Wednesday, November 21, 2012

Fixture or Fad – What’s YOUR Vision for Future of Payments?

Earlier this month, we reached out to some of our esteemed Prepaid Expo alumni to explore the future of prepaid and payments with us.

Here's what David Parker, Director, Polymath Consulting, foresees:


What’s your vision for the future of payments? 
How do you think NFC, EMV, mobile technologies, apps and wallets will impact prepaid?      

Mobile enablement – the access of your desired payment solution through mobile – is now a must-have.  On the other hand, payments through NFC off a phone will grow, but will remain a growing niche based on where you live, and who you are.  

What’s a fluke – and what will become a fixture?            

The vision of payments is one where I will still have a card, but it may also be contactless. Will I pay off my phone? Possibly, for some things such as transit. But the vast majority of my payments will be on the plastic card in my physical wallet for the next five years.  

Sure, online, I will have a nice one-click wallet solution backed up by my card of choice. But too many global mobile operators are blinkered and looking at closed-loop, agent-led solutions. They all quote M-PESA in Africa as a great example, but it had unique circumstances.  

Try naming five, or even one, other market globally where this model has over a 20% market share of payments.  What we are seeing is closed-loop wallet led solutions attaching prepaid cards to themselves for a variety of reasons:  Neteller, Skrill, Paypal, Hyperwallet and MPesa!

The challenge here that telcos need to consider how open and closed loop will sit side by side from the start, and not look to implement these solutions later on.  Only in this way can they ensure that the best solution is implemented on Day 1, not a mixture of systems bolted together later on. Is there a role for closed-loop models? Certainly. 

But, I would argue that open-loop is complementary to the closed-loop part. After all, a very large number of withdrawal requests from M-PESA small agents are rejected due to the agent not having available funds.

Meanwhile, the growth of Mobile POS is here to stay.  Post-Square, we have seen a number of other companies launching in Europe and more are planned for Africa. This growth in a merchant acceptance base will fly in the face of those that believe everything will be NFC and Mobile within a few years.  

In my view, the plastic in your wallet will be there for a long time, especially if you travel/do business across a large number of markets. While some  Mobile/NFC based solutions may gain traction in certain jurisdictions, the old piece of plastic - Mag Stripe or Chip and Pin – still has the widest acceptance of any digital format.    

What technology will consumers choose?           

Consumers will choose technology based on a number of factors. First is availability.  Many pieces of 'technology' are talked about, but in reality are only offered in a small number of locations/markets.  The exception to this is NFC, which we will continue to see increasingly rolled out not just in the first world but also in developing markets, such as Africa. (Note: the recent announcement of 1 million prepaid contactless MasterCard Cards in Kenya.)

So what will consumers choose to adopt? A mixture of what they are offered which adds real benefits to their lives, and has a real value-add proposition.  The easy answer is of course mobile, but only where specific value propositions are identified and offered.  

Sometimes these will only be for a small group of people.  The key to adoption by consumers is perceived value.  It is no good for a bank to say, “Wow look what we can do for you!”  It is all about what consumers value.

About the Author:

David Parker is Founder and Chief Executive Officer at U.K.-based, internationally working consulting and research firm, Polymath Consulting Ltd.   

Editor's Note: 

For 2013, Prepaid Expo is focused on the future of prepaid and payments. We want YOU to be a part of the conversation. Give us your answer – and we’ll publish the best submissions

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