Drone-based commerce is challenging, risky—and inevitable

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Airborne drone delivery is becoming e-commerce's version of self-driving cars: A promising but troubled technology that's nonetheless creating opportunities to change the way people make payments.

Worldpay, Amazon and JD.com are among the companies taking airborne fulfillment seriously, investing in technology, scoping out market segments and putting pressure on other companies.

Given Amazon's impact on retail technology in other areas, such as cashierless stores, expect to see pilots and proofs of concept in the near term from companies that don't want to be rendered obsolete by Amazon's innovations.

Worldpay last week unveiled Drone Pay, a proof of concept that uses EMV contactless payment card technology embedded in a drone landing pad, which in this case resembles a "smart doormat." This doormat embeds card details to verify receipt and execute payments.

"In the next two to five years, drone delivery will be a reality. It will be a common experience," said Greg Worch, senior vice president and head of business development for global enterprise e-commerce in North America for Worldpay. "There's a lot of excitement about this."

The drone looks like a small helicopter and drops off its payload once the payment is confirmed. It then flies away. The acquirer contends 71% of Generation Z consumers want items delivered via drone, citing internal research.

That's a key group to capture if Worldpay is going to compete in a merchant acquiring market where fintechs that offer web-hosted payments, credit and store management are building momentum.

"Drone delivery is definitely a high potential concept. There are significant boundaries to overcome, and payment is only one of them," said Rick Oglesby, president of AZ Payment Group. "It’s great for Worldpay to position itself on the cutting edge as a key enabler, but it’s too early to accurately identify how supply and demand will ultimately define the right payment solutions for drone delivery."

Worldpay earlier this year completed its $11.6 billion merger with Vantiv, a combination that's expected to birth myriad technology projects to address ordering, fulfillment, CRM and emerging models such as self-service checkout and cashierless stores. Innovative ordering and delivery can help Worldpay differentiate from other acquirers and fintechs while reaching younger consumers.

"New consumers want immediate delivery and there are logistical challenges for existing delivery methods that are out there," Worch said.

There are also hurdles to drone delivery, including compliance issues regarding privacy and the public usage of drones. There are further logistic challenges in delivery in urban areas.

Worch acknowledges these challenges and said they will be worked on over time, with input and collaboration with merchants. "This is designed as a proof of concept; what we need to do is think about how we can help merchants meet new needs," Worch said.

There's also the matter of securing the doormat that will act as an at-home point of sale. Worth said that would be addressed — there would be authentication, and the deployment of drones on consumer property would likely be addressed between merchants and consumers, since the drone delivery would be a merchant product.

But there's also ample reasons to adopt drone delivery. It's less expensive (perhaps by half) and faster than having drivers deliver products. And drone delivery is not as futuristic as it sounds. The concept has already proven workable in delivering medical supplies. In China, e-commerce company JD.com is using drones in a manner similar to Amazon's proposal.

There's also the Amazon factor. Amazon's tests of drone delivery are well-publicized, and other retail innovation at Amazon such as its Go cashierless stores and smart doorbell delivery for consumers who aren't at home have sparked immediate competitive responses to serve nervous retailers.

In addition to drones, there's a virtual parade of robots and even small vehicles that are vying to be the replacement for traditional delivery, all seeking the right mix of use case, demand and consumer appeal.

"Drone delivery is the next step beyond smart doorbells or the 'endless aisle' concept," Worch said. "The idea is the make the store a showroom where items can be ordered, delivered and paid for."

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NFC Digital payments Acquirers Retailers Worldpay U.K.