15 January 2014
Short blog today, there is so much going on I just don’t know where to start. Perhaps an inventory of key items? No… other news services do a decent job of that. I’m so fortunate to work with such great people and customers, quite frankly I’m busting with new news… but I can’t share it without consequences.
Let’s take a look at my 2013 predictions (http://blog.starpointllp.com/?p=2213)
1. Retailer friendly value propositions will get traction (MCX, Square, Levelup, Fishbowl, Google, Facebook, …)
C, though I’m still hopeful. There are 2 primary aspects to value here: payment cost, and offers/loyalty. LevelUp and Square are having tremendous problems in broadening merchant acceptance, neither have successfully transitioned to loyalty/offers. Rumor is that Square may lose the Starbucks business if they don’t launch in the next few months. MCX is entity with most traction… many still believe it is a ghost, a view I don’t share. US banks are beginning to move away from debit.. and MCX will be the entity carrying the flag.
2. MCX will not deliver any service for 2 years, but individual retailers will create services that “align” with principals outlined by MCX (Target Redcard, Safeway Fastforward, …etc). The service which MCX should build is a Least Cost Routing Switch to enable the most efficient transaction across payment “dumb pipes”. This will enable merchants who want to take risk on any given customer the ability to do so..
A. Spot on so far.. My good friend Dekkers is now at the helm and I have great confidence that this will be a fantastic service for consumers and merchants.
3. Banks will build yet another consortium in an attempt to control payments. They will work to “protect consumers” by hiding their account information and issue “payment tokens”. I agree with all of this, yet this is a very poorly formed value proposition and Banks will find it hard to influence consumer behavior.
A. This prediction was a precursor to my Token blogs. We now have tokens.. and the death of tokens (at The Clearing House). Funny story, the Banks have directed TCH to take the leadership role in setting a token standard (as opposed to running the service). TCH doesn’t really want to own a standards body, so they sent the banks their 2014 budget allocations with a pilot.. to which the banks said “do a better job of listening.. and take this out”. The Federal Reserve and the OCC were going to be the driver of tokens, and have taken a giant regulatory step away from it, issuing a call for comments on payment infrastructure plans. My comments are http://fedpaymentsimprovement.org/wp-content/uploads/Tomas_Noyes-Starpoint_LLP-120213.pdf
4. We will see more than one bank start a pilot around Push Payments (see blog).
B+. 15 banks are part of the Paydiant push payments pilot (hmmm say that 5 times fast). The problem here is that there is no established way for the Banks to profit from payments (interchange). So I believe this is also in a rapid death spiral. A close cousin to this activity is ClearXchange, with former Well Fargo Board Member Mike Kennedy.
5. Facebook and Google will gain significant traction in mobile ad targeting…. following on to targeted incentives… which will lead to mobile success. Bankers, please read this again.. success in mobile will begin with ad targeting and incentives. Payments are an afterthought…
A-. Much left to do.. but much progress made this year. See this WSJ article. http://blogs.wsj.com/cio/2013/10/30/facebook-exec-says-data-analysis-had-huge-impact-on-mobile-revenue
6. Retailers at the leading edge will begin to see that their consumer data asset is of greater value than their core business.
D. A long way away. This should be a 10 yr prediction.
7. Banks will follow Amex’s lead in creating dedicated data businesses. What is CLO today will morph into retailer analytics, offers and loyalty.
A+. This is a big focus of the top issuers. JPMC hired Len Laufler, former CEO of Argus to run a new division. Currently Amex is 3+ years ahead.
8. Apple will put NFC in their iPhone.. but usage is focused on device-device communication… not payment. NFC will be just another radio in the handset, there will be multiple SEs with the carriers owning a SWP/SIM based one.. and the platform provider managing the other. Which will succeed? A: the group that can best ORCHESTRATE value across 1000s of companies.
B-. Has not happened yet, but think beacons… I believe BLE will be the contactless form of choice here.
9. Visa will lose a top 5 issuer to MA, and they will see a future where their debit revenue is gone (in the US) as MCX and bank consortiums take ownership of ACH and PIN debit
D. I thought Visa would lose Chase, but Charlie got the CEO job and kept JPMC in the tent. We are seeing the bifurcation of VisaNet as clusters form. See my article on the golden goose http://blog.starpointllp.com/?p=2393
10. We will see 100s of new companies work to create new physical commerce experiences that include marketing, incentives, shopping, selection. Amazon is the driving force for many, as retailers work to create a better consumer experience at competitive price.
A. Still the case.. although this is rather qualitative.
11. Chaos in executive ranks. Amex, Citi, MCX, PayPal, Visa all have new CEOs.. all will be shaking up their payment teams.
A+. Wow.. big changes here. Google, Citi, Visa, PayPal, Chase, Verifone, Chase Paymentech, All have had complete changes in their payments organizations. This may have been a headhunter’s dream year.
12. Retail banking is going through fundamental change. Bank brands, fee income and NRFF are declining, big dedicated branches will be replaced by more self service. Mass market retail will see significant leakage into products like pre-paid. Retailers and Mobile Operators are better able to profitably deliver basic financial services, to the mass market, than banks…. see my Blog Future of Retail: Prepaid.
B. This will be a 2014 theme.
13, Unlocking the Cloud… and Authentication. KYC is a $5B business. Look for mobile operators to build consumer registration services that will tie biometrics with phone. Digital Signatures on contracts, payment through biometrics, .. all will be possible in a world without plastic. Forget NFC… See previous Blog on KYC and Cloud Wallets
B-. Biometrics and Security on mobile platforms is improving dramatically. What is left is consumer trust of the platforms.
- Consumer Privacy. After reading yesterday’s WSJ on Wi-Fi tracking.. there must be a way to improve on data privacy and leakage of data.
- Retail banking. There will be major changes in retail bank products at the base of the pyramid. Amex and Retailers are best positioned to make products like GPR pre-paid the new baseline product (see Blog)
- Debit Volume. We have seen massive fluctuations in Visa’s debit volume (19% of revenue), dropping 50% 18 mo ago and recovering some this year. Judge Leon is likely to move debit from $0.21 to less than $0.07.. we will see the 10 or so PIN debit networks consolidate and signature volume flow through PIN networks. The banks will begin to price debit cards, and actively work to move consumers away from them. I believe there is a bank funded PR firm somewhere behind all the Target hack press. I don’t see any retailer friendly messages in mass media. See my blog Debit Card Wars
- Mobile BEACONS. Forget about mobile payment and NFC. Why transfer data view NFC/ISO 14443 @ 424kb/s when Bluetooth V2.1 is 2.1 Mbit/s and Bluetooth V4/V3 (BLE) is 24Mbit/s… (60x faster). We will see some VERY VERY cool new shopping experiences with mobile. Nordstrom, Macys and others are doing a fantastic job.
- mCommerce Payments. As Payments move into the OS (see blog), Paypal doesn’t have one. Amazon, Google, Apple, will make SIGNIFICANT dents in Paypal as the platform controls authentication and authorization. Amex/Visa/MA’s new rules on tokens, combined with consumer privacy concerns, will accelerate the trend. Why give your card out to everyone? Keep it in the cloud with Apple/Goog/Amazon and let merchants deal with them.
- Specialized Hardware makes way for commodity hardware and software. This will impact NFC, EMV, Authorization, Payment Terminals, Point of Sale Systems, Security and Payments in the OS. Predications.. Gemalto and Verifone will see a bump in revenue due to EMV reterminalization.. but we will see a very rapid decline afterward.
- Host Card Emulation. I am super excited about HCE. Why? See my long blog. We will see this approach copied by other handset manufacturers.
- EMV. Retailers love it.. banks don’t. See EMV blog and also blog on Chip and Signature. Mastercard has a TREMENDOUS edge here as it learned lessons in Europe that Visa did not (Visa EU is a separate bank owned company). I believe MA will lead EMV with a push toward using PIN in every transaction.
- Banks have given up on payment innovation. Citi, Chase and others have completely dismantled their payment innovation teams. Retailers, Goog, Amazon, Apple, Samsung, MSFT are all growing theirs. Now that regulators have said that they will not force tokens, the ball is in the court of retailer friendly value platforms.
- ISIS WILL DIE..
Sticking with following 2013 predictions
- Unlocking the Cloud… and Authentication. KYC is a $5B business. Look for mobile operators to build consumer registration services that will tie biometrics with phone. Digital Signatures on contracts, payment through biometrics, .. all will be possible in a world without plastic. Forget NFC… See previous Blog on KYC and Cloud Wallets
- Retailer friendly value propositions will get traction (MCX, Square, Levelup, Fishbowl, Google, Facebook, …). MCX begin.
- Apple will put NFC in their iPhone.. but focus will be on BLE.