Canadians are tired of totting around their wallets and credit cards, according to the findings of a recent study commissioned by PayPal Canada and conducted by Nielsen. The convenience of paying digitally means that 29% of respondents had already used their mobile phone to make an online purchase, while 23% had used it to pay in-store. But these early-adopters are being forced to choose among a confusing profusion of services and payment systems.
Two providers control more than three-quarters of the credit card market, but there’s no equivalent to the Visa-MasterCard duopoly in the emerging mobile payments sector. Banks, handset manufacturers, telecom companies and retailer consortiums are all vying for a piece of the market. And feuds are breaking out among the competing services and technologies—Merchant Customer Exchange, a group backed by major retailers like Wal-Mart and Best Buy, recently banned members from accepting alternatives like Apple Pay.
Consumers who want to leave their wallets at home are not going to tolerate this chaotic payment ecosystem for long, warns Canadian futurist and Retail Prophet founder Doug Stephens. “They want convenience, something that is universally accepted at as many locations as they can possibly use it at, and I think that’s part of the moon race in the mobile payments world,” he says. “Companies are trying to quickly bring as many retailers onside as they possibly can.
“Ultimately the consumer won’t need 15 different apps on their phone to pay in various places, but they’ll have one universal payment platform that they can use be it to make an online purchase when they’re sitting in a coffee shop or to make a physical purchase when they’re visiting a store.” Stephens discussed the future of payment systems and wearable technology.
Canadian Business: Does the launch of Apple Pay mean mobile payments are here to stay?
Doug Stephens: When Apple finally makes a decision to get into something, you can sort of accept that it’s mainstreaming. They have a history of sitting on the sidelines and very carefully and cautiously watching what’s going on, and when they see an opportune time to move into a market, they do. Of course mobile payment has been around for a long time. The fact that Apple is getting into it means we have reached an inflection point where consumer demand is now at a point where Apple feels this is a market they need to take advantage of if they can.
The mobile device has very quickly become the centre of our consumer universes. How many times now when you’re out and on-the-go are you referring to your device, either for a local retailer or for reviews on a product or restaurant or hotel? Payment is just one component of a much larger suite of things that the consumer is looking for in terms of convenience. They want the convenience of being able to track their spending, to keep track of all of their payment methods in one place. They would love to be able to put loyalty cards, coupons and offers all under one roof, and have all of that at their disposal when they need it. Payment is just a logical extension of our growing dependence on our mobile devices. Something like 70% won’t leave the house without their mobile device.
Is there one technology or interface that will become dominant?
Right now we’re in the middle of a tumultuous market. Everyone wants a piece of it, not only for the transaction values, but also for the connection to the consumer and the data stream that all these consumers and all this purchasing throws off, and then the consequent marketing and advertising revenue that could be attached to that.
Where it all shakes out comes back to fundamentals. Think about using your credit cards: imagine if you needed to have 13 credit cards in your wallet because you could only use certain cards at certain places. How did VISA, MasterCard and American Express attain the market share they did? Part of it was developing trust—in the universe of credit cards that were out there, these three companies attained a level of trust in the marketplace. Consumers were able to use those cards at many locations around the world for a variety of different things so there was ease and frictionless use. Ultimately they arrived at a system that was comfortable for users to operate within. The same thing is going to play out in mobile payment.
The companies that are dominant in the marketplace are going to be those whose products achieve a high level of trust, are ubiquitous in the sense that they can be used online and at thousands of different retail locations, and are easy to use.
Where do wearables fit into this mobile payment world?
Wearables are interesting because if you look at the history of digital technology, devices are getting smaller and closer to our bodies all the time. Originally you had the mainframe computer that sat in a separate room and then that became the networked enterprise-level computers that sat on our desks. Then it was the home computer that sat in our house somewhere. Ultimately it became the laptop, which became the tablet or mobile device. Wearables seem to be a very logical extension of that.
Sergey Brin of Google said that as human beings we want to live our lives in a heads-up fashion. We don’t want to be walking into lampposts or getting hit by cars as we check our email or take a photo. It may be an uncomfortable shift at first, but I think wearables is the logical extension of where technology is going. The study PayPal did with Nielsen, 18% of consumers said they would, if given the opportunity, have a small chip implanted in their finger that they could use for payments. There’s an acceptance level out there on the part of consumers. In fact consumers might be more daring and more future forward-thinking than the retailers that are serving them.