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I find myself at the forefront of many debates these days. And I’m not talking about politics, but rather how we will pay for products or services in the future.
A year ago, the topic of mobile payments circulated as mild Internet banter in terms of how money is exchanged across sources, rails and platforms. Today, this complex subject makes its way into daily conversations.
When discussing the future of mobile payments, rarely do I observe people who ride the party line. You’re either for it or against it. There’s no such thing as a moderate. And the ever-important question: near field communication (NFC) or the cloud? Is there room for both? And are people actually ready to use something other than plastic to pay for stuff?
I remember downloading the Blaze app to my iPhone in 2008. It was exciting to have a mobile wallet app on my phone that I could share with clients, friends and family. Everyone chuckled at the notion that I had a wallet on my phone. I remember working for a leading mobile banking platform provider (who would later provide mobile banking services to one-third of the top 50 banks in North America and a compelling international pipeline) at the time when it only offered short message service (SMS) and Mobile Web. The provider wasn’t marketing mobile applications because consumer usage was slanted toward SMS and Mobile Web was less intrusive. When I bragged that I had a wallet app on my phone, no one was impressed. My bubble burst. Regrettably, I never used the Blaze app. The concept was clever, but it was premature.
To understand mobile payments, we have to look at the history of mobile banking: even it failed in the beginning. In 2001, I was working for one of the leaders in online banking, which offered mobile banking through a small platform provider. Our client base was presumably highly educated, tech savvy and, based on their deposits, pretty wealthy. The perfect group for mobile banking, or so we thought. We rolled out a Wireless Application Protocol (WAP) solution that was available for the only devices that could support Web browsing from your phone, as long as you had a BlackBerry or Treo. If the past is an indicator of the future, prophets would have been able to predict that both RIM and Palm would later struggle for meaningful market share. It would be six years before mobile banking would resurface as a viable option.
Today, in 2013, technology is finally mature enough along the distribution chain and smartphone saturation is at a peak (and still growing). Alternative payment networks like Square and Dwolla are making significant traction in the market, and both players make it easier for consumers and merchants to exchange currency. Square has gone a step further through its Pay with Square app. Apple recently announced Passbook, and Lemon launched a similar offering. Other options include Paydiant (cloud), ISIS (NFC), Google Wallet (NFC), the CIBC and Rogers relationship (NFC), the Walmart and Target agreement (NFC), as well as daily noise from carriers and card issuers.
We’re more engaged with our mobile devices than ever before. Whether we’re tweeting, Instagramming life’s great moments, updating Facebook statuses, or replying to text messages, our devices have become vital to the way we communicate. So it’s easy to understand why this technology could also serve as our lifeline to our money.
How do I see mobile payments shifting? I've always been a fan of the cloud. Whether developed or hosted, shared or dedicated, the cloud is simple. As I approach payments, I side with the cloud over NFC for several reasons: deployment and distribution, utility, time to market, consumption and adoption, and, in most cases, unlimited by hardware. NFC, on the other hand, requires consumers and merchants to update their device (or attach a sticker to it), which proves to be a detractor. Simple wins every time.
I’ve been on a project in San Francisco and have been able to use Square or Dwolla (my two favorite cloud-based payment providers) as a means of payment on a daily basis (not to oversell, but the apps even direct you to nearby merchants supporting their method of payment). And while every Starbucks in the city accepts mobile app payments, it is proprietary (built by mFoundry), so distribution is narrow. But it works.
Let’s not forget the other great thing about making payments through these applications: e-receipts. Even in my hometown of Birmingham, Alabama (not exactly the hotbed of technology transformation), I’ve been able to use these apps. Another benefit is that these offerings allow small businesses to accept card-based payments without high interchange fees and investments in merchant services and hardware.
Don't get me wrong. I'm not blind to the utility of NFC and the sophistication it offers. But if we waited for every merchant to upgrade their hardware and software, and for every consumer to update their device, it could be years before it’s a relevant, not to mention predominant, method of payment, whereas cloud-based payments could be as easy as software updates for merchants and consumers.
Although Apple was one of the first to offer payments at the device, others are following suit. I recently bought merchandise at Nordstrom, where the checkout process was executed on the spot, with the associate using iPhone and emailing me the receipt. It’s even easier during your next visit to Nordstrom because, like Square, the retailer assigns the e-receipt preference to your card number, so it is automatically sent after the transaction is approved. Through a limited rollout, Macy’s now accepts Google Wallet payments (though store associates consistently tell me they hate it and it never works). ATM giant NCR recently announced a new machine that allows cash withdrawals using a mobile phone and 2D barcode. I can even use my card at vending machines – even if it’s NFC enabled.
It’s evident that the market is maturing, behaviors are changing and technology is at the forefront of both.
The issue we face, regardless of your school of thought, is who, or what, survives? Will there be a single form of payment or is there room to support the cloud and NFC? Who is more powerful: the consumer or the merchant? Does the carrier deserve a seat at the table? All complex questions with no easy answers.
I’ll close with the following list of my favorite mobile applications:
What form of mobile payment do you prefer? Join the discussion and leave comment.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Damien Dugauquier Co-Founder & CEO at iPiD
30 October
Kyrylo Reitor Chief Marketing Officer at International Fintech Business
Prashant Bhardwaj Innovation Manager at Crif
Philipp Buschmann Founder & CEO at AAZZUR
29 October
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