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The future of mobile payments

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The future of mobile payments
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People of a “certain age”, all Boomers included, will identify with a familiar set of payment options for shopping and paying household bills as they grew up. Early on, cash, checks and credit cards were the only choices available, with debit cards and ACH payment added to the mix more recently.

With the pace of change so rapid today, it’s easy to overlook that it was only ten years ago when consumers were struggling to rationalize using a credit card at the grocery store and hesitated to connect their checking account information online to make an ACH payment.

Fast forward to 2014 and witness that Paypal, Square Cash, and bank sponsored peer to peer payments are representing an increasing share of our wallet spend. While cash will always have its place, traditional credit and debit cards are being challenged by new forms of digital and mobile payment.

In hopes of sorting out the future of mobile payments, I attended a workshop of the same name sponsored by Refresh Miami, the leading technology networking group in South Florida founded by Brian Breslin in 2006. On the panel were Jim McKelvey, Co-Founder of Square and Founder of, Ali Aidi, MasterCard Innovations, Alexander Sjogrun, CTO, and Joshua Unseth, a Bitcoin expert.

Each of the panelists shared viewpoints on the recent launch of Apple Pay, the role of Crypto-Currency Bitcoin and more. It was an interesting debate.

There was consensus that the telecom giants first became interested in mobile payments in response to the progression of their core communication products from a menu-driven, tiered pricing model to a more commoditized, bundled set of services. Eventually, ATT, T-Mobile and Verizon banded together to launch ISIS, now Softcard, as an NFC based payment service working on their mobile handsets.

Along the way, there have been controversial battles over control of the “secure element” that resides on the mobile handset. Panelist Ali Aidi described the secure element as the secure memory and execution environment in which sensitive data and apps can be stored to enable financial transactions and other mobile marketing apps such as coupons and loyalty.

Early attempts by the telcos to block use of the secure element by third parties (Google Wallet as example) have mostly been resolved and a new technology, Host Card Emulation, is opening options for software developers to mimic the secure element within an app in order to process an NFC transaction at point-of-sale. There was general agreement that key stakeholders in the mobile payment wars must find a way to identify complementary roles and move towards a more collaborative model if a broad based mobile payment solution is to be developed and adopted by consumers. Of course, revenue sharing among the stakeholders is the central and most difficult issue to resolve.

The panelists described a general shift from the traditional “4 party payment model” that depicts the Visa/MasterCard systems towards a decentralized trust model, where currencies like Bitcoin can flourish as a facilitator of day to day commerce.

Attendees were asked to tweet questions to the panelists using #refreshmiami and you might be interested to search that hashtag to see what was being discussed. My inquiry as to whether Bitcoin was an “investment medium or could it truly be considered as a payment system”, was met with some disdain from Bitcoin advocates in the room.

The arguments put forth by Bitcoin advocates were passion-infused as illustrated by just these two tweets and in this video:

  • “This is hilarious how clueless the status quo is”
  • “I can pretty much answer all the questions at #refreshmiami with bitcoin”

The closest the panelists came to framing up how the mobile wallet wars will be decided was to present a set of additional questions for attendees to consider:

  1. An omni-channel approach to payments may result in the optimal solution overall. Which solution will work in multiple channels, at point-of-sale, online, and peer to peer?
  2. Security issues need to be addressed from an operational perspective, but also to manage perceptions with consumers. One panelist invited attendees to count the number of apps already on their smartphones requiring credit or debit card information. That exercise helped to put context around the level of risk exposure incurred by many consumers today.
  3. With more mobile phones than bank accounts in our nation, will Bitcoin become a solution to help the underbanked manage their finances?

There was tacit agreement among the panelists that more than one solution would become part of an overall standard. Just like we have lived with MasterCard, Visa and American Express for decades, it is likely that we will have multiple mobile payment options in the future.

The common denominators of a winning solution will be ubiquity of acceptance, unquestionable consumer confidence in the security of their chosen payment method, and convenience, speed, and cost control for merchants and consumers. It was interesting that none of the panelists mentioned the merchant sponsored MCX initiative, one alternative that is focused on delivering value to the merchant community.

However these debates are resolved, we will one day have a new set of payment options that are acceptable to the majority of consumers and in which we hold great confidence. The question becomes, once our daily lives of commerce shift from current standards to new digital methods, how will the new payment methods differentiate from one another?

That takes us full circle to customer loyalty, offer management, and merchant networks as means to differentiate among payment solutions. When the technology debate subsides, marketers will still be tasked with making the purchase experience as special as possible to win share and generate profits.

Some things never change.



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