Cardless ATMs and disappointing mobile wallet adoption

While I’m an outspoken advocate of financial services technology, I have been a bit of a curmudgeon when it comes to mobile wallets. My skeptical attitude reached an apex when I dropped my smartphone in a glass of merlot several years ago and hasn’t recovered. Had my smartphone been my mobile wallet, embarrassment would have been the least of my problems. Said simply, I just don’t see a compelling use-case for most consumers. Until they arise, I expect industry press to continue to publish stories of lackluster adoption. There have been many. One in particular caught my eye. A recent article in Digital Transactions makes my point in its opening statement, “The introduction of cardless ATMs, which rely on a financial institution’s mobile wallet instead of a debit card to make an ATM withdrawal, could help further the adoption of mobile wallets and mobile payments.” Said another way, if the industry offers consumers enough reasons to configure and use a mobile wallet, adoption may eventually result. This doesn’t sound remotely compelling to me. I can hear the rebuttals now. In defense of Bank of America, BMO Harris, Chase, Peoples Bank and other institutions that have invested in cardless ATM access, physical debit card usage at the ATM could pose an annoyance to mobile wallet adopters, few that they are. With ATM usage roughly twice the customer penetration of mobile banking (below), the last thing banks need is a reason for customers to be dissatisfied with their ATM experience. In my opinion, that’s a more compelling rational for investment than some vein attempt to bolster mobile wallet adoption.

US P12M Channel Usage 2014Source: Consumers and Mobile Financial Services 2015, U.S. Federal Reserve, March 2015

In the article, one banker summed up the challenge associated with mobile cash access this way: “We found the biggest struggle is explaining what it is and the benefit it offers.” If the biggest struggle is communicating a compelling value proposition, then maybe the value proposition isn’t compelling. I don’t think it is – at least not yet. Please don’t misunderstand, I think cardless cash ATM access is a reasonable initiative, but not for the reason stated in the article. I applaud efforts to better integrate retail delivery channels, and ATM cash access is a baby step in that direction. Combine cardless ATM access with other capabilities such as broader P2P payment mechanisms, geo-location and a merchant-funded rewards program, and mobile wallets begin to look compelling. Until then, banks have a bevy of higher priority initiatives to deliver in my opinion. But, even if my bank enabled cardless cash access, I still wouldn’t abandon my physical wallet. In the event of another tragic merlot mishap, traditional ATM cash access might be a real life-saver.

The Painfully Long Path to Electronic Payments Nirvana

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? smb-payments-acceptance-june-12

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.

Never Ending Excitement in Digital Payments

It’s official – I can’t go on holiday anymore. Or at least, not if I want to keep up with all the interesting developments in digital payments. Vacation and business travel conspired to keep me out of the office for nearly 3 weeks and in that time, there were important announcements from Apple, Microsoft and Facebook. And that’s just the highlights – there plenty more. No, don’t worry, I am not under any illussions of grandeur that good folks at Apple or Microsoft are checking my holiday schedule to time their announcements. But it does highlight the incredible “blink and you’ll miss it” pace of developments in payments. Having kept everyone on their toes about their plans in payments, Apple has recently announced a Passbook app. While the idea at the moment is to store various “passes”, such as boarding passes, store cards, and movie tickets in one place, I do agree with others who view it as the first step towards the development of a full-scale mobile wallet. It is perhaps telling that one of the early examples of “passes” is a payments app – a Starbucks card which automatically appears on the phone screen when the customer walks into a store. For now, such a use of geolocation technology to automatically display passes is perhaps the most interesting aspect of the app. It remains to be seen what Apple does in payments more broadly. I and many others have long noted the potential for iTunes to become a payments wallet given the ever growing number of cards registered there (400 million seems to be the latest number.) However, despite multiple patents around NFC technology, Apple continues to be silent on its plans (or lack of) around NFC. One of the companies annoucing recently that it would be embracing NFC was Microsoft. At an event about its upcoming Windows Phone 8 mobile operating system, Microsoft said that it would be supporting NFC with a SIM card-based secure element. It will also include a new wallet app that will store credit and debit cards as well as loyalty and membership cards. As somebody said on the internet, Microsoft is taking on Google and Apple, while keeping the telcos happy. Orange, which is the launch MNO partner for the Wallet, praised the SIM move and said it was “important that Microsoft has aligned with the recommendations of the telco trade body, the GSMA, on the issue.” Perhaps the most surprising recent announcement was also the one with the least fanfare. Facebook posted on its developer blog that it would be dropping its virtual currency Facebook Credits in favour of local currency pricing. The phenomenal rise of Facebook Credits in recent years made many in the industry wary of potential implications of an unregulated global currency gaining mass adoption. However, while the central bankers looking after fiat currencies might breath a sigh of relief, I don’t think the new announcement means that Facebook is giving up on its ambitions in payments. In fact, it’s likely to be the opposite – by transforming its Credits platform into a localised standard-currency payments platform Facebook is positioning itself for opportunities beyond its own ecosystem. Add Facebook Connect as a solution for the identity problem on the net into the mix, and the opportunities become really interesting. Lithuanians have a proverb, “a silent pig digs the deepest root.” The quietest of the announcements here may yet prove to have the most far reaching consequences. What do you think of all this?

Bank Mobile Wallets: NFC or Cloud?

Extensive travel tends to wreak havoc on the usual patterns and the best intentions. As a result, I haven’t yet had a chance to blog about an interesting development first announced a couple of weeks ago. FIS, a large technology and services provider, has announced a new m-payments system, developed in partnership with Paydiant, a mobile technology company. Celent clients may recall my recent report, “What’s In Your Mobile Wallet? Winning the Battle for Mobile at the Retail POS” where I described the four major domains which represent the key battlegrounds for bringing mobile payments to the physical stores in the developed markets. In that report, I suggested that banks are in danger of losing control over POS payments to cloud-based wallet providers, such as PayPal and others. I also said that NFC, despite all the concerns around infrastructure and business models, represents the best chance for banks to keep their payments credentials used at the POS in the mobile world. With the announcement from FIS, it seems that banks can take on the cloud-based wallet providers at their own game. FIS and Paydiant developed a cloud-based solution that can be integrated into the bank’s mobile app and simply requires downloadable apps for consumers and retailers. Because the app resides in the cloud, no payment credentials need to be exchanged at the POS, giving everyone an additional piece of mind and alleviating the retailers from PCI compliance requirements. In the demo showed to Celent in Boston, the POS terminal produced a QR code, which a consumer would scan with his app on a mobile phone, which then triggers the payment transaction. The QR code is only one possible communications technology – NFC could be used instead if both the terminal and the phone were NFC-capable. The payment is done via one of the payment instruments (e.g. a card) that the consumer has pre-registered with the app and the retailer already accepts. The app could also be developed by retailers rather than banks. In fact, the retailers might find the solution easier to implement than banks, as they can control the acceptance side. The banks wishing to use this solution must ensure that there are enough merchants that have downloaded the appropriate app and are willing to let customers use it. All of which points for the need to create and manage a new scheme, one that consumers recognise as they decide which app to pull up on their mobile phone at the POS. Still, I think it’s a very interesting solution and one that allows the FIs and retailers explore the opportunities around cloud-based wallets.

Winning the Battle for Mobile at the Retail Point of Sale

Over recent months, there has been a considerable increase in the buzz around mobile and electronic wallets in the developed markets. New wallets have been launched (e.g., Google Wallet, Amex Serve), with many more companies announcing intent to compete in this space (e.g., Visa, PayPal, Isis, and others). A number of industry leaders proclaimed (again) the end of physical wallets. Are all these new wallets fundamentally the same? If not, how do they differ? What challenges do they face? What does it take to replace a physical wallet? Who are most likely to emerge as leaders in this space? How will they compete? What does it mean for the payment industry incumbents? These are the questions I am exploring in my new report “What’s in Your Mobile Wallet? Winning the Battle for Mobile at the Retail POS,” published yesterday. One of the insights of the report is that retail POS is not just about NFC. And actually, despite all the challenges to implement NFC-based solutions, they might just offer the banks an opportunity to remain in control of merchant and consumer relationships. The alternative vision of commerce promoted by cloud-based mobile wallet providers, such as PayPal, is a lot less appealing to banks and other incumbents. The report defines the four major domains along which players will compete to bring mobile solutions to retail. It also describes the requirements mobile wallets should fulfill in order to succeed in the market and how specific features are likely to evolve. Finally, the report offers predictions on how the market is likely to develop and makes recommendations for financial institutions. Let me know if you agree with my conclusions.

If My Phone Was My Wallet: Reflections from NACHA Payments 2010

It’s hard to imagine a business trip without a Smartphone. This week at NACHA Payments 2010, an embarrassing event caused me to consider the practical risks of overreliance on mobile devices. Mobile payments were a hot topic in Seattle this week. Multiple sessions argued the coincidence of factors that will bring about the ascent of mobile payments in North America. Few need convincing that mobile devices are increasingly becoming the primary point of contact for a growing segment of the population. Most nod in agreement that mobile devices would be a great mechanism for P2P convenience payments for example – but wholesale replacement of plastic? Is this really a good idea? While assertions about the superior security and convenience of mobile payments abounded at the conference, I didn’t hear much discussion about a rather obvious risk. What happens if one’s phone stops working? Perhaps I’m a bit of a curmudgeon about this trend, but I’m reluctant to place even more dependence on mobile devices than we already have. Consider airline electronic check-in for example. Like many, I find it convenient to check-in from the office and print boarding passes ahead of time in return for faster navigation once at the airport. But, I’m not yet ready to trust my next business trip to an eBoarding pass for its incremental convenience. Once again, what happens if your phone stops working and the boarding gate is about to close? The first evening at Payments 2010, I was scheduled to meet a colleague at a reception event. The room was large and crowded and I was unable to find him. Sending him a quick text seemed like a reasonable next step. This posed a modest problem for me, however because I had just graciously accepted a glass of fine Washington State Merlot and there was no convenient place to set it down in order to operate my device. (My fine motor skills aren’t advanced enough to operate the HTC device without using a stylus. It therefore takes both hands for me to send a text message.) Unwilling to risk the fine wine, I simply tried to hold both the wine and my HTC for the quick text. Be forewarned – it’s not a bright idea. My device ended up in the glass and most of the merlot onto my previously white shirt. Three days later, my phone still hasn’t recovered. All this has been both an embarrassment and inconvenience. Heck, I stopped wearing watches long ago since phones keep decent time. Mine used to. But, if my phone was my wallet, I might be sleepless – and stranded in Seattle.