Bar codes are increasingly popular as a way to link mobile users with in-store product information or campaign-related content from a poster or print ad. However, bar codes are also increasingly being used to enable mobile payments, often giving merchants and consumers a quicker and easier path to mcommerce than near-field communications.

Probably the best example of how powerful bar codes can be in terms of enabling mobile payments is the Starbucks Card Mobile app, which has reportedly processed 42 million payments via mobile bar codes that are delivered to the app and scanned at retail. PayPal is also testing a new app in Britain that enables users to make purchases via a unique bar code linked to their account.

“The Starbucks solution shows firsthand that mobile payments are very viable,” said Drew Sievers, CEO of mFoundry, San Francisco. “The bar code approach makes a lot of sense, particularly for closed loop solutions like Starbucks.

“I think that bar code and cloud based solutions will rapidly evolve, particularly if a more open and reasonable path to NFC doesn’t surface in the short-term,” he said.

“Mobile payments and the need to find a frictionless way to get around business model obstacles create technology opportunities that remind me of Jurassic Park: nature, or in our case technology, will find a way.”

The loyalty factor

Another example of the growing interest in bar code-based mobile payments solutions is LevelUp, which was developed by the same group behind the SCVNGR mobile game.

SCVNGR said last week that it has raised $12 million in funding to support the rapid growth of LevelUp. The app is available at 3,000 merchants in eight cities, including Johnny Rockets and Ben & Jerry’s. It has 200,000 users who are spending at a volume of $2 million per month using the app.

LevelUp works by enabling users to link their credit or debit card to the app and generating a unique bar code that can be scanned at checkout to make a payment. The app also offers incentives from businesses to encourage repeat visits.

One of the keys to the success of the Starbucks bar code app and others is that they are not just focused on payments but also on building loyalty and bringing users back to an establishment.

The benefits of bar code-based mobile payments are that they can be easily integrated into retailers existing systems and can be delivered to most mobile phones. Companies such as LevelUp also provide the bar code readers to merchants for free.

“Bar codes can be used on most any system without an expensive POS swap,” Mr. Sievers said. “They also can be delivered on just about every existing mobile phone today.

“The challenge is that bar codes are certified by the big payment networks, so open loop use is a challenge,” he said. “That’s where cloud-based wallet solutions may be able to gain hold, working around the NFC ecosystem obstacles completely.

Another challenge facing companies looking to offer bar code-enabled mobile payments is encouraging consumers to sign up.

The easy way

Bar code-enabled payments are gaining traction with retailers because of how inexpensive and easy they are compared to NFC. While companies such as Google and Isis have gotten behind NFC-enabled mobile payments that let users tap to pay, the uptake has been slow.

The reasons for the slow adoption of NFC include that it requires retailers to invest in expensive hardware, not that many phones are NFC-enabled so far and it is a complex ecosystem with numerous stakeholders.

“Bar codes are absolutely picking up,” said Nick Holland, senior analyst at Yankee Group, Boston. “One of the reasons why is that it is pretty cheap to put in a bar code reader compared to NFC.

Another reason for the growing interest in bar code-enable mobile payments is the proliferation of bar codes more broadly, which is making consumers aware of and comfortable with the idea of using bar codes to complete some sort of activity, whether is it downloading an app by scanning a bar code on a poster or learning more about a product while shopping in a store.

“Consumers are becoming aware of QR codes as a call to action in the real world,” Mr. Holland said. “Consumers are getting used to them, it is not science fiction anymore but becoming a part of everyday life.”

Many see bar codes as a stopgap solution enabling them to participate in the growing interest in mobile payments now while they wait for NFC, which is expected to offer a more robust solution.

“In many respects, bar codes are the current generation solution,” Mr. Holland said. “It makes sense for companies to get to market quickly and get penetration by using what is already there.

“The end game will be NFC in terms of it being that much more usable.”

By Chantal Tode
Mobile Marketer