Mobile Payments – 2015 Current State
Lots of stuff going on right now.. hard for me to keep track. Sometimes just writing this silly blog helps me coalesce all the information coming my way.
As I outlined in January’s Structural Changes in Payments, payments and banking are evolving at an amazing pace. Thought I would cover news worthy items that touch on the top areas I outlined:
- Risk and Identity
- Data/Commerce Value
- Consumer Behavior/Trust/Acceptance
- Issuance/Customer Acquisition/HCE
- Regulatory/Rates/Rules (Fees)
- Mobile/Payment in the OS
- Visa and Mastercard have “won” the payment wars. They are in control of mobile payments, EMV, tokenization of cards, new rules (ex VDEP). They are now starting to “tilt” their networks to be more merchant friendly to enable commerce collaboration (see my blog from last week). Even in Europe where interchange will be capped at 30bps for credit and 20bps for debit the networks win (no change in network fees).
- Visa working to buy Visa Europe.
- Visa’s VDEP program. A major announcement. VDEP is to Tokens what VisaNet is to Cards. VDEP is the KEY ENABLER of Payments in the OS. Visa has established rules that will greatly accelerate mobile payments. Removing all economic incentives and data from wallet providers and enabling frictionless enrollment/adoption/use that is consistent with how physical cards work today. Wallets must find another way to make money. I am a very very big fan of Visa’s move here and the have greatly expanded their role as the hub of remote payments.
- After the global adoption of VDEP (ie rollout of ApplePay/Android Pay), I expect to see a new V/MA rate tier for use of tokens in mobile. “Cardholder present” that will mean liability shift to bank and a rate reduction of around 10-25bps (in the US). Timeline is late 2016. Huge implications for paypal here.
- Google’s Android Pay moves payment out of an APP and into the OS (Android). Not much in new features, but as this is based upon Host Card Emulation.. this has 3 very big implications: 1) Tokens and Proprietary Architectures have beat out the GSMA’s vision for SIM based payment (NFC) and 2) Google has expanded the Android platform to allow any app to take advantage of payment (see Google Creating Platform), and 3) Google has moved payment into Google Mandatory Services (GMS) like maps, search and mail for Android M. MNOs and OEMs can still choose the free Android, or build their own.. but it comes at a big loss.
- Plastic cards work REALLY WELL. Consumers just don’t care about mobile payments at the point of sale. Less than 6% of iPhone 6 users use ApplePay (Behavior change requires value)
- Consumer behavior is continuing a massive shift toward mobile… nothing has ever moved this fast. Important to note that over 65%+ of interaction is within an App. This creates great opportunity for ApplePay/AndroidPay…
- Real Time Payments in the US… What a mess! This month NACHA agreed to create 3 intraday windows. The Fed working group still pushes a string uphill with token bank support. The Clearing House (TCH) is trying to position itself as both the token utility and the hub for real time (to no avail). On this one the TCH board has asked them to move, but bank operating teams have told them to get lost. The Banks token pilot (3 yrs ago) hasn’t moved an inch.
- Somewhat related to RT/P2P Payments, Mastercard seems intent on re-invigorating MoneySend as a way to enable a downline (ie disbursement channel) to support commercial business (ex dividend payments, insurance distribution, mobile wallet P2P). If I were Visa I would keep a keen eye on the bilateral debit routing facility established for ApplePay.. particularly transactions from CrossRiver Bank (as a sort of ODFI). Why is this in my “top items”…. ? If Mastercard is indeed doing this, it will set up a new competitive dynamic with issuers and commercial payments companies. Debit card heads don’t exactly like someone using their cards as free P2P platforms (see VMT blog from 5 yrs ago).
- Microsoft rumored to be working on payments platform for Internet Explorer (as neither one of the Windows Mobile users were interested in using it on their phone). This would be a MAJOR hit to Paypal as Internet Explorer is over 50% of the global user base (all versions). Microsoft hasn’t succeed in its quest for “Live” accounts.
- MCX has lost its CEO Dekkers Davidson (a good friend) and its platform Paydiant (sold to my good friend Dan at Paypal). My view is that MCX members agreed to collaborate on payments, but due to their competitive nature could not agree to collaborate on marketing/loyalty. A payments only wallet had no future. Paypal is a natural alliance partner of MCX and retailers.. but their 325-375 bps take rate must go down to under 50bps for this to ever work.
- Trust/Identity. Mobile + Tokens has created the most secure payment method in the world (far better than EMV). While there was some enrollment fraud at Apple, this has now been resolved. For more information see “Stripe of Identity” and, Structural Change in Payments. Google has also added biometrics into the new Android M.
- JPM’s Payments Enigma (See Blog ChaseNet) is a running industry joke (ex asking Amazon to put a chase wallet button next to one click checkout). Unfortunately JPM pushed out (or moved to mortgage compliance) everyone that knew how to run it. One Card Exec said it this way “Chase is building a F(*(^ing island, the rest of us will be building a continent”. Another example of this is Visa’s support of Citi in winning the Costco deal (Citi is Mastercard’s largest issuer, JPM is Visa’s).
- Lots of payment M&A Activity… Best source is FT Partner’s analysis here. The data space is even more crazy (ex Oracle on Datalogix/Bluekai, Neilsen, WPP, …)
- MASSIVE Talent Churn. From the unfortunate death of Ed Gilligan, Amazon’s loss of its top 2 payment execs (Matt Swann to Citi, Mary Kay to Square), Google’s loss of Frank Young (to Global Payments), Bank of America (Jason Blackhurst to Visa), the industry is changing like never before.
- ISIS is dead bought by Google
- Samsung Pay. Samsung bought loopPay for its MST technology filling the acceptance gap (non-EMV in US and Mexico) only to find out 3 months later that Google did direct MNO deals (in US) to make AndroidPay GMS. Samsung can’t load its own wallet on its own phone.. As of last month they still were telling banks everything is fine. I told the banks to go talk to Verizon
- Twitter Acquires Cardspring.. I liked this one (Merchant friendly card linked offers). Problem is that Cardspring was built on FirstData’s Offerwise Platform (IBM) not their Unix/Clover stuff
- Payment Terminals and Points of Sales. Heartland gives up on Leaf, FD is still pushing on Clover, and Verifone is pitching a new data service
- Payment data is leaking everywhere.. CommerceSignals is working to help bring a little structure here