I still remember being amazed at an Apple store where the point of sale (POS) came to me, the consumer, for payment rather than standing in a queue to complete my purchase. Later, on a business trip in Atlanta a couple of years ago, I found myself paying a taxi driver by swiping my card on his iPhone (he was using a Square dongle). In the past 12 – 18 months, both these experiences have become the accepted norm. An increasing number of retailers are embracing the Apple model for credit card transactions. Square on the other hand are seeing competition from the likes of PayPal; and now payment dongles are being used as mobile POS by everybody from large retailers to coffee shops and small merchants and every day service providers like barbers, electricians, and plumbers.
The future of payment is mobile
It’s just a matter of time before mobile payment gains traction with all brick and mortar stores; and mobile payment options see mainstream adoption. This adoption will be driven by demand from the consumers. I believe the horizon is the next 12 months. According to Statista (see graph below), mobile payments will almost double to ₹47,387.73 B by 2017.
What we will see is a move from Bluetooth or NFC based payment terminals accepting smartphone wallets to a myriad of devices being able to perform the payment function. Wearable devices, connected devices with microchips will become the new norm for payment devices. The industry and consumer are both convinced about mitigating security risks by using PINs, biometrics and facial recognition as authentication methods for payment. Reaching for your wallet – no longer required!
New e-commerce enabled payment channels with digital wallets, peer-to-peer transfers and new age currencies like Bitcoin. However, it is the contact-less payments in physical stores that will increase the adoption of new technologies and payment methods. With all the major mobile operating systems and smartphone devices equipped with Near Field Communications (NFC), more and more customers are tapping their phones to pay at the cash register for now, and at the aisles in future – instant gratification!
More than just payments
The move towards mobility is not just seen in payment transactions. It is the ecosystem which is being transformed by the growth in mobile transactions.
An industry traditionally served by banks with local, national and international presence is now creating new financial institutions. Mobile operators, Retailers, software developers and mobile app developers are all part of this new financial market. We have seen FDIC insured virtual banks providing internet only banking and operating with no branches. But now, we are seeing a whole new way of banking – using nothing else but your smartphone.
Moven, a mobile-only bank provides FDIC insured accounts and passes on some of the operational savings (through branchless operations) to their customers. Moven customers can use 40,000+ ATMs across the US with no fees.
It is understandable that even with this growth, people are not ready to leave their wallets at home. There are new disruptive players who are introducing more ways to reduce the size of your wallet.
Most recently Coin and Plastc have come up with innovative products which clone multiple credit cards into one piece of smart card hardware – it looks like a card – can be used in an ATM machine and traditional POS terminals. Great innovation! However, to the technophobe, it is yet another ‘device’ to charge.
Closer to a cashless society
I’ll stay away from the debate of the merits and de-merits of a cashless society, but it is clear it has massive, even life changing, social implications. However, the fact of the matter is that we are moving ever closer to one.
Banking and payment methods around are different around the world with varying levels of maturity and acceptance for new technology. While Europe is more advanced in contactless payments, Asia and Africa have more mobile payment transactions. However, the trend globally is driven by consumer behavior and as smartphone penetration grows exponentially, consumers will move towards speed and convenience of a transaction.
Although no single method of payment will solve all security, simplicity and dependability concerns, the evidence of dynamic and drastic change is abundant for the financial services industry. It remains to be seen what percentage will be a cashless society in coming years. For now, it is the mobile payment industry which is moving the needle of disruption.
