Experts Debate EMV and mPayments Mojo

I had the chance to moderate an awesome panel of mobile payments “playmakers” on Wednesday at TAG FinTECH’s August meeting in Atlanta. The topic, “Mobile Payments – Tipping or Slipping”, was about as hot as the temperature outside! And, since it was the day after Visa’s EMV announcement, we had plenty of new stuff to talk about. We filled the auditorium and had a pretty riveting discussion. Without attribution to any one panel person (with one exception as noted), I thought I’d let you in on a few of the more “controversial” topics of conversation.

We started things off with a framework that I’ve been noodling on how to characterize mobile payments. It is a phrase that means many things to many people, so I wanted to put the right context around the discussion and did not want to limit the discussion to simply using the phone as a form factor at a physical point of sale. That framework goes something like this…

Mobile as a device, when applied to payments, can be characterized in four ways :

It is a channel extender. In its most basic sense, it is a mini-computer that provides access to the Internet and enables shopping online just like it would if you were on a laptop. It’s how a lot of mobile payments take place today.

It is a channel replacer. This is the scenario in which mobile phones become physical acceptance devices, replacing traditional POS terminals à la what Apple is doing with Zipcheck. Or it’s simply moving paper online, like what Square and GoPayment are doing by turning phones into acceptance devices. It’s also what new players, like AisleBuyer, are doing to allow checkout via the mobile anywhere in the physical store with its line-busting application. (Related: Innovation at the Point of Transaction)

It is a channel enhancer. This is where I would lump scenarios in which the mobile enhances the experience for merchants and consumers at any point of sale. Examples would be what Starbucks is doing with mobile bar codes, what Foursquare is doing serving offers to drive traffic to local merchants and linking payment to those opportunities and what Google Wallet and ISIS are doing with NFC-enabled wallets. (Related: Starbucks Exec on Why Mobile Payments Must Start with the Consumer)

It is a channel disruptor. This is the notion that applications delivered via the mobile create a disruptive environment for existing channels – like what Amazon is doing with Price Check that enables price checking in-store and then purchase online.

This framework is still a work in process. Yet it was motivated by the desire to take the focus off of the phone as a device and place it in the role that it plays in driving opportunity and disruption into the channels in which commerce takes place today. Stay tuned as this gets tweaked.

OK, so now back to the panel discussion. Here are a few of the more interesting takeaways with my two cents inserted in italics.

Mobile as secure payments device. This was actually two conversations in one: privacy and security, which in some way, is two sides of the same coin. On the privacy issue, the consensus is that it is an opt-in world baby – where the constant bombardment of the wrong offers at the wrong time to the wrong people (e.g., free manicures to men who happen to walk by nail salons) will force an environment where consumers don’t just opt in. Instead, they opt out advertisers that they don’t want to hear from. On the security issue, the broad consensus is that the mobile security isn’t about security at all but rather the consumer perception over security, and the consumer confusion over who to call if a phone is lost or stolen. Bottom line, there needs to be a giant educational campaign to get people comfortable with the notion that mobile payments is not just as secure but more so.

My two cents: Totally agree on the education front – just like consumers needed to be educated on how safe it was to use their cards online. It will require changes, too. These might include password-enabling the phone, which most people probably don’t do today. Another difference might also be the extent to which mobile wallets really do become physical wallet replacements and include debit and/or stored-value cards. Then, the issue of security feels more real, since the losses can be (in the case of stored-value cards at least) really tangible. On the opt-in/privacy part, I agree in principle, but think that it depends on who you are. There are an awful lot of younger people who are much more open to sharing and receiving offer, because they know that they can set their preferences and change them at the drop of a hat. It is knowing that they can opt out that they don’t as a matter of general principle.

Visa’s EMV announcement. I would say that most people were sort of giddy over this one, seeing it as a very good way to advance both mCommerce via contactless and addressing security and fraud issues related to the use of mag stripe cards, not to mention addressing the issue of bringing international parity to the card world. The news was still fresh, so people were still digesting it. But the general consensus was that it was the news the ecosystem needed to break the impasse associated with decisions about terminalization and technology standards and that could accelerate the march toward NFC. Open questions related to the extent to which other networks would follow suit.

My two cents. I agree – exciting and interesting news. Big questions for me also revolve around the real impact of this decision to the merchant if the other networks don’t follow through (the PCI compliance savings is only valid if all networks embrace, otherwise merchants still have to prove compliance).It’s also how the issuers feel about having to issue zillions of new (and more expensive cards) to everyone, not just the peeps who travel internationally (a very small segment). Getting that news on the heels of the stock market drubbing may not have made their day.

Mobile value proposition. This was (and always is) an interesting discussion. Mobile payments won’t ignite unless it can deliver a value proposition that is better than what exists today in the good old fashioned mag stripe world. NFC is viewed as the horse that most are betting on to win the race, because it offers consumers and merchants a lot of flexibility to aggregate payment types and offers a simple consumer experience – but it will take time.

My two cents: The latter – it will take time piece. This is why I am still wondering about NFC as the horse to bet all of what’s left in your bank accounts on. Starbucks is a great example of merchant, and 4 million consumers feeling the mobile payments love, and that experience is via bar code. It is simple for both consumers and merchants to use and is reliable. And what is even more interesting is that it has been so widely adopted, even though it can’t be used anywhere but Starbucks. A year ago this time, no one ever thought about mobile payments and bar codes, but here we are 4+ million customers later. Four years, which is now Gartner’s view of the time line for NFC adoption, is a very long window for something that we haven’t thought about yet to develop and get traction.

Small Business Mobile Payments. This was motivated by a discussion of Square and the love/hate relationship that the sector has with it. All view this as a huge area of opportunity for the sector for all of the obvious reasons. But believe that Square is unsustainable unless it addresses its risk management issues. Solutions that have some way to not just manage risk but verify that merchants are legit and not engaged in nefarious activities are the long-term winners. This is an area at which Home Depot is looking seriously, because one of their problem areas is collecting from customers who use Home Depot subcontractors to do home improvement work.

My two cents: Square solved a real problem for a segment of the micro merchant population that simply did not have any other way to get paid reliably and helped to catalyze the small business mobile acceptance payments market at a point in time where there were a lot of micro merchants starting new businesses (aka the financial crisis). The more interesting aspect of Square, I think, is their ambition to go beyond being a small business acceptance solution to being THE business acceptance solution. Whether that is real or PR bluster, they have some pretty sophisticated strategic and financial partners (e.g., Chase and Visa), who are probably as interested as anyone in getting the Square risk management house in order.

Winners and Losers. It is way too early to declare any winner, but there were plenty of opinions about who might end up in the losing column. On that score, well, bad news for the carriers here. Not a lot of warm and fuzzies anywhere in the room with respect to carriers as a result of the lack of a business model, and more fundamentally, a lack of value that they bring to the mobile payments environment. Bank issuers was another category that was viewed as mixed. It is clear that issuers’ cards will go in mobile wallets, but the extent to which bank’s brand is visible or the extent to which banks drive that is unclear. Google is viewed as big player with a lot of potential, but not exactly a case study in how to launch a successful payments network given their experience with Google Checkout. The player to watch? PayPal. And, the emerging player to watch? Tabbedout. The prevailing wisdom is that cardless in the restaurant sector is a killer app that someone will solve and just kill the market with.

My two cents: Yep, PayPal is the one to watch. Of the two things that you need for mobile payments – acceptance and account holders on the mobile phone, they have 100 million of the latter. Getting acceptance is not easy, but it’s perhaps easier than having the risk associated with the stutter step of getting people to “fill a wallet” for the first time.

We went for 90 minutes and probably could have talked for an hour more. I’d love to get your views on what we discussed, and of course, my two cents, too.

Karen Webster is the President of Market Platform Dynamics (MPD), a consulting firm that helps companies find, implement and monetize innovation. She serves as an advisor and member of the board for a number of companies operating in the payment, technology and digital media industries. More info here.


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