Long experience has taught me to pay no attention whatsoever to any expression of public opinion about electronic transactions or the future – and most especially to ignore pronouncements on the future of electronic transactions, says bobsguide blogger Dave Birch of Consult Hyperion. So I don't know why I accidentally started looking at a recent WorldPay survey on the future of payments. The most interesting part of this survey (and, I'm sure, the main reason for it) was the part about Mobile Point of Sale (MPoS) devices and its examination of whether using smartphones to pay at shop checkouts is the future? It is a topic I intend to address in this blog, which will examine if there is there a future for the physical card or the physical card reader terminal.
There have been a lot of announcements and hype around Mobile Point of Sale (MPoS) so far this year, with PayPal Here, Intuit, Square, iZettle and many others targeting this area for growth. WorldPay has also released its own Zinc offering and partnered with Zapp to process mobile payments, while Barclays Pingit app also plays into the space, and Lloyds Bank and Monitise have both made MPoS announcements. It’s been a busy year for MPoS but does all this sound and fury signify anything?
The WorldPay survey showed that many consumers are consciously choosing a supplier that accepts card payments over one that does not, as they form a "negative impression" or consider it as a sign of "poor customer service". As do I. The same could apply for mobile initiated payments.
I note that the WorldPay survey says that nearly a fifth of UK consumers consider non-acceptance of card payments as a sign of a business being "unprofessional" and in the past year one in five UK consumers have abandoned a purchase as a result. The same rationale will eventually apply to the mobile channel and business’ ability to cater to it or not.
I've abandoned payments myself in the past on more than one occasion, so perhaps I'm skewing the figures! The point is, though, that even for the smallest micro-merchants and sole traders accepting card payments is important, and the mobile phone has delivered new ways for that to happen. MPoS devices and procedures can help small-to-medium-sized enterprises (SMEs).
This is a more important observation than it might seem at first glance. A few years ago it seemed like quite a radical prediction to say that the reason that mobile phones would be disruptive in the payment space was that they could take payments, as well as make payments. Now it's common currency (pun intended).
The Big Picture for the Future of Payments: Is the Frame Square?
The big picture surrounding the future of payments is, to me at least, pretty clear: the constraint on card use is not card issuing (easy) but card accepting (difficult). I don't simply mean card accepting in the physical sense of the card interface. The revolution started by Square wasn't the gizmo (which was very cute all the same) but the business model.
Square meant that a person could start accepting cards right away, instead of filling out forms, paying monthly fees, submitting accounts to the bank and all the rest of it. It disrupted the model. I remember when I first signed up for it – in the lounge at Chicago O'Hare airport, US, if memory serves – I took my first card payment within a couple of minutes of firing up the app.
That was genuinely revolutionary. Since Square's launch there has been an explosion of mobile acquiring solutions and the Mobile Point of Sale (MPoS) is now recognised as a distinct category of new technology. In the space of a couple of years we've gone from disruptive start-ups (like Square) through technology-driven innovators such as PayPal, and we're now onto the big boys. WorldPay have launched their MPoS service (called Zinc) and other large acquirers are sure to follow suit.
It does make you wonder about the long game though. Making my phone pretend to be a credit card in order to pay your phone, which is pretending to be a credit card terminal does seem like an awful lot of work. Why doesn't my phone just pay your phone? I thought about this when I went off into West London to try out PayPal Here.
Real-world Example: My In-Store Experience
On the way to a train station, I noticed a PayPal logo in the window of ‘The Farmery’ frozen yoghurt shop. There was nothing I could do to stop myself from going in to try it out. The very friendly and helpful assistant told me that if I paid with a card using their “conventional" PoS terminal then there would be a 20p surcharge, but that if I paid with a card using their PayPal reader then there wouldn't be a charge. She broke out her iPhone and I broke out my Visa card and away we went.
The shop assistant in London ran the PayPal Here PoS application on her iPhone, at which point I decided to try a different experiment. I ran PayPal on my iPhone and clicked on ‘local’. Obviously I was the only person in the shop using it, so only one picture came up on her phone and it was me, so I was able to grab my coffee and go without swiping card, waving a phone, typing in a PIN or anything else. The receipt was e-mailed to me so I didn't even have to wait for something to print.
I asked the London shop assistant whether she preferred using cards or PayPal Here and she said (I'm paraphrasing here slightly) that when it worked, PayPal Here was better. I thought so too. It worked so well that it made me wonder – as was the case using Square back in the US – what was the point of having either the physical card or the physical card reader? Is there a future for the physical card or the physical card reader terminal? We will likely find out the answer in the next few years, depending upon the uptake for MPoS devices.
• For further stimulating technology discussions, viewpoints and blogs please visit our new bobsguide blogger (aka contributing editor) landing page, where you can view a selection of blogs about mobile financial services (MFS), information security and capital markets from the Mobey Forum, ISACA and the FIX Trading Community respectively. Other BG Bloggers on transactional banking and a range of other topics can be viewed here.