout at Home Depot but still have to wait in line to get to one of their machines?

Mobile self-checkout has been building slowly over the last year, but is now really starting to gain significant momentum. Some of the notable developments that have caught our attention, roughly in chronological order, include:

  • AisleBuyer. A merchant-centric startup out of Boston that helps retailers sell to buyers in the aisle while they are shopping. Shoppers can scan items using their phone, access detailed product information, browse the merchant’s product catalog, and buy the goods in their hands. AisleBuyer still has some work to do on the payment piece of their value proposition, but are clearly working on it. Right now they take a photo of a card to capture data for a “card not present” transaction.
  • Chipotle Mobile App. A remote ordering and payments app from the Chipotle fast food restaurant that helps buyers remotely order their favorite meal, pay in-app using stored credentials, and then skip the in-store, twelve-person lunchtime line when they go straight to pick up the order. Chipotle holds payment card data in the cloud.
  • TabbedOut. A restaurant-centric startup out of Austin that helps consumers close out their bill at a restaurant or bar. TabbedOut has partnered with MICROS and some of the other iPOS vendors in the restaurant segment so that people can pay their tab (with tip) from their table when they are ready to leave. Card data is secured on the buyer’s mobile device, and transmitted to the in-store iPOS system when the tab is closed.
  • PayPal In-Aisle Purchase. Recently unveiled as part of PayPal’s push to support end-to-end commerce with brick-and-mortar merchants—without the need for merchants to upgrade their POS infrastructure to NFC. Leverages PayPal early lead in mobile payments and their checkout expertise.
  • Square Card Case. Lets Square buyers and sellers complete transactions with nothing more than a name and a thank you at the POS. “Charge this cup of coffee to Russ.” Card Case also takes advantage of the geo-fencing capability in Apple iOS that triggers an app to take a certain action (in this case recognizing when a Card Case customer has walked in the store) when the phone comes within a certain radius of a GPS location. Magic. Make my life simpler at my favorite merchants.
  • Apple EasyPay. Apple’s new in-store self checkout capability embedded in the latest version of the Apple Store mobile app. Buyers see items flagged for EasyPay in their local Apple store, scan them with their iPhone to put them in their cart, and then pay using payment credentials on file in the cloud with iTunes.

Payment professionals might argue that all of these mobile self-checkout transactions will be treated as the more expensive Card Not Present (CNP) transactions because there is no capture of the magnetic stripe at POS. So what?

The Fed’s Regulation II –– which went into effect on October 1, 2011 –– draws no distinction between card present (CP) and card not present (CNP) economics for regulated debit cards. In fact, we pointed out earlier that one of the “unintended consequences” of the Durbin Amendment might be to ignite the mobile commerce market much like we’re describing. And, even when buyers are paying with a credit card (where there are no interchange caps today), the marginal cost of a CNP transaction over a CP transaction can be easily lost in the economics of small ticket everyday purchases.

Of course, none of this means that mobile self-checkout is going to sweep across the industry tomorrow. But it’s worth considering what problem we’re trying to solve as payment professionals.

Many card payments technologists were jazzed ten years ago about the idea of contactless cards increasing POS throughput. Tapping was carefully measured to be seconds faster (or was that milliseconds faster?) than swiping. But it was the decision by card companies to waive the signature requirement for purchases under a certain purchase threshold that really accelerated the POS checkout process. Said differently, changing the business rules to adjust the signature requirement moved the big dial, tapping requiring new card and POS technology moved the small dial.

There could be a similar thing going on here with mobile self-checkout. We’re waiting on mobile network operators to begin buying NFC-equipped handsets from handset manufacturers, waiting on merchants to upgrade their POS terminal infrastructure to support acceptance of new mobile devices, and waiting on the mobile network operators and the banks to come to terms on agreeing the economics around mobile wallets.

Maybe retailers and shopkeepers could just embrace today’s mobile technology instead, change their in-store control procedures, and let a thousand flowers bloom? When Apple – arguably one of the most successful retailers in the last decade –– says that mobile self-checkout is ready for use today, others might very well want to have a look. And quickly.

What do you think? Share your thoughts by posting a comment below, sending me an email or by giving me a call.

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Denise Bahs
9 years ago

GREAT article!

So, I’m trying to picture several people scanning a product they want, paying for it on their phone without standing in line, then simply walking out the door of the store. I wonder how the retailers will distinguish those who are shoplifting from those who have paid with their phones. Any thoughts on this?

Scott Loftesness
9 years ago

Russ, great post! Reminds me of Allen’s earlier post and his comment about upgrading the POS in the US to support EMV/Contactless – along the lines of “if you’re going to force POS upgrades on merchants, can’t we make the experience much better for the consumer?”

Rich Eicher Sr
9 years ago


‘distinguish those who are shoplifting’

One way is based on a variation of the current model where upon exiting a clerk checks your mobile receipt, including a list of the items you purchased.

However, there’s a much more uniform (think easily read) and secure way to achieve the same results. After completing their purchase, the shopper is shown a unique QR code on their phone. That code represents that specific transaction. The code is then read at the door by a secure, enterprise-grade barcode scanning app which validates the data embedded in the code against the merchant’s back end database and displays the corresponding receipt and items purchased.

This is already being done with QR codes for a number of transaction types. It can also be easily done with NFC, though the demand isn’t quite there yet. And if the shopper is enrolled in a loyalty program, their picture can also be presented to the clerk.

This method is not suitable for all merchants but it’s simple and inexpensive – the only hardware the merchant needs at the exit is a smartphone, iPod or iPad and an app.

Steve Klebe
9 years ago

Bravo! Russ, you rock! Extremely well written piece with all the necessary subtleties and a hint of cynacism that every good payment pro needs. Just like the Starbuck’s mobile app Mobile Self Checkout is not a panacea for every type of merchant, channel or merchandise but if properly deployed, with reasonable controls (like everything in payments), the benefits will outweigh the detriments.

Aaron Roberts
9 years ago

There’s one other company out there doing this in grocery, and it will work with NFC too, making NFC adoption more seamless.

QThru – A YouTube video of the service being used can be found here:

MaryAnn Allison
MaryAnn Allison
9 years ago

Great article! I have been thinking the same things about mobile leapfrogging EMV/Chip at POS as well as the potential for shoplifting. But, I’m wondering if any kind of binary technology can be put into the QR code on the consumer item itself so that when the shopper’s mobile scans the QR code, it logs something at the retailer’s end (kind of an on/off switch in the tag) that is validated when the consumer ‘checks out’ with their final tally QR that is generated via the shopping app on the mobile that talks to the merchant’s system.

I don’t think it is too far off if Apple (and others) can use geo fencing as a means to get a buyer to purchase an item nearby, this would be an extension of the proximity function I believe.

Either way, I will be happy to see people shopping with their mobile phones instead of talking on them the entire time they are in the store!

Joseph Mognon
Joseph Mognon
9 years ago

Great writeup and interweaving of the pros/cons.

Flannery Daley
Flannery Daley
9 years ago

Russ – do you have any thoughts on services like ExpressPay at Walgreens (register a credit/debit card, future purchases can be on “ExpressPay” and no need to present card)? I’d be interested to hear what you think about that and if there are other retailers/orther industries using that concept. Thanks!

Flannery Daley
Flannery Daley
9 years ago
Reply to  Russ Jones

Thanks, Russ! Just to clarify, on the Walgreens ExpressPay, you register a card and then each time you’re picking-up an RX, they ask if you want it on ExpressPay. It is really only through their pharmacy, although if you have additional retail items, they let you put that on ExpressPay, as well (but only at the pharmacy counter). It isn’t so much that you order online and then pick it up, but rather that you have the option, at the time you’re picking-up the RX (that, techincally speaking, you did “pre-order”), to put it on that registered card without needing to present it. Do you know of anyone else doing something like that? Thanks, again!

9 years ago

Hi Russ

Great summary of the various initiatives for mobile checkout. I have some comments.

AisleBuyer- It is surprising that in spite of the company’s mShop product being out in the market for around 2 years, we do not see major retailers (Target, Walmart, Costco, Home Depot.etc.) embracing this solution. As mentioned by one of the readers above, shop lifting seems to be a major concern. We surely need a more elegant solution that a physical check required by the clerk at the exit – something that AisleBuyer needs to think about. Also, in order to achieve the functionality of mobile checkout, the retailer needs to integrate its inventory platform to the mobile solution of AisleBuyer. I am not sure of technical solution of AisleBuyer but it should ensure minimal software upgrade from the retailers. The mobile solution should also be reliable and quick as searching 1 product from a database of thousands of products in store using a smartphone would be a challenge. Also, to your point of converting a CP to a CNP rate, though the point of incremental sales is valid, I am of the view that mobile solutions charging CNP rates to the retailer when the retailer is currently paying CP rates may get low acceptance from the retailers. Your point of taking advantage of Durbin and using debit cards as the means of payment is great but would consumers move from using Credit Cards to Debit cards (and lose reward points) to avail themselves of the mobile checkout needs to be tested out.
Do you have other views of why Aislebuyer has not been accepted widely?

PayPal – Though the acquisition of RedLaser and Milo would help PayPal move towards the ultimate goal of mobile checkout, there are few challenges that need to be addressed. First, if PayPal’s goal is that a consumer will walk into a store and user RedLaser/Milo to scan a product and buy it using PayPal and walk out of the store, then it is highly ambitious. RedLaser/Milo would then need to have information about every product of every store that PayPal is accepted at. This would mean that all retailers would need to send a nightly feed of inventory data to Milo and hope that Milo is able to effectively manage this inventory from multiple retailers. Sometime ago, Toys R Us did just this by sending a nightly feed to RedLaser (Milo functionality is now integrated into the new version of RedLaser). In order to test this, I downloaded the recent RedLaser app and walked into Toys R Us and every 2nd or 3rd product DID NOT show up on RedLaser. Also, the current functionality allows users to scan a product, buy it instantly on the phone and pick it up at a store. What about when I am in a store and want to pick it up immediately and not stand in a line? There is NO shopping cart feature and I also have to wait for an e-mail confirming my purchase which I show to the customer service rep to pick up my items – hardly an ideal solution. It is highly ambitious to assume that RedLaser/Milo would be the super database that would hold inventory from all retailers. What we need is a more local database search that is specific to the retailer that the user visits. This inventory management solution has to have minimal work on the retailer side. (Would love to know more about how AisleBuyer is managing this?)

8 years ago

Once i have scanned all items I want to purchase, why cant I pay using stored credit / debit card details on my phone (like I pay for I tunes)?

Perhaps have an app of the store, register my card on the app – scan the items through the same app, and when i am in the store, ready to check out – it allows me to pay using stored card details.

As for security, once my transaction is authorised, the system generates a bar code which needs to be scanned at an exit point before you can step out?