Saturday, 20 August 2016

Are mobile payments a fintech quagmire?

By Stanley Epstein - Principal Associate - Citadel Advantage Ltd.

A while back I wrote an article in which I expressed my concerns about the future of mobile payments; “Why I am worried about the future of mobile payments”.

In essence, the problem that I focused on is this - there are just too many forms of mobile payments being offered by too many organisations and by too many banks. This approach creates confusion. It come about because everyone is bent on promoting their own form of payment mechanism in the hope that it will be the next “big thing”.

There is nothing new in this approach. Ever since banks and technology began to come together beginning in the 1970’s, there has existed this weird notion that if a bank can create something unique they would be able to capture the market, beat the competition and make a fortune.

Of course this notion is totally false.  We have seen this proved on countless past occasions whenever new innovations have just failed to take off, simply because banks failed to note that the key to success is co-operation.

If they cooperate everybody wins. If they don’t cooperate we end up with multiple failures.
If there are too many payment mechanisms and too many payment apps all that will be achieved will be a multitude of duplicate systems. These systems will often be inadequate in their own right too as they fail to adequately address user needs. These users will be totally frustrated as too will be the retailers. Very rapidly these mechanisms will fall into disuse and be abandoned.

The key to success is a single simple uniform and universal mechanism available to all users, sellers, banks and technology vendors.

So now I fast forward from these sentiments which I jotted down in March 2015.

In recent weeks two articles have grabbed my attention. Both point to the sorry state of mobile payments today.

The one article is “Mobile banking adoption growth is slower than you think”. Here Stephen Greer makes it clear that there is a disconnection between the hype surrounding mobile banking and the reality of how consumers actually interact with financial institutions. He points to the facts that a recent iteration of the Federal Reserve’s “Consumer and Mobile Financial Services 2016” survey report shows that mobile banking adoption is really slow. Among the reasons for the slowdown is the fact that 86% of respondents say that they don’t use mobile banking because they can achieve their banking needs without it. Many consumers are perfectly fine solely using online banking or ATM’s or branches.

Their reasons for non-adoption are that many apps are not mature enough (39% said the screen was too small; 20% said apps were too difficult to use). And what applies to mobile banking applies to mobile payments as well.

The second article was even more damning. “This new app proves mobile payments are a mess” states that basically there was a time when to make a purchase was a simple process. You gave the cashier money or a credit card and you would get your purchases and maybe some change and maybe a receipt and off you would go. But today in many places that have embraced mobile payments, a multitude of the different services and apps has left the process at the checkout counter a confusing mess.

Different stores accept different payment mechanisms. This means that users have to have a multitude of different apps on their mobile phones as they don’t all work the same way. This leads to confusion and delays to the frustration of all concerned.

Different retail outlets have joined the fray as well.  In the U.S. Walmart refuses to accept Apple Pay because it wants to promote its own mobile wallet app.

So the intervening year and a half since I expressed my concerns have left me even more skeptical then I was then. No one, either banks or retailers seem to see how this misguided notion of beating the “competition” is not working. In the end the people who matter, the consumer, are going to turn their backs on this disorganized mess.

And that would really be a pity. 
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