Thinking Beyond "Dumb Payments"
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24 May 2010
Years ago, while an employee at Visa, I was told by my manager that for commercial card payments, "the value is in the non-financial information". In other words, the value of a commercial card transaction is in the enhanced data that helped corporations with decisioning. On the other hand, financial settlement (moving money from Point A to Point B), is assumed and thus holds little perceived value. Over the past months, my research in Japan, Apple's patent filings and a presentation by Geoffrey Moore have reminded me of my manager's words, but applied to mobile retail payments. I'm now convinced that the mobile payment value-add will be enhanced data used for consumer decisioning, not moving money. Specifically, this will mean using mobile technology to guide consumers in real-time to understand which products to buy, at what discount, where to buy them, when, for how many reward points, at what price and importantly, with what payment types. Despite what the mobile future holds, banks and payment brands do not appear to be positioning themselves to play a role in consumers' payment decisioning. Rather, it appears that they are focusing their mobile payments efforts on what they know best -- financial settlement. Their announcements about NFC pilots and mobile technologies relate to new ways of moving money from Point A to Point B. Don't get me wrong, I am sure that NFC payments and mobile wallets will work fantastically. However, coupled with decisioning, financial settlement will become an afterthought. Put more crassly, financial settlement without prior decisioning intelligence is in danger of being regarded as a "dumb payment". In the past, banks' and payment brands' lack of a decisioning role wouldn't have mattered -- no company had such a capability. However, the combination of the mobile channel with technologies such as merchant aggregation/promotion engines, user analytics, cost comparison tools, location-based services, bar code scanning, etc. means that it's a matter of time before there is a company (think PayPal, Apple, Google, Verizon, foursquare) that will play a payment decisioning role. It is the banks' and payment brands' decision whether or not to play in the decisioning game. However, if properly-executed, payment decisioning would eliminate consumers' need to choose a payment/bank brand -- this choice would be made for them by the likes of PayPal and its ilk. Although this won't hit critical mass anytime soon, it still cannot be a fun thought for the financial services industry. Going forward, I'll be very curious to see if it thinks beyond its financial settlement-centric role.