Thanks Dad: Zappos rolls out fancy new credit card-reader (with help from parent Amazon)

By Michael Carney , written on July 21, 2014

From The News Desk

Despite being one of the earliest and most successful ecommerce 2.0 companies, Zappos has never really been known for its technical innovation. Service? Absolutely. Tony Hsieh’s* company redefined what consumers expect from online retailers, setting a bar that the entire industry has since been forced to clear. (Much to the chagrin of their bottom lines. All that free shipping doesn't come cheap.)

Today, however, the company is departing from this soft-science focus with a new mobile payment experience built entirely in-house – with some help from its rich parent overlord, Amazon.

Zappos today released an updated version of its iPhone app with a new card scanning feature that allows consumers to skip the tedious task of entering their credit card numbers.

“We’re always trying to innovate and make the process easier for consumers,” says Zappos head of mobile Aki Iida. “On the small keyboards of smartphones it’s especially important that we make checkout as easy as possible. This is one way we can do that. It’s even more important than on a tablet, which is why we began with our iPhone app.”

Zappos isn’t the first company to offer credit card scanning. In fact Jumio has built a highly-valued business around offering this functionality as a service under the NetSwipe brand and is incorporated into mobile products from Travelocity, AirBnB, Western Union, and Fab, among others. But Hsieh’s company elected to build the functionality from house, in partnership with Amazon’s development group. One reason? The company wanted to handle all the card reading and image processing on the device, rather than on its (or Jumio's) cloud servers.

[Editor's note: Jumio contacted Pando after publishing to clarifty that its NetSwipe service processes images on-device and does not send information to cloud-based servers.]

“No photos of the credit card are taken during scanning, it simply reads the number and auto populates it as text into the appropriate fields – all of this happens on the device” Iida explains. He adds that user testing revealed that the perception is that on-device processing is viewed as much safer than the alternative and thus results in higher levels of consumer satisfaction.

“The addition of this feature wasn’t necessarily about increasing conversion rates or reducing time to completion – although both may result,” Iida says. “We set out to build this to deliver a better experience. People like this and they find it easy and fun.”

Mobile transaction volume is growing rapidly for Zappos as it is for most online retailers. Perhaps counterintuitively, however, the company is seeing higher conversion rates in its native apps than on the Web, with mobile Web coming in a distant third. Moreover, the average order size is larger from mobile app shoppers as well. Notably, iOS leads Android in both categories although not by the enormous margins that other etailers have reported, according to Iida.

This new card-scanning feature will only affect a portion of Zappos’ customers – namely those who have yet to save their payment card info to their account – this could be new customers, or those who have previously declined to save this information. That said, the company focused on designing its card-reading experience in a way that was intuitive for both tech-savvy and novice users, Iida says, although iPhone users tend to pre-select for technical proficiency, in the company’s experience. Zappos’ Android and iPad will receive similar updates in the near future.

Iida’s team plans to add in more personalization and discovery magic to the Zappos mobile experience, both of which are areas in which Amazon has been a pioneer. Like with card-reading, both these features go back to the unique challenges of delivering a joyous shopping experience on a cramped four to five inch screen. And for Zappos in particular, which offers a seemingly infinite number of product SKUs, this is a partigularly poignant problem to solve. The data clearly shows that if Zappos and other retailers can make it easier for consumers to find and purchase the items that they want (whether they know it or not) more transactions will result.

There’s a fine line between making mobile shopping convenient and making it so easy that consumers wake up with an ugly case of buyer’s remorse. It’s for this reason that payments company Braintree and its clients deliberately find ways to add friction, like in HotelTonight's case forcing consumers to do things like trace a hotel bed with their finger to confirm that a purchase is in fact intentional. But card entry is one of those annoying things that can stand to be eliminated entirely without leading to accidental purchases.

It may be out of character for Zappos to turn to bits, rather than atoms in an effort to delight its consumers. But the focus on satisfaction above all else is very much what we’ve come to expect from the etailer. Like most consumers, if I never have to enter another credit card number on a mobile keyboard, that’s just fine with me.

[*Disclosure: Hsieh is an investor in Pando.]

[image via Zappos]