Commerce 2014: Return of the Tech

By Dan Rosen

Well, it’s time again at the outset of a New Year to take stock of past, present and future. I’d like to think we’re at an important crossroads in the retail, payments and commerce industries. Below is a brief review of where we’ve been and an exploration of how new fundamental technologies may play an important role in this eco-system moving forward.

WHERE WE’VE BEEN

About 6 years ago, the high-tech industry produced a barrage of fundamental computing advances, including the rise of virtualization (thanks, VMWare), the maturation of cloud computing (thanks, Amazon) and the arrival of the first real smartphone (thanks, Apple). Since then, adoption of these platform technologies has exploded, and we’ve spent the last 4 or 5 years developing and distributing software (e.g. SaaS, web properties, mobile apps) that takes full advantage of such new computing platforms.

In the commerce world, there has been a flood of e-commerce startups, flash sales sites and daily deals companies. Smartphones have enabled distributed marketplace models like Uber, while their tablet cousins have become point-of-sale devices thanks to software vendors like Square, Revel and ShopKeep. To punctuate the trend, we’ve seen large companies built who provide tools and platforms to make this software development even easier, including: mobile app development platforms like Appcelerator, API management platforms like Mashery, E-commerce site platforms like Shopify, payments gateways like Braintree and the list goes on. In short, developing and producing mobile and web software has never been easier or less expensive.
SO WHAT NOW?
Looking towards 2014, I suspect we’re due for another wave of fundamental technology advances. We should expect a proliferation of mobile, digital computing platforms that surround us in our daily lives. Coordination across these platforms will create challenging software opportunities and, once resolved, spawn a whole new set of application opportunities for omni-channel commerce. Below is a list of some of these technologies and some discussion of their impact on our eco-system.

1. Bluetooth Low Energy (“BLE”) (Apple iBeacon)

a.What is BLE? Wireless networking technology that promises considerably reduced power consumption and lower cost while maintaining a similar communication range for devices.

b. What is a Beacon? A beacon is a device designed to attract attention to its location. iBeacon refers to Apple’s enablement of iOS devices to emit signals to others iOS devices in a power-friendly way (using BLE) for applications such as indoor navigation, proximity-based couponing and even mobile payments.

c. So What? Most iBeacon use cases are well suited to retail. If broadly deployed, the iBeacon might fundamentally change the consumer shopping experience. Already PayPal, Qualcomm, ShopKick and several other startups have developed early beacon products, but the big X factor will be Apple, who seems determined to bring the iBeacon to market itself – partially through dedicated devices and partially through nearly 200 million iOS devices which are iBeacon capable and already in use today. Imagine a day when every store associate knows your name and purchase history when you walk in the door.

2. Delivery Drones (Amazon Prime Air)

a. What is a Drone? Another name for an Unmanned Aerial Vehicle (UAV), which is an aircraft without human pilot on board, controlled either autonomously or remotely by a pilot on the ground.

b. So What? Although E-commerce is growing rapidly, fulfillment and delivery remains one of the biggest challenges to its growth. Drones represent an interesting potential solution for rapid, cost-effective delivery of e-commerce purchases…as envisioned by Amazon CEO, Jeff Bezos. Today, the alternative remains car and driver.

3. Wearables meet Shopping (Google Glass)

a. What is Google Glass? Google Glass is a visor mounted display that enables heads up computing for people while they perform their regular daily routing. Today, the device functions primarily tethered to one’s smartphone and its Internet connection.

b. So What? In 2014, Google is expected to launch the Glass app store, and it is easy to imagine a multitude of shopping-related applications. Phones may go back into pockets when shopping and the shopping experience may become more immersive…assuming we’re all ok with the aesthetic.

4. New Payment Devices (Coin, Loop)

a. Examples: Today, almost all in-person electronic payments are completed using plastic cards. However, several startups have developed new products that can enable a digital payment without the traditional bank-issued plastic card. These include all-in-one digital payment cards, which store multiple payment accounts on a flexible, plastic card-sized mag stripe device. The latest such company, Coin, received a lot of publicity from a successful crowdfunding campaign got them started. Another approach is that of Loop Pay, a company whose product syncs to a digital wallet and, when activated, can emit a magnetic field strong enough to register on a payment terminal WITHOUT swiping a card.

b. So What? The payments industry has been waiting for NFC for nearly a decade and, I think it’s fair to say, most of us are beginning to doubt its eventual arrival (i.e. mass market adoption). One might argue that technologies like BLE beacons, multi-wallet programmable payment cards and magnetic field-emitting phone accessories might obviate the need for NFC entirely.

5. Cryptocurrencies (Bitcoin)

a. What is a Cryptocurrency? Cryptocurrencies (or math-based currencies) are digital media of exchange, which incorporate principles of cryptography (i.e. public-key encryption) to implement a distributed, decentralized and secure information economy. Said simply, there is no ‘central bank’ and the eventual supply of money is capped from the outset. The best-known and most popular cryptocurrency today is Bitcoin.

b. What is Bitcoin? Bitcoin (BTC) is a cryptocurrency introduced in 2009 by Satoshi Nakamoto, which has gained notoriety in the past 12-18 months for its explosive growth in value from $14 on January 1, 2013 to a high of $1,242 in November 2013. Despite regulatory enforcement actions in China and other countries, the currency still trades near its historical high and proponents believe Bitcoin to be the future of money in an increasingly real-time, privacy-sensitive digital world.

c. Isn’t this Software? While cryptography certainly relies on software, cryptocurrencies require substantially more complex math and software development capabilities, and their manufacture (or “mining”) requires expansive computing resources…so much so that whole blocks of computing resources have been so dedicated around the world.
d. So What? The implications of a new global, digital currency (if successful) are too wide ranging to capture in this small article. One would have to imagine the opportunity to invent the U.S. Dollar and then imagine that it reaches its global importance of today in a matter of a few years. The impact would be felt by every major merchant, payment processor, financial institution, financial regulator and sovereign government on the planet.

6. Big Data & Analytics

a. What is Big Data? Big Data is a collection of data sets so large and complex that it becomes difficult to process using on-hand database management tools or traditional data processing applications. The challenges include capture, curation, storage, search, sharing, transfer, analysis and visualization. Gartner created the 3 V’s of to describe big data: High Volume, High Velocity and/or High Variety information assets that require new forms of processing to enable enhanced decision making, insight discovery and process optimization.

b. How does it apply to Commerce? Today, most retailers, banks and payments companies have an enormous amount of data. However, a small fraction of their data sets are large enough to qualify as big data. Very large retailers, such as Walmart and Amazon, sure have ‘big datasets’, as do large financial institutions such as JPMorgan Chase and Bank of America and payments processors like First Data. These data can be used for personalization, marketing analytics and optimization, fraud prevention and many other critical applications.

c. A Retail Big Data Example? An estimated 100 million people shop at Walmart every 4.2 days purchasing an average of 13.6 items per visit (SOURCE: InfoScout). This creates a core data set that grows at 2.3 billion units per week. If Walmart is capturing product attributes (e.g. price, location in store, time on shelf), marketing data (e.g. applicable promotions, customer loyalty, digital attribution) and in-store activities (e.g. products browsed, display consideration, time in store, associate engagement), the data set can be expanded as much as 100x. This suggests Walmart could have an ever-changing dataset with tens of trillions of data points…this qualifies as big data. Imagine for a moment that a frequent Walmart shopper visits Walmart.com. Assuming Walmart renders its digital assortment dynamically, loading the first page would require analyzing the consumer’s purchase history, product preferences, propensity to spend and purchase patterns amongst similar consumers…all in a couple of seconds.

d. So What? Proper digestion and analysis of big datasets require new and specialized technology platforms. These can include: A/B testing, crowdsourcing, data fusion and integration, genetic algorithms, machine learning, natural language processing, signal processing, simulation, time series analysis and data visualization. These big date technologies are like to represent an increasing allocation of corporate IT budgets over the next several years.

WHAT DOES THIS ALL MEAN?

If I’m correct about the adoption of the above technologies, we could see a complete re-imagination of the way that consumer marketing, shopping and payments. As such infrastructure proliferates, we can also expect to enter another golden period for software developers who build coordinated, omni-channel software applications for themselves, retailers, brands or other commerce-related businesses. Over the long-term, this should mean a bright and exciting future for commerce innovation. Meanwhile, Happy New Year everyone!

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. Check out the February 2019 PYMNTS Financial Invisibles Report

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