Picking a Winner for Payments
By David Dorf-Oracle on Jan 22, 2013
Probably the most common question I get asked is, "which emerging payment system is best?" Its a good question, and unfortunately, my crystal ball is a bit cloudy. Remember, it took credit cards a while before they got traction. Some of the same things I hear today ("we don't need a new payment scheme," and "it compromises my privacy") I'm hearing in reference to emerging payments. And just as those complaints eventually quieted, the same thing will happen and people will adopt new ways of paying. One thing I can say confidently is that the payment landscape will change over the next 3-5 years.
Is NFC dead on arrival? No. I'm not going to count Google, AT&T, Verizon, T-Mobile, and MasterCard out this early in the game. They are behind thanks to a lack of NFC support in iPhones, but they are still viable solutions. With retailers needing to upgrade their POS terminals to accept EMV cards, now is a great time to also install NFC capabilities. Once there are more NFC readers out there, more and more innovation will occur around them.
PayPal is definitely in the lead since they are able to leverage their e-commerce base of users. Their lack of reliance on NFC has worked in their favor, at least in the short-term. Of course if NFC takes off, I'm sure PayPal can add that technology as well. Their flexibility and reach are strong points.
Google and Isis have great systems, but since they are limited to Android devices they are not serving enough of the market. That, of course, will improve over time. While all three (Google, Isis, PayPal) are addressing consumer convenience, none are really addressing transaction costs for merchants. That's where MCX, the retailer led mobile wallet, could shine. Since they are not on the forefront, they have the luxury of watching the market and picking the best ideas.
At the recent NRF conference, MCX representatives said they are planning to use barcodes for payments in order to support all mobile phones. They are also focused on lowering transaction costs for merchants as well as protecting customer data, something that differentiates them. The approach sounds right, but they are far behind in development unless they acquire or partner to gain access to an existing wallet. Best potential of all the solutions, but furthest behind.
I suppose I could put all my retirement savings into one stock, but I'd rather spread the risk across many. By the same token, there's no reason for retailers to pick winners at this early stage. The best advice is to get into the game and try supporting one of the new wallets. In many cases, there's funding available to help offset costs. This invaluable experience will prepare you to take advantage when winners are more apparent.