As mobile wallets multiply, one product keeps coming up as the example for others to follow: Starbucks' mobile card app.

Gene Cornfield, chief marketing officer for digital gift card provider CashStar Inc., recently sat down with PaymentsSource to discuss how Starbucks, Apple and other companies are setting the tone for the next developments in mobile commerce. This interview has been edited for length and clarity.

PaymentsSource: Why has Starbucks’ mobile payment system been so popular?
Cornfield: When walking up to a Starbucks, I turn on my phone, click Passbook and there’s my Starbucks card. There is a certain “cool” factor to that. You tap your phone and you are done. I see that my balance gets low, so why wouldn’t I let the balance expire vs. reloading more funds into my Starbucks card? It’s because I want to see those little stars in the Starbucks app going into my virtual cup and when I have 12 of those stars, I get a free coffee.

PaymentsSource: What is the most important message for retailers to grasp as mobile commerce grows?
Cornfield: One is that mobile is about the relationship that the consumer and the brand have with one another. It enables that constant presence. The overall strategy has to be one that combines loyalty, payments and offers. Today, those exist in different places at most retail brands. But mobile gives the consumer a unified view of what the merchant holds, and gives the retailer a unified view of what the consumer holds.

PaymentsSource: That sounds like the Merchant Customer Exchange, a mobile wallet initiative of Walmart, Target and other major retailers. They want to address the fragmentation in mobile payments by creating a system that's consistent across multiple retailers.
Cornfield: Yes, but the retailer has to own the customer experience, customer relationship and data. Every brand today can do something similar to what Starbucks has done. There are almost no brands like Starbucks in terms of high consumability, high frequency and low denomination, but the reality is that every brand today can convert their plastic or digital gift cards into a reloadable mobile payment card in their mobile app that is linked to a loyalty or rewards program. It’s right there, as a first step.

PaymentsSource: Mobile payment remains a small portion of retail sales in the U.S. Do you see that changing?
Cornfield: We will probably this year deliver half a billion dollars in digital gift cards, and I think by the end of the year, we will be on a run rate in which 15% to 20% of those cards are loaded into a mobile wallet, either a third-party wallet or a retailer wallet. Even over the last year, we have seen a huge increase in the number of consumers presenting their phones at the point of sale. If you narrowly define mobile payments as a credit card on a phone vs. someone using their phone to pay for something, we’re seeing mobile adoption grow significantly. Right now, 12% of all e-gift cards are being loaded into [Apple's] Passbook, on average.

PaymentsSource: KFC just developed a mobile payment system for ordering and paying ahead of time to eliminate the wait in a line. But some say you don’t want to eliminate the customer experience with employees, and going through a line is part of that.
Cornfield: There is an issue there in mobile, overall. We’re all still trying to figure out what the right balance is between several things. That’s why we view the gift card as an opportunity for the retailer to establish a relationship.

PaymentsSource: Is there a way for a smaller retailer to establish digital gift cards through a company like CashStar?
Cornfield: Right now, our clients are in the larger category. A lot of complexity went into the back end of our system, and it still requires enough of our employee’s time that we can’t invest it on behalf of a very small retailer. Our solution has been to automate the system as much as possible and we are determining how we can expose this functionality to smaller retailers so they can on-board themselves. But we are still a little ways from doing that.

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