It’s no longer a matter of if the future of mobile payments systems arrives, it’s a matter of how soon.
MIAMI, Fla. – The technology surrounding payments was a great idea in in the 1970s, but as the players and security issues has evolved, what we’re dealing with today is an inefficient system of static cardholder data, very little authentication, risk and fraud.
Antiquated and fragile — not exactly factors that bode well for the speeding train of mobile payments systems that are coming into your stores.
“The revolution is here. It’s a not a matter of if, it’s a matter of when,” said Gray Taylor during the “Future of Payments” general session at the NACS Leadership Forum, noting that the issues that relate to the future of payments are not just specific to cards and mobile devices.
“Better, faster and cheaper doesn’t apply in today’s payment markets,” said Taylor, adding that there “isn’t a monopoly in play today” that could withstand the market forces coming to the mobile payments landscape. And at the end of the day, “when technology moves, even the strongest market players can’t stand up against the headwinds.”
With payments in flux, and the emergence of EMV coming down through the payments pipeline, Taylor cited six key themes:
1. Digitization of Payments: For the banks it’s about survival and preserving the interchange model. For new players it’s huge margins, where the “less than interchange” pricing is an attractive feature. Also, there’s a “Blue Ocean” view because of a lack of innovation in the current payments system.
2. Redefining Retail Banking: Consumers are in a “Depression” mentality where they have to live, but they won’t do it off a credit card. In fact, more than 70 million U.S. households are un-banked or under-banked, meaning they don’t want to pay fees, which makes prepaid an attractive and profitable option.
3. Consumerization: “Never try to train a customer and never bet against what they want,” said Taylor, adding that the old mentality of “build it and they will come” is dead. Instead, retailers should be focusing on the user exerience and how they are using mobile options.
4. Authentication: In a nutshell, this is more about payments — consumers expect that their personal data should be protected and secure. Authentication also has deep ramifications to other aspects of modern life — government ID, health-care access, access to the cloud — but only if done in an open and rent-free manner. Authentication in the foundation of the vaunted Mobile Wallet.
5. Many to Many – the “Cloud” (Secure Web): This is a major disruption to Visa and MasterCard’s network models, as it negates the current assumption that payments need a closed network to function; and success will come to those who reinvent or circumvent the “system.
6. Standards are Absent, Regulation Spotty: Payments platforms cross many boundaries, and essentially it’s a Wild West scenario: Funding is well regulated except for prepaid; the system is regulated except for prepaid, signature debit and credit, and the method if how that transaction is tendered is neither regulated or standardized today.
As the industry looks quickly at a very foreseeable future, the takeaway is that retailers must act like stakeholders if they want to be truly revolutionary in the payments landscape.