JERSEY CITY, N.J. -- Who are the authorities on the future of the convenience store industry and what can you learn from them? In this series of exclusive one-on-one interviews with c-store industry leaders, Convenience Store News Editorial Director Don Longo explores the more important trends and issues facing the convenience industry.
This month, Longo interviews David Gilbert, president of the Hospitality Group at Heartland Payment Systems Inc., a company at the forefront of data security and mobile payments -– two of the hottest topics in retail technology.
Prior to joining Heartland, Gilbert was chief operating officer of the National Restaurant Association (NRA). Before that, he spent several years as a restaurant/hospitality industry consultant and held several executive positions with national chains, including chief administrative officer with Cracker Barrel Old Country Store Inc., executive vice president and chief administration officer with Shoney’s Inc., and executive director of development with Applebee’s International Inc.
Gilbert is also a current member of the NRA, the International Council of Shopping Centers and the West Virginia University Hospitality Board of Advisors.
Longo: How much of a dent can mobile payments make in the marketplace? Are they a solid alternative to traditional debit and credit cards for both merchants and consumers?
Gilbert: By 2017, it’s estimated that worldwide purchase volume over mobile devices will exceed $1 trillion, according to IDC Financial Insights. As impressive as this is, mobile payments haven’t made a significant dent in the marketplace yet. But with 78 percent of consumers surveyed interested in making mobile payments through their smartphones, mobile payments are well positioned to be a solid alternative to traditional debit and credit cards in the very near future.
One of the benefits of mobile payments is that they save the merchant time and add consumer expediency, so it makes sense for convenience stores –- where the experience should allow the customer to quickly get in and out –- to take a bigger role in this space as it expands.
More important are the opportunities that mobile makes available to the merchant to drive loyalty and additional revenue. Payment is not the primary reason that merchants will enable mobile apps; it will be creating a mobile experience that consumers view as personally valuable.
Longo: How will the mobile payment marketplace change within the next few years?
Gilbert: There will undoubtedly be more players rushing to this space because mobile payments are convenient for customers and, in most cases, will help with the speed of service. Case in point, a month after rolling out a mobile wallet, an ARCO gas station in Santa Monica, Calif., saw 6 percent of its sales go mobile last fall.
While convenience stores are dipping their toe into the mobile payment industry, restaurants have easily taken the lead. Many merchants, including TGI Friday’s, Famous Dave’s and Firebirds, now offer mobile payments through TabbedOut, an application that allows consumers to open, review and securely pay their tab from a mobile phone. It's currently being used in thousands of bars and restaurants nationwide.
Other major chains, such as Starbucks, are having huge successes with mobile payments. In October 2013, Starbucks announced that 11 percent of its sales are via its own mobile wallet. Chick-fil-A also just announced in June that it’s testing a free mobile pay app for customers in North Carolina and is considering expanding the mobile app payment program to other markets later this year.
Wendy’s has updated its My Wendy's app for iOS devices with the ability to take mobile payments at most of its 5,800 locations in the United States, which comes on the heels of Chipotle, Domino’s Pizza and Pizza Hut providing the option for customers to make mobile payments. McDonald’s, Burger King and Taco Bell are expected to soon follow suit.
The ability to make mobile payments will continue to increase as we get smarter about our technology.
Payments are only one aspect of the “mobile experience” we are seeing. Numerous providers, including Heartland, have released mobile marketing, offers, coupons, gift, loyalty and other services that are designed to drive additional recurring revenue with current customers, while enticing new customers to their business.
Longo: Is EMV the answer to data security breaches? Why or why not?
Gilbert: EMV is a good first step to data security breaches, but unfortunately, it’s not enough to prevent future attacks by sophisticated hackers. EMV alone would not have prevented recent breaches, such as with Target, because the theft occurred as a result of malware in the point-of-sale that interfaces with Target’s signature pad payment devices.
The reality is that no single countermeasure is enough, which is why merchants need to move to a more comprehensive approach that integrates EMV, encryption and tokenization.
Longo: Despite liability shift dates, many experts believe it will take 10 years for EMV to be fully implemented in the United States. By that point, will it be a dated technology and not able to counteract sophisticated hackers?
Gilbert: EMV is a good step, but it’s already dated technology. EMV has been around since the 1990s and unfortunately, the U.S. has lagged behind in adopting it.
If you truly want to protect your business, you really need to think beyond EMV and look at integrating end-to-end encryption and tokenization to secure credit and debit card transactions. If I were a merchant, I would want this technology immediately to better protect my customers’ credit and debit card information and my reputation as a safe place to shop.
Longo: What is the best method now and in the future to prevent data security breaches?
Gilbert: The best method to prevent data security breaches is a comprehensive approach. EMV is good. End-to-end encryption is good. And tokenization is also good, but none of these are enough on their own. Merchants really need a comprehensive approach to security to be fully protected and Visa agrees.
During her keynote presentation at Information Security Media Group's Fraud Summit in San Francisco, Ellen Richey, chief legal officer and enterprise risk officer at Visa, stressed that reducing card fraud requires this three-pronged approach: EMV, tokenization and end-to-end encryption.
Editor's note: Heartland Secure offers EMV electronic chip card technology to prove a consumer’s card is genuine; E3 end-to-end encryption technology, which immediately encrypts card data as it is entered so that no one else can read it; and tokenization technology, which replaces card data with “tokens” that can be used for returns and repeat purchases, but are unusable by outsiders because they have no value.