Archives for August 2012
Gareth Lodge and Zil Bareisis both blogged on the difficulties mobile payments have had at the London Summer Games over the past few weeks. I have nothing to directly add by way of personal observation, since I’ve been stuck in Atlanta the past few weeks.Gareth’s citing the widespread use of cash despite Visa’s expensive promotion of mobile NFC payments caught my notice. Payment choice at point of sale is a consumer choice, of course, so long as the merchant accepts the payment of choice. Much has been written about consumer adoption of NFC (or not). But what of merchants. What do they wish for? We know the Starbucks story and that now, Dunkin’ Donuts has launched its own mobile payment application. To that I say big deal. Even Waffle House has its own app, but it doesn’t do payments. But what about small businesses – all several million of them? Will they all want their own app too (and will you want them on your phone)? I digress. Having nothing to do with the Olympics, Celent surveyed 500 small business owners of multiple varieties this summer to explore attitudes on invoicing, payments and the like. We found that checks were the most widely accepted payment method, closely followed by cash. True, a significant number of the businesses surveyed were B2B businesses, but c’mon! Barely a third accepted credit cards. What gives?
The survey went on to ask, “If you could be paid the same way each time by every customer –how would you choose to be paid?” Here we go again… checks and cash – dramatically more preferred than the next closest payment type (ACH) by a factor of three!
Why the devotion to antiquated payment methods? In the case of cash (in order of incidence): 1. Less chance of bad funds 2. Less expensive (no interchange) 3. Immediate funds availability In the case of checks, it’s all about the lack of transaction fees, since the chance of bad funds is a real and present danger with checks unless one spends for guarantee services. Sure, there are use cases where Square may be awesome for example, but to the significant majority of U.S. small businesses, neither technology nor electronic payments is all that interesting to them. This seems particularly true among older demographics. For example, in the same survey, only 15% of business owners/managers 65 and older thought tablets were “somewhat or very important to running their business”. In contrast, 45% of owners/managers 40 and younger felt that way. So, while it often appears that we are on a fast-track to mobile payments ubiquity, at least among the millions of small businesses that aren’t yet convinced, it may in fact be a long and winding road. Don’t throw away your leather wallets just yet.
10.23.12: Celent Banking Webinar: What App Doc?: An Evaluation of Mobile Banking at the Top US Banks
- Bank of America
- Capital One
- Fifth Third
- HSBC US
- TD Bank
- US Bank
- Wells Fargo
- Consumers, Google and payment networks, especially MasterCard, are likely to emerge as the winners here. Consumers are now in control and can register and manage their cards directly with Google, independent of their banks. They will have to learn to trust Google, which has some work to do to re-establish its image after the initial security concerns. However, as and when consumers come on board, this will be good news for Google and its card partners.
- While Google continues to stick with NFC for the “last mile” technology, MNOs will continue to have a say in this game. However, this set up now lays the ground for Google to potentially decide to bypass the secure element, and the MNOs, in the future altogether.
- The impact on banks is likely to be mixed. Most banks didn’t want to play with Google when it was offering the opportunity to digitalise their payments credentials directly and remain in control of the payments portion of the transaction. Now, while the bank cards will continue to be part of the transcation, they are clearly taking the back seat and will have to deal with Google as a “merchant of record” for their transactions. True, they won’t have to incur the extra costs of provisioning their card credentials on to secure element, but that would also rule them out from participating in other NFC ventures, such as Isis.
- The biggest unknown is the impact on merchants. And that’s because the transaction economics are no longer obvious for Google Wallet and is a question I am most keen to find out more about. In the initial set-up Google was clear that they would not take a cut on the payment transaction and the merchant would have paid a standard fee depending on the card used. Now, from the merchant point of view, they are accepting a prepaid MasterCard, while it might an Amex card that actually funds the transaction. PayPal deals with it by having direct acquiring relationships with its merchants and offering them a discount rate which represents an expected blend of funding transactions. Does it also mean that Google Wallet will have to establish relationships with the acquirers to re-coup from merchants any potential differences in transaction costs? Or will it have to charge the end user for “loading” their wallet, something that other prepaid card providers do for card-based re-load transactions?