On a daily basis, I get an email about a new conference or report or blog around this fascinating new opportunity found at the intersection of mobile and payments. This indicates a couple of things to me.
- I have become fashionable by accident. Like a stopped clock being right twice a day, my core area of research for the last ten years is red hot right now (this will pass).
- With this much noise, there is a bubble. Bubbles burst.
And here is where I produce a nice sharp needle…
YES, there is a lot of activity around mobile payments at the moment. BUT, it is time for a reality check. The mobile payments industry is, as the name might hint, made up of two industries – mobile and payments. The former is radically evolving the way we interface with the world around us, having a significant impact on many facets of our daily lives. The latter is evolving with a speed best described as vegetable. And therein is the rub.
It is hard to think of a single mobile payments initiative in developed countries that is not anchored to traditional payment rails. Even iTunes and PayPal are connected to existing credit or debit accounts held at traditional financial institutions. And, these traditional entities are quite happy with the way things are. In fact, change is to be shunned because change would upset very well established dynamics around tried and tested “top of wallet” strategies and clear interchange models around “card present” and “card not present”. Change bad.
So, we have this dichotomy – the mobile industry chomping at the bit, desperate to evolve and disrupt and the payments industry, content with the status quo and although interested in what mobile can do, really see the handset as simply a new form factor at the very periphery of what already exists. Mobile is a veneer, that is all.
And it seems we are reaching an impasse. The ‘mobile’ part of mobile payments has ran out their leash as far as they can and are now choking themselves while they wait for the ‘payments’ part of mobile payments to catch up. In the US, this is a two to three year wait for EMV infrastructure at the POS, a move that is expected (but not guaranteed) to provide the requisite contactless architecture for NFC to ignite. Elsewhere, there is less of a catalytic event and more of an expectation that next gen POS upgrades will seed the market with the right technology. But again, this is just a change at the periphery and the status quo of traditional payment networks is intact.
For all of the bluster around mobile payments, the two most important stakeholders, merchants and consumers, are often overlooked. For consumers, existing payment systems work fine. Cards and cash are fast, secure, ubiquitous and relatively inexpensive. For merchants, yes, there may be some gripes relating to the cost of card acceptance, but that is pretty much the cost of doing business.
Mobile payments today are not trumping existing payment mechanisms in a way that is noticeable for merchants and consumers. Yes, it may be more convenient to scan a QR Code at Starbucks and redeem points, but that is not so measurably better than swiping a card that a consumer wouldn’t default back in a pinch. And, fine, that works for a major coffee chain, but the fact is that existing payment mechanisms are the ones we still have to use in the 99% of other retail locations. I’m not saying that there are no advantages to mobile payments. However, the opportunity for consumer / merchant value addition seems to be less around the transaction and far more around augmenting the retail experience. The mobile payments obsession is missing the point.
What it comes down to is this… this is not like moving to MP3s from CDs. Mobile does not and will not replace plastic for many, many years to come. And that is our reality. Mobile payments are this year’s hot conference item, but sober evaluation of the opportunity is starting to seep in. The payments industry will not adapt to change at the rate that the mobile industry wants it to. I just hope that the mobile industry has the tenacity to hang in there before moving to the next shiny object.
(Look, a blue car!)