Payments. Oh, payments. When will they ever make sense?
All through 2015, one thing after another happened, each of which seemed to change everything altogether, only to be supplanted by the next thing that seemed to change everything altogether. 2016 looks to be no different.
Mercator Advisory Group’s Ken Paterson puts it pretty well: “Coming on the heels of 2015’s big events—Samsung/Android/Walmart/Target/Chase Pay announcements, the EMV liability shift, and awakening real-time payments to name just a few—disruption has become a fixture of the payments industry in 2016.”
One need only look at a couple of unrelated announcements by those long-time harbingers of trends payments—Visa and MasterCard—to start to sense the payments tech craziness.
Pay as you drive
Visa’s is pretty interesting. It is expanding its Visa Ready program to include internet of things companies—namely, in the short term, companies that produce wearables and companies that produce automobiles.
Soon you’ll be able to buy something by tapping your exercise band on a register—or by talking to your hands-free communication-equipped SUV.
“More and more, consumers are relying on smart appliances and connected devices to make their lives easier,” says Jim McCarthy, executive vice-president of innovation and strategic partnerships at Visa. “By adding payments to these devices, we are turning virtually any internet connection into a commerce experience—making secure payments seamless, and ultimately more accessible, to merchants and consumers.”
Cars and exercise bands are just the beginning. Visa hints that it is willing to talk with manufacturers of appliances, public transportation services, clothing, and “almost any other connected device.”
“Give us ready-to-use options”
MasterCard’s announcement is a bit slyer but just as eyebrow-raising. It’s based on a survey, but not just any kind of survey. It tracked 2 million global social media posts about mobile payments that crossed Twitter, Facebook, Instagram, Forums, Google+, and YouTube.
Two million mobile payment-related posts. That’s up from 85,000 in 2012, when it did a similar survey.
Never mind the fact that such a survey could physically (or, presumably, ethically) be done. (MasterCard worked with PRIME Research, which uses “proprietary human-based social media analytics methods and technology.”)
What it found, in a nutshell, is that “across the globe, cardholders are asking banks and retailers to provide real-life, ready-to-use mobile payments options.”
Digital wallets including Apple Pay, Samsung Pay, Android Pay, and MasterPass dominated the social media conversation, encompassing product launches, service improvements, and how users are evaluating them. Other topics covered contactless cards, biometrics, personal payments, and wearables.
“As more choices are made available to them, the conversation has evolved and consumers seem to be fully embracing the next generation of payments,” says Marcy Cohen, vice president of digital communications at MasterCard.
All signs point up … or not
Of course, these two examples are the most whiz-bang of recent payments-related news. There are plenty of other numbers-heavy announcements that add gravitas to the craziness.
Two from Ovum, to start with. One has the title “Prepare for an m-commerce explosion.” It concludes that “the total global user base for mobile payments will increase from an estimated 690 million users in 2014 to 4.77 billion users in 2019.”
The second one narrows things down, to “mobile proximity payments.” (Recall the Visa announcement, above.) The global user base for mobile proximity payments, both NFC and non-NFC, stood at almost 45 million in 2014. By 2019, Ovum projects, there will be more than 1 billion global mobile proximity payment users.
Yet another, unrelated study, this one from market research publisher Packaged Facts. It predicts that in 2016, the U.S. market for mobile payments made at the retailer point of sale will increase to $23 billion, up 54% from 2015. It calls for “robust growth” of mobile payments through 2019, as smartphone usage nears saturation.
So, based on all this, there’s a clear path ahead for mobile payments, right?
Wrong, of course. The customer demand seems to be there, but what about the supply? Namely, what about retailers? What about banks?
Accenture takes a shot at retailers, with a survey of 10,000 consumers across 13 countries. On the demand side, it found that the number of consumers shopping on the go grew from 35% in 2014 to 40% in 2015. However, only 58% of retailers offer smartphone apps with purchase capabilities.
“Retailers must make every effort to improve their mobile commerce capabilities and keep up with consumers’ expectations,” says Patricia Walker, senior managing director in Accenture’s Products practice.
Celent doesn’t exactly take a shot at bankers, but it does observe “a paradox.” Zilvinas Bareisis, a Celent analyst, recounts in a Celent blog results of the latest of one of its research panels in which financial institutions are invited to volunteer. Of 42 institutions that participated in its latest digital payments panel, nearly all said that digital payments are important. However, only 13% viewed it as a strategic priority into which they plan to lead and invest accordingly.
In a follow-up question, 71% of the financial institutions agreed that financial institutions in general should offer branded digital wallets, but are more likely to participate in third-party wallets.
Time to reimagine fintech
As with most new disruptive technology trends in banking, the glue tends to depend on the participation of third parties—which recently have been dubbed “fintechs.” Where do they stand in the payments craziness?
ACI Worldwide issued a report recently trying, ahem, to make sense of all this.
It concludes, says Paul Thomalla, senior vice-president of Global Corporate Relations and Development, this way: “We believe that now is the time to reimagine the payments relationships between banks, retailers, and fintechs. Banks need to enter into a new era of cooperation with retailers and the new players entering the market. They need to understand that the requirements and interactions with consumers and businesses are changing. Rather than seeing the regulators and the new fintech players as a threat, banks should embrace the opportunities that the new payments landscape will bring. Only by combining the best aspects of both worlds can they offer today’s savvy customers the services they want.”
Oh for the days when you just plopped a fiver on the counter and got your Big Mac meal.
Sources used for this article include:
- PPP: SBA Issues Guidance on Changes in Ownership and Full Forgiveness Eased for Smaller Loans
- First Citizens, CIT Plan Merger to Create $100bn Bank
- OCC Levies Third Major Fine This Month
- ABA Urges DoJ to Update Market Data to Help M&A Governance
- JP Morgan Chase Outperforms, Good Sign for the Banking Industry