It seems like every day there is another one—an article, blog post, special report, white paper, video, or interview transcript that discusses the evolution of payment systems.
These articles tend to take one of three approaches…
◆ Use data to make one of two points—use of/interest in alternative mobile payment systems is growing or that use of/interest in it has leveled off (I’ve yet to see anyone seriously argue that it is declining).
◆ Discuss, explore, review, or debate alternative mobile payments systems—whether with a hidden or overt agenda, the pros and cons are presented and the conclusion drawn that it is a wait and see situation at the moment because it’s simply not clear who will emerge as the winners and losers.
◆ Argue that (no matter what happens) traditional payment systems will survive—a variety of (head in the sand?) arguments are presented that usually have some implicit connection to (assumed or alleged) generational preferences and rely on overly simplified reasons to justify conclusions.
But there is a key (and I believe critical) element missing from these discussions.
No one seems to be questioning the implicit assumption that we have seen the full potential of mobile payment systems. It’s a ridiculous assumption because we are far too early in the shake-out process to have seen all that there is to offer.
Just yesterday, International Business Times reported that Apple will sign deals with leading payment networks, banks, and retailers to help turn its next iPhone – the iPhone 6 – into a digital wallet. The report mentions ongoing rumors that the iPhone will feature a mobile payment system that utilizes Near Field Communications, or NFC.
Bloomberg reported that the new iPhone will make mobile payments easier by including a near-field communication chip for the first time, as well as Touch ID, a fingerprint recognition reader that debuted on the most recent iPhone, that will allow consumers to securely pay for items in a store with the touch of a finger.
Apple is expected to unveil its new mobile payment system on September 9 and is said to be penning agreements with major payment networks, banks, and retailers, including VISA, MasterCard and American Express.
My take: We need more rigorous thinking and discussion about mobile payments systems if we are going to do justice to the subject and explore the true disruptive potential involved for credit unions.
Technology evolves rapidly, and utilization moves from the early adopter stage to the tipping point in a nanosecond when the right technology emerges—the one that has the right mix of benefits for everyone involved in the payment process.
It’s too easy to explain away the lack of faster adoption rates when the systems currently being used are still very tied to traditional structures and processes (and thinking). The disruption will achieve its potential only when the implicit barriers that are in place are removed via some new technology or new approach.
If the financial services industry is serious about playing in this new game, then its leaders need to think differently about how mobile payment systems (and just about everything else they do) can be done differently and better, instead of implicitly trying to argue that the status quo will remain and that only certain segments of the population are even interested in new approaches.
The fact (OK, it’s pretty much my opinion, but I know others share it) is that consumers want one thing more than any other and it is the same for every business on the planet—they want things that make their lives easier and less complex. They want things that reduce the amount of effort required on their behalf, and they want it yesterday (Yeah, I know that’s three things…but they are inherently related, if not redundant).
With regard to mobile payment systems, when we figure out how to remove the obstacles that make it cumbersome—like opening an app or typing in a passcode or having to use different approaches with different businesses—the floodgates to adoption will open and the disruption won’t start… it will have already occurred.
Action Advice: We can’t say what will or won’t happen with regard to the future of payment systems, because implementation efforts to date have not been stellar, and financial institutions are still involved in the back end. Since payment processing is a primary revenue source for a lot of credit unions, as you work through your strategic planning process and look to the future, you need to be having serious conversations about alternative revenue streams. What will happen when the game changes in mobile payment systems and financial institutions are removed from the equation?