ARE MOBILE PAYMENT APPS DIVINE OR THE DEVIL? This week Bob asks: Is cash dead?

I like money. The smelly, dirty, green stuff that you put into your wallet every morning before leaving the house. Plastic also has a special place in my well used wallet.

But today, more and more people are making mobile payments (often called virtual wallets by in-the-know smartphone users). Mobile payment is an alternative to carrying cash for simple things such as a cup of coffee to more expensive items such as concert tickets. Instead of paying with cash, check or credit cards a consumer can use a smartphone to pay for a wide range of services and goods. According to recent studies, mobile payments are expected to reach more than $600 billion globally by 2013, which will double the current estimate of more than $300 billion. So, is cash dead?

According to a recent blog post on Bankrate.com (mobile payments by smartphone still dicey), "Store scanners can read payment data on your smartphone, but the market is learning as it goes. So, early adopters need extra layers of safety when downloading mobile payment apps of stores."

But, there are success stories out there; otherwise this phenomenal growth would not be taking place. One great success story is Starbucks. Howard Schultz, president and CEO of Starbucks, claims that his company is "...the number one company not in the U.S. but in the world in terms of mobile payment, transactions and dollars.” In December 2011, Starbucks revealed that it has had 26 million mobile transactions since the launch of its mobile payment program in January 2011. Starbucks reported total net revenues increased in the last quarter of 2011 by 16% to a record $3.4 billion.

There are three good reasons for Starbucks success, according to a senior analyst with Forrester Research:

1.  Coffee is a frequently purchased item and customers are typically looking to get in and out of a store quickly.

2.  Starbucks owns the point-of-sale terminals in its locations, making the transaction a closed loop. This also enables Starbucks to easily make changes.

3.  Starbucks has a close relationship with many consumers who are members of its loyalty program.

Other transactions within the same model as Starbucks, such as mass transit, entertainment venues and national grocery chains will see similar success. And while wariness on the part of businesses and consumers alike will likely fade away, it's still good to be cautious in exploring mobile payments.

ONE LAST THING...

Marketing in this new virtual era has its virtues and its vices. My advice to businesses entering into mobile payment is to test, test, test, before going public. Make sure the mobile payment app you provide for customers is safe, secure and well-encrypted.