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Payments Technology Today |
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When I first entered the data processing industry, I feared it would be boring. The following two questions illustrate why this industry is more interesting than ever before.
The catalysts behind these questions are new payments technologies. At issue is how these technologies will impact our industry.
The PayPal Phenomenon Has anyone noticed what PayPal has done in the past 18 months? For starters, it now accounts for more than one-third of eBay’s revenue and, at current growth rates, will exceed eBay’s revenue by 2014. That would not have come about if people were using PayPal only to make purchases on eBay.
eBay CEO John Donahoe said, “Money is going digital,” in an interview with TheStreet.com. The company’s website says more than 87 million people now use PayPal to make everyday online purchases, send money to anyone with an e-mail address and accept money. Their recent iPhone application not only includes the features mentioned above; it also allows you to take a picture of a check and deposit the funds into your PayPal account. |
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Along with those features comes the announcement of PayPal’s Mobile Express Checkout. Mobile Express Checkout is a platform that will allow customers to make point-of-sale purchases using their mobile phones. Starbucks will be the first retailer to adopt the platform.
Now, let’s address the question I posed at the beginning of this article. As of this writing, PayPal does not offer a lending solution, which eliminates one area of competition. However, I think financial institutions will agree that PayPal is doing much more to influence the way consumers interact with their money.
It is not a bank, yet it is taking deposits, transferring money and establishing merchant accounts. Just as important, it is influencing consumers everywhere in a profound way. It is making people comfortable with exchanging money by non-traditional methods.
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PayPal represents many consumers’ first use of alternative payment channels. The next steps are going to be non-traditional investing and lending. |
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Fractured Payment Channels Near-field communications (NFC) will be a buzzword of 2011. In December 2010, Google CEO Eric Schmidt announced that the new Google Nexus Smartphone – a device slated to be released around the end of this year – will come with NFC capabilities. One of the primary reasons to include NFC on a smartphone is to allow the phone to communicate to payment devices that are NFC-capable (see related story, page 4). The iPhone 5 is rumored to have NFC capabilities as well.
Recently, Bloomberg Businessweek published an article online titled, “In the Works: A Google Mobile Payment Service?” The article’s sources claim Google is building a payment and advertising service that would allow consumers to purchase goods by waving their mobile phones against a register at checkout. The payment service has not been confirmed by Google, but it is something to watch for.
A mobile payment network that has been announced is Isis. Isis is a joint venture among Verizon, AT&T and T-Mobile that will focus on building a mobile payment network allowing mobile phones to make purchases at the point of sale by using smartphone and NFC technology. The transactions will be processed on the Discover Network.
In a press release, Isis CEO Michael Abbott is quoted as saying, “While mobile payments will be at the core of our offering, it is only the start. We plan to create a mobile wallet that ultimately eliminates the need for consumers to carry cash, credit and debit cards, reward cards, coupons, tickets and transit passes.”
Currently, mobile payments are a land grab. The examples above are from non-traditional payment companies that are looking to tap into the trillion-dollar payments industry. Five years ago, it would have been impossible to create a worthwhile business around a payment channel that did not involve a consumer reaching into his or her wallet for a payment card.
The important takeaway is that the introduction of new consumer technology is going to be the catalyst for change. I believe it is in financial institutions’ best interest to monitor these emerging channels, and to be proactive in making them available so that your account holders can still use their debit card, even if it never leaves their wallet. |
Derik Sutton is director of Ancillary Sales for McCoy Myers & Associates, a Computer Services, Inc. (CSI) company. McCoy Myers and CSI are data processing companies for community banks. Sutton also has responsibility within McCoy Myers & Associates for evaluating and implementing new products and services for its customer banks. He has worked for the company for 11 years. |
