Microsoft's Larry Hryb, known to gamers as Major Nelson, recently posted a six-second video demonstrating how the company's new Xbox console redeems codes for games and subscription services. It's six seconds that many in the payments industry should watch.
The clip, uploaded through the Vine video-sharing service, demonstrates how Microsoft is replacing the process of redeeming codes for games, subscriptions and funds. The old system, reminiscent of the process of loading funds from a Green Dot MoneyPak or a PayPal My Cash card, required users to type a string of numbers 25 digits long.
The new system for the upcoming Xbox One console uses QR codes, allowing gamers to instantly redeem a voucher by holding a code up to the Kinect camera that comes bundled with the console when it is released on Nov. 22.
QR codes, which are blocky two-dimensional bar codes, are already a central feature of many mobile payment systems, including the successful Starbucks app, which is used for 11% of the coffee chain's U.S. and Canadian sales. Microsoft's method of loading funds through a camera could easily be duplicated by any prepaid card company that offers a smartphone app.
Beyond phones, newer consumer gadgets such as Google Glass and the Samsung Galaxy Gear smartwatch have built-in cameras that can also scan codes to reload prepaid accounts. In my experience with Google Glass, the process of scanning a QR code using Google's headgear happens so fast that I didn't even realize it had occurred.
Video game makers often cater to the same audience prepaid card marketers do. For example, many gamers are teens who favor cash because they do not have access to a credit or debit card. Microsoft, Nintendo and Sony each offer stored-value accounts tied to their game consoles, allowing users to load funds by purchasing cards in a store. Each company has also experimented with new funding models such as mobile billing.
Microsoft's video demonstrates how new technology can take a common but tedious process and turn it into one so effortless that it can easily fit within the six-second time limit Vine imposes on its users.
To Green Dot's credit, it's already one step ahead of Microsoft with a system that lets consumers load funds at the cash register without having to pick up a MoneyPak card. Green Dot's cardless system works at CVS, Kmart and Walmart stores.
When a MoneyPak card is involved, consumers purchase the card, take it home and then type the MoneyPak's printed code into a website or read it to a customer service agent over the phone. The consumer chooses how much to load when buying the card.
But whereas Green Dot is moving away from reload cards, many other payment companies are just starting to use them. PayPal and American Express introduced their own reload cards this year through partnerships with InComm.
PayPal is already experimenting with QR codes for point of sale payments. But even if these companies do not want to start printing QR codes onto their reload vouchers, they can still cut time out of the process by using the smartphone's camera to read the printed code off the card. PayPal already owns the technology for this through its 2012 acquisition of Card.io.