Putting Self-Checkout on a Mobile Device

 

Developing a self-pay app is fairly straightforward. The tough part might be waiting for merchants and consumers to catch up.

It doesn’t take much to imagine miniaturizing the large cash wraps found in home-improvement and grocery stores that consumers use to scan and pay for their own merchandise. The technology, exemplified by the smart phone, is here already.

The concept is simple: A consumer scans and purchases his items using nothing more than his phone, its built-in data-capture technology, and an app that contains his payment and identification data.

It’s the concept of self-checkout reduced to a handheld device, and the reason it’s important is simple: It allows consumers to make more purchases in stores while holding the actual item they want to buy. That could increase sales for merchants and the volume of electronic payments for processors.

But two big things are missing. One is the resolution of logistical, technological, and behavioral issues that appear to be hindering consumer-held point-of-sale services. What’s also missing, at least currently, is merchant willingness to try the technology.

‘Change the Dialog’

Just a handful of companies offer a smart-phone-based self-checkout service, and it appears that only one specializes in traditional retail, while others cater to restaurants and grocers.

Among retailers, Toronto-based Digital Retail Apps, with its SelfPay service, is trying to build awareness among these merchants. It got a boost earlier this year when Visa Inc. said it would showcase SelfPay by enabling it at the Visa Innovation Center, its technology lab in San Francisco.

Digital Retail Apps says Visa will integrate the SelfPay technology into the Visa Everywhere Shop app, enabling consumers to shop and pay from anywhere in a store directly on their own mobile phone, without queuing up at a checkout line. Visa is making SelfPay available in an Android app for the Samsung Galaxy S6 device.

SelfPay works on both Android and iOS devices. Here’s how it works on an iPhone. Once a SelfPay account is set up, a consumer can shop with it inside the store. SelfPay taps into the iPhone’s geo-location technology to know when the device is inside a participating retailer. Retailers need to ensure there is at least minimal cellular service to their locations, and install a Bluetooth low-energy beacon supplied by Digital Retail Apps.

The beacon uses Bluetooth to identify consumers who have the SelfPay app installed on their smart phones. Says Wendy MacKinnon Keith, chief executive of Digital Retail Apps: “On our backend, we integrate their existing payment processor, and on the inventory side we can do a direct integration to their backend or to their middleware provider.” No changes to the merchant’s existing payment agreement are needed, she adds.

After recognizing the consumer inside the store, the app displays a custom, retailer-branded screen, which unlocks the capability to make a purchase, Keith says. The user scans either the Universal Product Code or a barcode placed on the merchandise and generated by the retailer’s point-of-sale system.

SelfPay displays an accurate in-store price and product description, also pulled from the retailer’s POS system. The shopper then adds the item to her cart, selects a payment method, and enters a SelfPay PIN.

When the customer exits the store, a sales clerk scans a barcode generated on the customer’s phone by the SelfPay app to ensure products are paid for. Available payment methods are credit and debit cards, PayPal, and Apple Pay.

Shoplifting is an issue, Keith says, but one that can be addressed. The retailer and the consumer want assurances only legitimate purchases leave stores, she says. Digital Retail Apps has a patent on technology that allows the retailer to use an associate-facing app called SelfPay Staff, she says.

When the employee uses this app to scan the consumer’s electronic receipt in her SelfPay app, the app checks the data for validity against the retailer’s back-end system, evaluating how recent the transaction happened or if it had been made before, among other metrics. “It’s just as important for the shopper to feel they’re not doing anything wrong,” Keith says.

Such technology does not replace other loss-prevention measures, she says. “Retailers still need to have loss-prevention methods in place, but if you think about the shopper who has a smart phone, downloaded an app and [the retailer] knows the specific device, it’s probably less likely that’s the profile of a shoplifter.”

Digital Retail Apps, which in August lined up additional funding for its expansion efforts, is in discussions with large chain retailers, Keith says.

“There is growing interest in this kind of technology, where you have this ability to put the point of sale directly on a shopper’s device,” Keith says. “A lot, or some, of the reason for that is as the technology evolved and improved, and with Apple Pay launching last year, it has started to change the dialog in executive suites where they are starting to take a longer look at mobile payments in general.”

‘A Whole Lot Easier’

Retailers appreciate reducing friction in the purchasing process, “and there is no greater point of friction than the checkout line,” says Rick Oglesby, senior analyst for Centennial, Colo.-based Double Diamond Payments Research, in an email message.

“Therefore, self checkout solutions will continue to surface and iterate until they finally achieve broad adoption,” Oglesby continues. “However, these solutions simultaneously represent a very large change in both consumer and merchant behavior, and the security aspects need to be addressed not just through technology, but also in the minds of the retailers, who need to feel confident letting consumers take control of the checkout process.”

Oglesby predicts that self checkout will win adoption: “Self checkout will eventually have its day, it’s just a question of when.”

But not all are so optimistic. “I’m not sure the self-scanning services of purchases in-aisle reduces much friction in the shopping experience,” says Thad Peterson, senior analyst at Aite Group LLC, a Boston-based payments research firm. “It could be really handy if an individual were just picking up one or two items, but the trade-off in extra effort by the customer in-aisle versus using a self-service kiosk or cash wrap for a larger shop may not be worth it.”

Keith, however, says the service encompasses consumer trends beyond the in-store experience. While the payment is essential to the service’s success, the app attempts to address all of the shopping experience, she says, where the payment is just a part of the experience.

Citing apps like Uber and Hotel Tonight, where the payment is made using a stored credit or debit card, Keith says their popularity is increasing among consumers. “Those companies and services are educating consumers there is a different way,” she says. “It doesn’t take too many times to know this [way] is a whole lot easier.”

‘A Step Or Two Beyond’

This is a “sea change” occurring in commerce, says Igor Faletski, chief executive and co-founder of Mobify, a Vancouver, British Columbia-based mobile-commerce platform provider. “The sea change right now is the customer journey is changing from in-store purchases and separate online conversions to a conversion that’s happening at any point in the customer journey,” Faletski says. “A customer could start with a mobile search at home, then think more about it while at work, and then go to a store to purchase, or maybe go home and buy from there within the app.”

The critical element in this is the mobile device, he says, which helps consumers throughout the shopping experience and helps them convert at any point in time and anywhere.

Another necessary shift in retailer thinking centers on the role of smart phones in their stores. “Most retailers see a phone out and think the customer is showrooming,” Faletski says, referring to what happens when consumers check out products using their smart phones in physical stores before buying them at a lower price from online merchants.

In the future, retailers can use technology, such as that from Mobify, Faletski says, that can help consumers find the searched-for products, and link that mobile activity to the consumer’s in-store activity, “and maybe help them buy more [products] because they’re looking at products more efficiently.”

Growing use of location marketing, better marketing-messaging practices, and a developing infrastructure that takes advantage of mobile-friendly technologies are contributing to conditions that could make self-pay technologies easier for retailers to adopt, Faletski says.

“At the very basic level, we’re big believers in having good app experiences,” he says. “Self checkout is an aspect of using the app in the store.” Within five years, he predicts, most locations will adopt such technology to reduce checkout lines and expenses.

But that’s the future. “Merchants are not flocking to this concept,” says Bill Siwicki, vice president of mobile strategy and research at GPShopper, a New York-based mobile-commerce platform company. “My sense is it is a matter of security and logistics … I can say I see the day when stores via beacons and security technology are able to let you just walk out the door with your scanned items and tally you up and check you out automatically once you exit the location.” But, that will take time, he says.

Time might be an ally of smart-phone-based self-checkout technology. “We’re now at the cusp of solving for mobile proximity payments at the point of sale with the iOS and Android wallets,” Aite’s Peterson says, “and that is a significant move forward. This might be a step or two beyond what’s practical or beneficial with current technology.”