When questions are asked about the future of money, the answer is invariably mobile (regardless of the actual question asked). Why? Probably because, mobile usage has exploded and no industry has remained untouched by both the threats and the opportunities that the Internet and mobile have presented.
Music, movies, newspaper publishing, photography, gaming – have all had their disruption and adaptation — why should money be any different?
In addition to the advent of mobile, we’re also living in “interesting times” when it comes to our relationshop with money, and those that keep it safe for us– the erosion of trust we’ve seen with Lehmann’s demise, Barclay’s LIBOR scandal and of course, the European banking crisis as a whole.
So, the perfect storm or inflection point is right now and banking is facing serious disruption, led by some non-traditional players. PayPal, Google Wallet, Square, Stripe and a host of new entrants are competing, not just for “share of wallet” but for the whole mobile wallet itself.
Here are a few examples of what the future looks like.
Twitter co-founder, Jack Dorsey, and his company Square have reimagined what it means to take traditional credit card payments.
Google have skin in the game. Google Checkout and Android offer a nice point of convergence to make Google a serious player. But do I want an advertising company knowing my every transaction? That bit scares me a little.
The ambitious start-up, Venmo, an app which makes paying friends as easy as finding their name in your contacts list. No bank account numbers, sort codes, IBANs or remembering fiddly security codes or PINs.
Along with Australia’s Commbank below the app is a good illustration of how the traditional players aren’t quite dead yet and are capable of innovation. Similar to Venmo, Barclay’s have removed the friction of having to log in to banking with a password and PIN, then knowing someone’s bank details then setting beneficiaries before you need to pay them. With PingIt, all you need is their mobile number.
In addition to the standard and expected mobile banking functionality, Australian Commbank’s app enables customers to pay anyone, without knowing their bank details (via mobile number, email or Facebook friend look-up). One drawback for the moment is that it’s iPhone only.
While Citi’s banking app starts doing the simple things really well, the user experience unravels when you try and add a new beneficiary or “contact”. The app forces you back to the web where you have to add new contacts.
Rather than being seamless, this is where a very visible seam appears in the overall experience and is a symptom of treating mobile users a little differently.
What this example also shows is how hard banking is to change – security, process, legacy systems etc.
It’s not for the faint-hearted.
The poster child for smart, simple mobile banking. M-Pesa was established in Kenya in 2007 as a joint effort between Vodafone and Safaricom, two mobile operators. In November 2011, over 14 million people in Kenya used the service.
It enables people to be “economically active” across the country without the need for a bank or even a bank account (which many people don’t have anyway). The service is used to send money to relatives, to pay for shopping, bills with the ease of sending an SMS.
The interesting part is that this is mainly done on what we’d consider “dumbphones”, i.e. feature phones with limited or no internet connectivity. It also highlights how the telcos will want their seat at the table.
“When UK phone users do get enthusiastic about mobile money, there’s a very lucrative business opportunity – and mobile operators will find themselves in a battle with the banks to grasp it.”
–Rory Cellan-Jones, Technology correspondent, BBC.
And with O2′s wallet which launched in the UK earlier this year, we’ll see how this develops.
“Paypal’s days are numbered”, reported the Pando Daily last week. While Paypal could almost be viewed as a trusted, traditional player, they’ve recently come out with their own version of Square’s card reader. Whether that piece of catch-up innovation (and whatever’s in the pipeline) is enough to sustain them, we’ll see, but I wouldn’t go as far to say their days are numbered – they’re looking at $10 billion in mobile transactions for the year.
What’s initially interesting about Stripe is that 3 of the 5 original founders of Paypal have invested in the ambitious payments start-up.
While many of the apps above have made it easy to make and receive person-to-person payments, Stripe make it ridiculously easy for developers to take payments online without the red tape, time and cost of setting up merchant accounts, services agreements, PCI compliance and all that other bureaucracy.
Derek Sivers, a speaker at Next Bank Asia, had a few words on the impact of all this bureaucrac, worth a watch.
I’m looking forward to welcoming them to Europe.
Does all this spell the end of cash?
So with all this disruption and innovation the “is cash dead?” question comes up.
Mobile may replace the need for cash for lots of transactions in lots of ways whether you swipe a square, “bump” or tap your phone when you buy a cup of coffee or pay your friend.
That said, we’ve had this thing called cash for thousands of years. And even with the arrival of cheques, credit cards, we still haven’t quite managed to get rid of it.
Cash is king for anonymity. There’s no transfer of data when you pay with cash as there is with an electronic payment. You can buy anything you want and the transaction is literally no one else’s business.
So, while a tap with an NFC-enabled phone could be an elegant replacement for the swipe of a magnetic stripe on a card, it doesn’t spell the end of cash.
And besides, how do you pay for something when your phone runs out of juice or when there’s a little software glitch?