P2P transforms C2B and B2B on the Small Screen: NACHA Payments 2010 Follow Up
Byline: Maggie Scarborough, Managing Director
(c) 2010 FinServ Strategies. All rights reserved.
A curious thing happened at the recent NACHA’s Payments 2010 conference in Seattle – it was how quickly the person to person (P2P) payment conversation turned to mobile commerce, consumer to business (C2B) and business to business (B2B). Voila! Granted the remittance payment market is ultimately P2P, banks are becoming more comfortable with the use/risk cases and will finally move beyond A2A (account to account transfers) Mom paying Billy at State U to ecommerce, Mom paying the homeowners association and spa (you need a break), and may one day allow two Gen Y’ers to pay each other back for drinks with smart phones. If the bank doesn’t serve them, Twitter might. The consumer is younger and more ready to pay businesses and each other from the small screen. Slightly over 80% of the 18-29 age group use only wireless/mobile communications. Bankers, these are your new consumer and business customers.
What will drive mobile ecommerce is the ubiquity of the small screen: the mobile phone or device, an “app for that,” a dash of youth, some new tech-comfort, and a rising number of middle-aged people getting apps for everything. What will make mobile ecommerce work is collaboration, business intelligence, and risk management. Payments will soon be mobile on the laptops and the small screen. During the “Leap Into the Future of Transaction Banking” panel on Monday sponsored by Fundtech, Cindy Murray of Bank of America Merrill Lynch was talking about flexible, intelligent infrastructure – IMHO it’s the kernel to risk, profit and well…making transaction banking work. Chris Ward of Capital One was driving at market aspects and focused on mobile, seriously spouting mobile statistics. Here’s why. In the US, according to Pew Research, 46% of adults own a laptop of them, 83% connect via WiFi and 28% via broadband. In addition, 55% of Americans connect to the Internet wirelessly of which surprisingly 83% have accessed the Internet via the phone. When the iPhone first came out it took 74 days to sell 1 million, when the iPad came out, it took 28 days to sell 1 million. Google, however, has taken a different approach and is letting anyone use its Android mobile operating system (phone operators, app developers, etc.) and is breaking through the Apple App Store stranglehold on mobile applications. This is synergy: infrastructure, end-user market, delivery, applications. Hello!
The idea that mobile ecommerce was a bigger fish than P2P was evident at Payments 2010. It began with Jan Estep, NACHA Executive Director, in a great opener about innovation, spoke of Javelin Strategy and Research’s 61% P2P growth projection. In another four sessions I attended, the discussion quickly moved from P2P to mobile commerce. The focus is on a business invoicing a consumer (or another business) and payment initiation on the spot at the point of presence even if it is your back yard. I heard the “pay the landscaper with your phone example” about five different times. User experience is a key to the vision.
Square did its pitch with Jack Dorsey, Twitter founder and CEO of Square, Inc., and Jim McKelvey, Artist (ahem… former IBMer) and Chairman and talked about invoicing and payment at the point of purchase, even a back yard, Mobility, and user experience. Clearly Square, Inc. intends to socialize payments on the mobile laptop or tablet, mobile phone or things we haven’t yet ideated. In another session, Fidelity National Information Services (FIS) spoke of their partnership with PayPal, which makes onboarding a merchant a breeze and can easily handle international payments. They spoke of a P2P portal into which they could drive invoices. Aite, speaking of their small business survey results spoke about P2P and small businesses. Outside of the sessions and during briefings, it became very clear that there is a number of emerging mobile commerce solutions ranging on the bank friendly scale from threatening disintermediator to friendly partner (these don’t last long).
I’m an ex-banker yet I love PayPal because they helped my small business grow. They gave my fledgling company affordable and easy direct debit payments and merchant services, when my very large bank didn’t (despite a blue chip credit rating and considerable funds I offered to let them collar). I like the wildcard mobile comer providers, too – that is more autonomous emerging mobile commerce solutions that let the bank benefit from the entire flow, not just a slice. How many banks will be able to play? Or for that matter be willing to play early in the game. The whole mobile commerce game didn’t work in 2000 because the user scale wasn’t right – a few banks got burnt. This time around, we’ll likely see bank-vendor-infrastructure partnerships until enough scale has been built for banks to take it back. They will need help from their networks – where the ACH Network (among other) enters in. Another consideration will be the front end initiation capability so heavily relied on for the Web banking. It will take real multichannel capability not many channeled capability to support, audit, and process this potential scale. Which all sounds swell, but we have never had this type of transaction volume before. There will be snags – it’s new ground.
P2P payments, now in the spotlight, will be quickly followed by mobile commerce. Bankers need to innovate with their networks and risk methodologies to serve all of the innovation outside of the industry and to insure that they are a part of it. Square will socialize its way into the payments business, PayPal is partnering with core banking infrastructure and other infrastructure and autonomous mobile commerce solutions are emerging. This will be interesting to watch and bigger than Web banking ever was.
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Maggie Scarborough, Managing Director
Maggie@FinServStrategies.com, +1 410.685.2324