The Problem
Many players have their fingers on some aspect of the mobile payments experience. Handset manufacturers, operating system providers, app developers, mobile network operators, payment providers, government regulators, and maybe even your Uncle Charlie are all doing something that will affect the experience. Maybe it will all work itself out as the market disciplines players who deviate from what’s necessary to achieve the best solution. Or maybe there’s just too much money at stake for these companies to play nicely.
The Question
How can the global payments industry converge most quickly to the mobile payments solution that delights the consumer?
Background
Lots of players have been trying to find common ground and to work together for some time. Banks and mobile operators and networks have over more than a decade started and scrapped numerous more joint ventures. The most successful mobile payments apps in the US are bypassing the dependencies on other players to just get something in the market—they’ve gone with simple apps using QR code authentication. They’ve done well with early adopters but it isn’t clear that they can scale to the greater population using this approach.
This is a problem that requires great creativity but also one that requires an open mind. Here are some provocations to stimulate thinking.
Maybe this bubble up approach is the best we can do and we should just try to promote more of it. Then the other players will have to bend to the solution that consumers seem to like the best.
Perhaps there needs to be a standard setting body that agrees on core principles for designing mobile payments but leaves plenty of room for innovation.
Maybe a bakeoff of the alternative technologies for mobile acceptances could narrow the choices of get people to agree with bakeoff judged by consumer and merchant representatives.
None of these are particularly great ideas. That’s why this one is a very tough problem.
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The Solutions
Team 5A
Team 5A believes that we should create a foundation for consumer friendly applications that include contemporary payment capability that gives consumer the trust and flexibility to pay how they want. To do this, we must have a body of standardization for transactions allowing services to focus on services using existing open-loop networks.
They propose the following guidelines for digital purses:
- Payment types of include all payment types, (ach, check, cards, gift, pre-paid, etc.)
- Risk management: (a) Risk and security needs based on payment modality; and (b) Risk and security constraints bad on transaction size
- Operating guidelines for ecosystem players.
- Standardize the capture and delivery of data to leverage of added services – loyalty, coupon, and location services. Include consumer opt-out/in.
- Standardized data elements.
- Regulations of government and currency functions.
- Security protocols including hardware functions and software encryption.
Team 5B
To make it simple for consumers and adaptable by the industry, Team 5B has created a “Marketing and Payment Facilitator Platform” that includes a mobile wallet system that consumers can use at any merchant location (without change of POS) and at website; apps for remote checkout; with the ability to load any payment type; and with the ability to enable other marketing and loyalty platforms to be delivered to the consumers on their wallet apps; and which would allow consumers to opt in to merchants promotions in a secure way.
Consumers should be able to choose their tender type of choice, which can be motivated at the time of transaction by merchants or issuers. The platform should combine transaction flow of payment, loyalty and incentives together in a simplified process, one action preferably. The platform must also be secure and not be usable if lost or stolen. And it must be easy to manage expenses, and receipts, i.e. export to personal finance software, Quicken, Expensify, etc.
The platform would:
- Allow merchants to easily implement promotion programs of their choice to these consumers with wallets, provide easy analytics to help them find and keep their customers better, minimize their cost of transactions and implementation.
- Allow Acquirers to easily get merchants to signup and utilize the system, with margins for the sales force and easy tracking and reporting of commissions/residuals.
- Allow Issuers to access and promote their brands and cards to the mobile wallet and their cardholders, and help Issuers manage credit and fraud risks.
Team 5C
Team 5C proposed ME3 embrace, empower and extend mobile solutions! In mobile payments to date, point solutions solve a single problem beautifully and are the best examples of customer delight. Uber summons a taxi and seemingly eliminates the transaction. TabbedOut replaces the awkward three-step dining dance of summoning the check, providing a card, writing out the tip with a couple clicks and a graceful departure. Starbucks’ app is faster than mag stripe, plus rewards customers for use. MLB’s app makes sure you don’t forget your tickets on game day. In each case, the experience of making the payment is tightly coupled with the consumer’s goals, context and behavior. The app developers use an intimate understanding of their customer to create delightful and enchanting apps.
Team 5C wants to accelerate this trend. We can solve the fundamental problems of the point solution, namely managing multiple stores of payment credentials, difficulty finding apps, painful app setup, picking the right app in context. Their solution is an industry standard solution to do these things on behalf of point solution developers. Think of it like Passbook meets Facebook Connect meets Stripe, a thin layer providing simple APIs to let point solutions access payment credentials.
Here is what the thin layer isn’t:
- An attempt to wrest strategic control of data or customers from established players
- A vehicle to capture or monetize consumer data
- A play to increase or capture interchange
- A marketing vehicle for offers
Here is what the thin layer is:
- Enablement technology to let a thousand apps bloom
- A viral technology to simplify consumer experiences and capture consumer preferences
- A cooperative industry effort with an Open Source approaches to IP
Readings
Hayashi, “Mobile Payments: What’s In It for Consumers,” Kansas City Fed, 2012.
Helgeson, “Mobile Payments: What’s No Go and What’s Go Go Go in 2013”, Forbes 1/18/2013
PYMNTS.com eBook on Mobile Commerce
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