Thanks to the hard work of many (Google, Citi, Sprint, MasterCard, etc.), NFC-based mobile payments are finally a reality in the United States ––and I’m super excited about… mobile self-checkout.

I don’t have anything against NFC mobile payments, but the payments industry is already almost a decade into this “next big thing” and is still, quite frankly, arguing about the business model.

If the business model could be sorted out, mobile devices with securely embedded payment card data would still be used… in the same card-centric checkout flow that credit and debit cards are today. You know the one. Grab my stuff, get in line, wait in line, pay at the point of sale by presenting my card, perhaps sign to authorize, wait for my receipt, and then leave.

The exact same thing, by the way, seems likely to happen with one of these new NFC mobile wallets. You’ll have your super flexible, offer-optimized mobile wallet –– and be waiting behind somebody with a purse full of coupons and their debit card or, worse, their checkbook. You’ll be way cooler, but you’ll still be waiting in line. Such is life.

Self-checkout has been also been around for about a decade –– mainly at the grocery store –– but only recently has it all of a sudden gone mobile. And I can feel the magic in the air. Almost like a lightning strike nearby…

First off, Americans love self-checkout. If you’ve never been to Home Depot on a Saturday, you really should go. A recent study by IHL Services, a retail industry research group, found that use of self-service kiosks is growing 10% a year and that nearly 50% of Americans want stores to offer self-checkout. In the grocery vertical, when self-checkout is implemented, sources say approximately 35% of purchases are completed this way.

Mobile changes self-checkout pretty much the same way it changes everything else. It puts the consumer in the driver’s seat (doing all the work by the way) and gives them the freedom to take action when they want, where they want. In this case, it eliminates the requirement to wait in the line –– and therefore eliminates the idea that there even have to be lines. How crazy is it for me to use self-checkout at Home Depot but still have to wait in line to get to one of their machines?

Mobile self-checkout has been building slowly over the last year, but is now really starting to gain significant momentum. Some of the notable developments that have caught our attention, roughly in chronological order, include:

• AisleBuyer. A merchant-centric startup out of Boston that helps retailers sell to buyers in the aisle while they are shopping. Shoppers can scan items using their phone, access detailed product information, browse the merchant’s product catalog, and buy the goods in their hands. AisleBuyer still has some work to do on the payment piece of their value proposition, but are clearly working on it. Right now they take a photo of a card to capture data for a “card not present” transaction.
• Chipotle Mobile App. A remote ordering and payments app from the Chipotle fast food restaurant that helps buyers remotely order their favorite meal, pay in-app using stored credentials, and then skip the in-store, twelve-person lunchtime line when they go straight to pick up the order. Chipotle holds payment card data in the cloud.
• TabbedOut. A restaurant-centric startup out of Austin that helps consumers close out their bill at a restaurant or bar. TabbedOut has partnered with MICROS and some of the other iPOS vendors in the restaurant segment so that people can pay their tab (with tip) from their table when they are ready to leave. Card data is secured on the buyer’s mobile device, and transmitted to the in-store iPOS system when the tab is closed.
• PayPal In-Aisle Purchase. Recently unveiled as part of PayPal’s push to support end-to-end commerce with brick-and-mortar merchants—without the need for merchants to upgrade their POS infrastructure to NFC. Leverages PayPal early lead in mobile payments and their checkout expertise.
• Square Card Case. Lets Square buyers and sellers complete transactions with nothing more than a name and a thank you at the POS. “Charge this cup of coffee to Russ.” Card Case also takes advantage of the geo-fencing capability in Apple iOS that triggers an app to take a certain action (in this case recognizing when a Card Case customer has walked in the store) when the phone comes within a certain radius of a GPS location. Magic. Make my life simpler at my favorite merchants.
• Apple EasyPay. Apple’s new in-store self checkout capability embedded in the latest version of the Apple Store mobile app. Buyers see items flagged for EasyPay in their local Apple store, scan them with their iPhone to put them in their cart, and then pay using payment credentials on file in the cloud with iTunes.

Payment professionals might argue that all of these mobile self-checkout transactions will be treated as the more expensive Card Not Present (CNP) transactions because there is no capture of the magnetic stripe at POS. So what?

The Fed’s Regulation II –– which went into effect on October 1, 2011 –– draws no distinction between card present (CP) and card not present (CNP) economics for regulated debit cards. In fact, we pointed out earlier that one of the “unintended consequences” of the Durbin Amendment might be to ignite the mobile commerce market much like we’re describing. And, even when buyers are paying with a credit card (where there are no interchange caps today), the marginal cost of a CNP transaction over a CP transaction can be easily lost in the economics of small ticket everyday purchases.

Of course, none of this means that mobile self-checkout is going to sweep across the industry tomorrow. But it’s worth considering what problem we’re trying to solve as payment professionals.

Many card payments technologists were jazzed ten years ago about the idea of contactless cards increasing POS throughput. Tapping was carefully measured to be seconds faster (or was that milliseconds faster?) than swiping. But it was the decision by card companies to waive the signature requirement for purchases under a certain purchase threshold that really accelerated the POS checkout process. Said differently, changing the business rules to adjust the signature requirement moved the big dial, tapping requiring new card and POS technology moved the small dial.

There could be a similar thing going on here with mobile self-checkout. We’re waiting on mobile network operators to begin buying NFC-equipped handsets from handset manufacturers, waiting on merchants to upgrade their POS terminal infrastructure to support acceptance of new mobile devices, and waiting on the mobile network operators and the banks to come to terms on agreeing the economics around mobile wallets.

Maybe retailers and shopkeepers could just embrace today’s mobile technology instead, change their in-store control procedures, and let a thousand flowers bloom? When Apple – arguably one of the most successful retailers in the last decade –– says that mobile self-checkout is ready for use today, others might very well want to have a look. And quickly.

What do you think? Share your thoughts by posting a comment below, sending me an email or by giving me a call.