Article

M&S makes move toward mobile payments

The British retailer's mobile payment pilot shows a commitment to the mobile channel.

April 5, 2013 by James Wester

What starts out as a small, simple story can sometimes open up a window to a much larger view.

Take the mobile payment trial being run by British retailer Marks & Spencer. As reported by The Independent (and linked in a Mobile Payments Today story), M&S is embarking on a pilot program of an app that allows customers in its coffee shops to order and pay using their mobile devices. The trial will launch later this spring. According to the story — entitled "Not just an app, a Marks & Spencer's app" — it "is the product of M&S's Digital Lab."

From that description one might think it's all an in-house effort from M&S's new digital team. M&S's Digital Lab is an attempt by the retailer to develop new technologies to address the customer experience. Launched in February, its similar to other efforts by large retailers, most notably Walmart Labs, to create units that design, build, test and deploy cutting edge mobile, social and payment products. In an email to Mobile Payments Today, a spokeswoman for M&S said the purpose of the Marks & Spencer's digital unit "is to help us explore emerging technologies and understand how they might work for us as a business."

For the M&S Digital Lab team to have developed a proprietary mobile payment app, and done so in such a rapid fashion, would have been remarkable considering that in-house mobile payment efforts from a major retailer are so rare as to be nonexistent.

But it turns out it's not necessarily an all in-house affair, and that's where the story becomes more interesting. Instead of sitting on the sidelines waiting for the mobile payment market to sort itself out, the M&S pilot is an example of how retailers are actively working to make mobile a part of their interactions with customers, and using every available resource to figure out how to do it.

The Paddle app

The app being used by M&S is the product of Paddle, a London-based start-up headed by founder Ed Lea. The year old company originally built its application to address the issue of purchasing things on mobile devices. "Most mobile payments don't make the payment easier and online is especially cumbersome," Lea said in a call with Mobile Payments Today. With Paddle, he said, consumers have an easier purchase experience on the mobile web

To pay with Paddle, users scan a QR code with their Paddle app. The code is generated by a website when the user selects a "Pay with Paddle" payment option on the checkout page. The first time a user pays with Paddle they are required to enter all of their credit card and shipping information into the app. Paddle stores all of that information securely in the cloud. For every subsequent use of Paddle, the user must enter the credit card's three or four digit security code to validate the purchase. That means users must still have access to their credit card or they can memorize those numbers.

The process is much faster and easier on both a computer and a mobile device since a user doesn't have to enter in all those digits on a small mobile screen. (A video of the actual process, which Paddle says isn't edited to shorten the time required to make a purchase, is shown below.)

It's the scan and pay feature that M&S will be repurposing for offline use. Instead of using QR codes on a website they will be printed on menus at the coffee shop next to items instead of rendered onscreen, to access the Paddle app. M&S wouldn't discuss the exact scope of the trial, only allowing that it's a small scale trial expected to be available at one site in London. If successful, the pilot could be rolled out to Marks & Spencer's more than 1,000 locations in Europe, the Middle East and Asia. 

"The future retail landscape"

While it's only a small trial at this point, the importance of the Paddle pilot is that it shows M&S is committed to mobile payments. The spokeswoman for M&S emphasized that mobile and contactless payments are a focus of the company's new digital lab. 

"Mobile and contactless payment is part of the future retail landscape and this is exactly the sort emerging technology we want our digital lab to explore," she said, adding that M&S' efforts are not limited exclusively to the trial with Paddle. 

M&S isn't alone in launching a number of experiments and pilot programs for mobile tools. Many large retailers are avoiding placing bets on any one technology and are instead looking at the myriad ways consumers may want to use their ubiquitous smartphones to shop.

As mentioned, Walmart has its own innovation lab building mobile solutions. The company recently reported it is expanding tests on its "Scan & Go" concept from 70 to 200 of its stores. With Scan & Go, customers use their smartphones to read barcodes on products in their shopping carts and then use the information to check themselves out at self-checkout registers. 

Pharmacy chain CVS has been very active in exploring mobile solutions. An original merchant partner in the Google Wallet in 2011, CVS' most recent mobile tool is an innovative new tablet app that produces a 3D rendering of a CVS store, letting customers wander the virtual store and access servcies like the pharmacy or photo center.

And both CVS and Walmart are among the first crop of merchants who have signed on a partners with MCX, the merchant consortium that is building a mobile payment solution. 

At this point it's obviously not clear just how shopping and paying with a mobile device will develop. But for many retailers, lack of a definitive solution isn't keeping them from exploring their options. A recent study from researchers at Forrester found more than half (51 percent) or retailers said their top priority for 2013 is site optimization, including checkout optimization and alternative payments.

The M&S spokeswoman may have summed up the feelings of many retailers in describing the company's expectations for its Paddle pilot "It's still early days so we would not want to speculate about what mobile payment might look like at M&S," she said. However, she added the company is pleased to already be engaging with innovative new technologies and start-ups.

"This is exactly the sort of emerging technology we want our newly created digital lab team to explore on behalf of M&S," the company spokeswoman said.

See the Paddle app in action:

Read more about payments in retail.

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