A Mobile Retail Quagmire: The Checkout

Written by Evan Schuman and Fred J. Aun
August 13th, 2009

Nothing will kill a potential Mobile Commerce customer’s enthusiasm faster than an onerous checkout process. But retailers have to balance security versus convenience in a way that is radically different from E-Commerce.

Going through the ritual of filling out shipping and payment forms on a regular E-Commerce site is annoying enough, but being forced to do that same dance on a mobile device can be downright cruel. But a true M-Commerce site must allow visitors to not only find products with their mobile devices but to also buy them.

Related Story: U.S. Retailers Tip-Toe Through Mobile Commerce Minefields

There are primarily four ways for a retailer to handle mobile transactions:

  • Force consumers to type in full payment card numbers, card verification value (CVV) [to be precise, the CVV-2 for Visa, the CID for American Express and CVC2 for MasterCard] and their full address for each and every time they checkout.
  • Allow for that data to be stored on the mobile device, presumably encrypted.
  • Allow for that data to be stored on the retailer’s server, typically requiring a password and some other authentication.
  • Use a third-part financial service to store that data and make it available to participating retailers.

    All of these approaches have severe drawbacks. Forcing consumers to type their data into their phone with each and every purchase session is the safest route, but is also highly impractical. It’s most likely to send transactions to a rival site that is more considerate of a user’s time.

    Allowing for the data to be stored on a consumer’s device has the advantages of being quick and easy for the consumer while keeping the data—and the associated legal and PCI protection responsibilities and costs—away from the retailer. But by placing the onus of data protection ultimately on the consumer, it may not be an acceptably secure approach. What if the phone gets stolen—a not unreasonable scenario—are a thief is able to crack into the password and make fraudulent purchases or perhaps access the card data directly?

    It’s reasonable to conclude that a retail chain’s IT department is in a much better position to properly protect the data than consumers.

    Then again, is it so reasonable to conclude? If the data is kept on tens of millions of consumer phones, each device only has one consumer’s information, making it a fairly unattractive target, compared with a national retailer preserving millions of pieces of data for such cards. The security debates boils down to having a huge pile of card data in a well-protected server—where it’s a target—or have it widely distributed, where it’s less of a target but it’s a much more soft target.

    Then there are those pesky PCI guidelines, which strongly frown on retailers retaining payment data after the transaction has been completed.

    The third-party route appears to be gaining little traction, as retailers have little incentive to share their already razor-thin profits with a contractor that offers what the retailer could do themselves. Some third-party services offer the argument that if such services handled data for many retailers, it could be more convenient for consumers. But that’s an argument that only works after dozens of major chains have signed up for such a service. It doesn’t offer a reason to join for the first retailers, which is a problem.

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