In the 1970s a local bank president told my father, “One day we won’t need bank tellers. Everyone will just be able to put their money into a machine.” At the time, my dad thought this man was crazy, that there were too many complications, software errors and security concerns that would need to be overcome in order to make something like that possible and even then who would trust it? Maybe the banker had been reading too much science fiction but sure enough Automated Teller Machines began creeping up. In no time, society has come to depend on them.
These days, people have the same reaction that my father did about ATMs when the topic of mobile payments is brought up. Even my fiancé said, “It seems like a great idea but I don’t know if it will ever happen.” What he doesn’t know is that it’s already happening. In Europe, checking out electronically in shops is common among consumers but mobile payment processing in American brick and mortar stores is still in its infancy although it’s growing up fast. Mobile carriers, banks, consumers and merchants are all anxious to see what comes next.
Hany Fam, president of strategic partnerships for Europe at MasterCard Inc. told Bloomberg TV, “I think it’s fair to say by next year we’ll see well over 50% of consumers with phones enabling themselves and availing themselves with technologies that are going to allow them to change the way they not only pay for things but the way that they shop for things, the way they research products and the way they ultimately interact with retailers really in an omni-channel sort of environment.”
50% of retailers told MasterCard that mobile payments are the single biggest investment they were making going into 2013. Business markets like apparel, automotive, beauty, book stores, convenience stores, dry cleaners, laundry services, fast food restaurants, gift shops, hobbies, jewelers, grocery stores/supermarkets, health stores, movie theaters, music stores, newsstands, office supplies, pet stores, pharmacies, restaurants/bars, retail, gas/service stations, specialty food & spirits, DVD rental kiosks, what’s left of the video stores and even vending machines have sought out mobile payment processing and MasterCard has responded. By developing PayPass, MasterCard offers a credit card that “lets you make everyday purchases without having to swipe the magnetic strip on your MasterCard card or provide your signature.” Taking their “Tap & Go” technology a step further, MasterCard is mobile and investing in smart phone apps.
Credit card and bank based mobile processing is just one way mobile banking could go. Other mobile payment options allow businesses to bypass credit card companies and their fees. According to the Wall Street Journal, these alternatives may charge far less than traditional providers of transaction processing to small businesses. Companies currently leading the way in accessible mobile wallet technology include:
- Google Wallet
- Isis
- Intuit
- Pay Pal
- Square
Big businesses have high stakes in mobile payment processing as well. Over a dozen large merchants including Wal-Mart Stores Inc, Target Corp and Japan's 7-Eleven announced that they are developing their own mobile payment network called Merchant Customer Exchange. According to Terry Scully, Target's president of financial and retail services, the group of retailers who account for about $1 trillion in annual sales, wants to make sure it has a say in the development of standards for mobile payments. Scully explains, "What we are looking for is a broad, seamless experience across all retail formats."
Changing the concept of traditional payment methods isn’t just about speeding up the checkout process or freeing up more floor space by eliminating registers. One touch payments and merging technology allow consumers to decide what is important to them and how to interact with retailers. It is enabling a different type of in-store experience and retailers realize if set up correctly they can cash in. By collecting data on how consumers are searching, shopping, and comparing products as well as monitoring the discussion about them in social forums they can tailor their marketing and streamline a more effective approach towards their audience.
Autonomized information can be as valuable as the payments processed so why leave that low-hanging fruit to the mobile carriers and banking institutions when companies can collect it themselves with Smartphone apps. A payments expert at consulting firm Aite Group, Rick Oglesby said, "These big retailers are doing this because they are not happy with the solutions being pushed on them by the market."
Mark Belford, managing director and co-head of the consumer and retail investment banking group of Janney Montgomery Scott LLC, explained at the Reuters Retail and Consumer Summit in New York, "Everyone's trying to find the right way to make (mobile payments) easy and no one's found it yet. No one has the secret sauce."
It’s only a matter of time before someone stumbles across that special recipe. A report from Juniper Research reveals that mobile payments are expected to rise to greater than $1.3 trillion annually by 2017, four times more than are processed now. Pretty soon those science-fiction-like financial fantasies will become commonplace and the world will wonder what it did before mobile payments became a way of life in the 21st century.
Image courtesy of chawalitpix at FreeDigitalPhotos.
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