I had the opportunity to attend two great payments conferences in the past month – Card Forum in Orlando, and NFC Solutions Summit in San Francisco. It got me to thinking about all the exciting developments on the horizon for payments. Two new made-up buzz words you often hear lately: Gamification and Appification. Gamification refers to the phenomena in which game design concepts are used to make technology more appealing. Appification is, of course, having an iPhone and/or Android app for everything. The resulting “data exhaust” is the Holy Grail for retailers and banks. But perhaps it’s just a fad – the average iPhone app costs $400,000 to build and more than 95% are downloaded and used only once.
The other hot topics are obviously mobile payments and EMV.
A team of Canadians is making the rounds to discuss lessons learned in the Canadian implementation. They encourage collaboration among the networks to make implementation possible. The common theme is “it takes way longer than you expect.” EMV will likely be the banking industry’s largest project over the next 3-5 years. Some of the toughest issues are PIN change, PIN synchronization between online and office, and consumer behavioral change at the POS. Having said that, it’s a tough business case for issuers. Customers are likely to start asking for EMV cards due to the European travel problem. A final word of advice: lock down resources early, after all they are scarce and the U.S. will be competing for these experts with China.
The mobile payments value chain consists of pre-payment, payment and post-payment, but the white space is pre- and post-. Starbucks mobile barcode is a good example of pre-payment success – it’s been very successful increasing spend, speeding checking and driving loyalty. One third of its transactions are stored value, so Starbucks is also making money on the float.
Some predictions on market readiness:
- Among 9.3m US merchant locations, 53% of POS are expected to be mobile/contactless enabled by 2015 (Aite)
- 2016 sees convergence and critical mass of NFC and smartphones. Alternative methods predominate until then (Mercator)
It’s very interesting to hear what potential payments disrupter Google has to say. Google’s Frank Young made an interesting observation that I tend to agree with: “It’s never winner takes all in payments. It won’t be for wallets either.” Google also wants to eliminate “Hot PANs” – all the card numbers out there “in the wild” but putting them onto Google’s cloud. Google said payments are not its endgame; the goal instead is delivering value to consumer through targeted, relevant offers. Viewed this way, payments are just a symptom of a successful interaction between consumer and merchant.
Speaking of innovation, advice from Mark Lenhard of PayPal was “focus on customer value and not just always the bottom line – a Silicon Valley mindset.” That would certainly be a refreshing change!
At San Francisco’s NFC Solutions Summit, it was “All NFC All the Time.” I hosted a great panel, Making the Case For NFC Payment Services with Merchants?. My panelists were Javed Chaudry, ViVOtech; Doug Morgan, C-SAM and Steve Mott, BeterBuyDesign. Commonly agreed-to drivers of NFC include an open ecosystem, standards for providing marketing offers, and consumer/merchant value beyond payments alone. Conversely, the biggest barriers to merchants adopting NFC are complexity, data privacy concerns and proprietary wallets.
Some memorable insights from the NFC Solutions Summit:
- NFC: It’s so simple and it works like magic
- FUN before FUD (Fear Uncertainty and Doubt) – give consumers something FUN to use now, they don’t care about Joint Ventures, collaboration, or ecosystems. This gets back to Gamification
- The future of NFC: a few wallets, merchant verticals, remote combined with proximity, context-sensitive simplicity masking complexity of the underlying ecosystem
- NFC tags and cloud are a powerful combination
- Today’s NFC solutions are driven primarily by payments. Another set of use cases will emerge 6-9 months making NFC a household name