Forecasting the payments industry's future was the agenda at the Electronic Transactions Association's Silicon Valley Day held at the Commonwealth Club of California in San Francisco Nov. 15, 2012. The event brought together representatives of new, high-tech payment companies and executives from traditional payment businesses. Among the notable predictions voiced at the meeting were the following:
ETA Chief Executive Officer Jason Oxman opened the day by welcoming new members of the payments community to the ETA-sponsored event. He proclaimed this moment "a defining time" in the payments industry. "I see the industry embarking on innovation like few in history have ever done," he said. "This industry recognizes that any technology that makes the use of credit cards better for the consumer is a good thing."
"Our common enemy is cash," he remarked. "Only 8 percent of merchants have employed mobile solutions. There is a lot of room for growth and it will happen rapidly." Oxman expects the mag stripe card will continue to be used in the United States even as contactless cards and wallets make them obsolete. "Mag stripe 10 years from now will be around, but it will look like 1950's technology looks to us today," he said.
Oxman said the ETA's Mobile Payments Committee is working to smooth the transition to mobile payments by helping the industry to achieve interoperability, create best practices, and educate legislators and regulators to insure the industry "is not stifled by nascent regulation." He also said the ETA will work with card companies to remove issues for processors and acquirers prior to their 2013 EMV compliance deadline.
Allen Weinberg of the payment consulting firm Glenbrook Partners LLC said innovation in payments has shifted from card company promotions to merchant-centric offerings.
He noted that payment technology companies must have the support of merchants and member service providers to succeed. He added that the current payment technology landscape is chaotic, and the industry is becoming increasingly fragmented as a result.
"Revenues aren't in clearing and settlement anymore," he said. "We are in a more fragmented, more specialized industry now." He noted that fragmentation in the industry is creating the "golden age of payments" or "certainly" the golden age of payment consulting. And he advised payment professionals to "ask not what mobile payments are; ask how payments fit into the mobile world."
Weinberg predicted it will be 2015 before a winner emerges from the wallet wars where combatants in the fight for consumer adoption of mobile wallets include such well-financed initiatives as JVL Ventures LLC's Isis, Google Inc.'s mobile wallet, PayPal Inc.'s offering and Visa Inc.'s V.me initiative, among others.
He called the Merchant Customer Exchange, the mobile payment platform launched by "an impressive list" of national retailers, "beyond fascinating" as an attempt by the retailers to gain control of customer data.
"The revenue in mobile is not in transactions," he stated, adding that in the future acquirers will focus more on merchant-specific payment applications as a primary revenue stream. "Merchants want to control the user experience," he said.
Weinberg believes the tipping point for adoption of mobile payments will arrive with the introduction of a cloud-based system from new companies with technology that will allow customers to simply plug into the payments grid. But that time is not here yet. "Consumer expectations are way beyond what we can deliver," he said.
Phil Kumnick, Visa's Head of Global Acquirer Processing, said his company wants to actively help acquirers create more transactions, but he thinks the rails transactions run on today are not the rails of the future. He added that simplicity will be critical to consumer adoption. "Consumer behavior will trump the next best gadget," he said.
Kumnick said new companies that are neither encumbered with legacy systems nor protective of legacy revenues are the most disruptive to competitors in the industry.
He also doesn't expect the introduction of EMV to change merchant ideas about payments because the solution is so narrowly focused on security. He predicted the tipping point for mobile payment adoption will be when Apple Inc. enters the payments market.
Gene Alston, Vice President and General Manager of Groupon Inc. Mobile, said his company's mission is to build a local commerce operating system. "Savvy shoppers get connected to local merchants on our platform, and that's our goal," he said, adding that he believes POS systems are the "heartbeat of the local merchant."
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