Microsoft Corp. has made several efforts to build new technology for payments, and its mixed successes provide insight into what consumers are willing to tolerate at the point of sale.

Its most prominent payment system is Microsoft Points, the digital currency Microsoft uses for its Xbox game console. Microsoft is expected to soon announce its next Xbox, codenamed Durango, giving the tech giant an opportunity to refine its approach to digital payments. Microsoft also built Near Field Communication-based payments into the Windows Phone 8 operating system it launched last year.

Microsoft describes another initiative, Zero-Effort Payments, as successful but not ready for prime time.

And last month, IT consulting company Avanade launched the Grab & Go interactive shopping experience, which uses Microsoft's Kinect motion sensing technology to facilitate shopping using both a kiosk and a mobile device. Avanade is a subsidiary of Accenture, which is partly owned by Microsoft.

"A lot of big companies that have consumer relationships are realizing that they play an integral role in connecting the mobile platform with payments," says Dave Kaminsky, senior analyst at Mercator Advisory Group.

Large technology companies such as Microsoft, Apple and Google already laid the groundwork for payments when building technology for other purposes, Kaminsky says.

For example, Apple could easily turn its iTunes accounts into a payment system for the point of sale, since it already has users' credit and debit cards enrolled for ongoing payments, he says. "Microsoft also has accounts for virtual products so in the same way [as Apple] leverage those customers," he says.

Microsoft's Zero-Effort Payments (ZEP) system uses Bluetooth Low Energy (BLE) technology instead of NFC. It also uses facial recognition software from its Kinect gaming system.

Microsoft tested the ZEP system in cafeterias on its Washington campus back in 2011. The company says in a white paper that it considered the test a success, although the system isn't quite ready for general use. In the test, 274 customers used the system to make 704 purchases using key fobs.

While the Avanade shopping experience doesn't specifically use ZEP, it uses Kinect for Windows combined with NFC, QR codes and augmented reality technology. Grab & Go enables allows consumers to use Jedi-like hand movements to drag products from a main screen to their mobile device screen for review and purchase.

The hands-free nature of the Kinect system addresses many of the concerns of more hands-on payment technology, such as using a biometric fingerprint reader.

With fingerprints, "cleanliness of the sensor is an additional issue because some people questioned to us the hygiene of such a solution," Microsoft says in its white paper. "Also, their association with police work or the 'mark of the beast' in Revelations makes customers in some countries reluctant to provide fingerprints on demand."

In a Sept. 2012 blog post, Microsoft project researchers admitted that some consumers might be hesitant about certain elements of ZEP they deem intrusive.

"Clearly, these systems all aim at providing more convenience and richer experiences in people's lives," says Stefan Saroiu, a researcher on the project, in the blog post. "These come with privacy tradeoffs. Some people are happy to make these tradeoffs, whereas others are not."

Microsoft declined to provide further comment about ZEP.

Kaminsky took issue with Microsoft's use of Bluetooth technology.

"I have a bunch of concerns with this," says Kaminsky. "The reason NFC is so appealing for payments is because of the inherent security of keeping things short range."

Bluetooth is usually a longer-range technology than NFC, Kaminsky says. NFC, based on proximity, only reaches about 4 centimeters, he says.  BLE can extend about 50 meters.

Kaminsky wonders if Bluetooth technology is secure enough to make payments although he says Microsoft probably went to great lengths to make the system secure.

"Shorter range is going to be inherently more secure than long range," he says. "A lot of attention is put on NFC and I would guess there's a reason for that."

With ZEP, after BLE communicates the user's location, Microsoft uses facial recognition software to identify which customer is at the point of sale. It can also make a video record of the sale.

Facial recognition "is going to throw up a lot of red flags for anyone concerned with consumer privacy," Kaminsky says. "A lot of people are uncomfortable with [facial recognition] at this time."

While the technology Microsoft is testing might rise in prominence it won't necessarily rise in usefulness, says Alex Kwiatkowski, research manager for banking at IDC Financial Insights.

"ZEP is a good example of what's technologically possible, but it's not financially or operationally desirable," Kwiatkowski says. "It's sensible for Microsoft not to push this as a revolution but instead this is just something they're playing with."

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