Recently I was told that cards and payments were merging into one. Wait a minute… aren’t cards payments? Aren’t they just instruments used to identify payments?
A colleague of mine recently stated, “Not a week goes by without someone launching some new payments initiative that combines technology with society’s want of “instant gratification.”” From a Gen-Y perspective, we are at the heart of a payments transformation era… I have an iPhone, therefore I am… On the other hand from a marketer’s perspective the payments industry can at times be as cumbersome as Sydney’s outdated train system. The challenge is marketing payments innovation in an industry split between those that recognize and are boldly embracing change to those that are aware of change but remain comfortable in their established ways.
The world’s largest banks continue to hold steadfast in their need for secure, reliable and efficient payments systems but how is that all changing with increasing customer demand for real-time payment transactions and alternative channels to make payments? Business models are changing, old models are slowly breaking down, technology is improving and we are increasingly becoming a connected society. The concept of batch or offline payment system is foreign for most people my age- why should money leave my account and go into a ‘black hole’ only to appear days later at its destination?
There is greater customer advocacy now more than ever. Cards, mobile, internet banking and alternate payment methods are all bridging the gap in payments through accessibility and interoperability. The payments future is being driven by the need to integrate all of the above for a simpler payments experience for the customer.
My first phone was a Nokia 3210, back in the year 2000. Other than for calls, I used it to challenge my friends at the game Snake. I could also use it to call my bank to get my balance. I rarely did though as tedious voice-guided phone banking was not always a pleasant experience. Phone banking back then was never cool…
Fast forward to 2012, and we are spoilt for choice with the latest mobile devices that are now helping us to organize our lives using applications to cater for just about everything. Personally I cannot leave the house without my iPhone. Forget Snake, my iPhone is my lifeline. I can access all my banking services at the touch of button – well swipe of a screen – and it’s not just balances and simple account transfers either. You can pay bills, move your money in between different accounts and pay friends directly via social media such as Facebook. You can even make contactless payments on your mobile phone … And this, they say is just the beginning!
Last November, the company I work for was a sponsor at FST Media’s Future of Banking conference and I was fortunately able to sit in on a Commbank demonstration of their latest mobile phone app, Kaching. We all curiously watched David Lindberg showcase Kaching’s capabilities and whilst sitting among a row of some skeptical looking bankers, I thought to myself- Wow! This is something I could definitely see myself using.
What is great about mobile payment apps like Kaching? It’s all about connecting “traditional” bank services with mobile, NFC and social media. Impressive step forward for the Aussie payments market and easily understood by the masses that already use Facebook on their mobiles every day.
So where is the drawback? As stated recently by my CEO, “these applications are only as good as the backend payments infrastructure that supports them.” They require embedded technology and a supportive network to successfully facilitate real time payments. If more of Australia’s banks did move to next generation payments infrastructure then just imagine what payments apps like Kaching could do?
Perhaps Australia can take a cue from the UK. My colleagues have mentioned Barclay’s Pingit a number of times as an industry example of a real-time mobile money transfer service. Facilitated by UK’s Faster Payments Service, Pingit is revolutionary and somewhat of a marketing dream. It answers customer wants for instant access to cash, and more recently with the release of the latest version of Pingit, it answers the wants of corporate users wanting to transfer an uncapped value of cash instantly from one account to another. Real money in real time… bank account to bank account.
Now with all this talk on innovative payments, and all these events showcasing the latest in mobile and NFC technologies, everyone seems to be asking the same question, what of cash?… Are we becoming a cashless society? Many argue that we are…
Whilst cash can be considered the most liquid and real-time of monetary instruments; it can still be used anywhere, anytime – even on the moon! – But it doesn’t do a few really important things well. Firstly, it doesn’t travel well; it is physical thus constrained by the laws of physics. Next, it doesn’t store well; cash is realized value and on its own its value depreciates (thanks inflation). Finally, it needs constant maintenance. Cash needs complex and regulated banking systems to effectively manage it. Installing ATM’s so cash is readily available for people everywhere is an expensive investment. This is a problem, particularly in emerging markets where traditional banking isn’t practical in areas cut-off from basic financial services.
If taken as an indicator of the relevance of cash, developing countries are embracing mobile payments technology- some more than others… Why? One of the reasons is because many people in countries such as India don’t even have bank accounts! They represent a significant part of the “unbanked” world. Interestingly many of them have a mobile phone… Another interesting observation is that India has one of the fastest growing telecommunications industries in the world. Conventional payment methods are not seen as conventional in certain geographies so there is a logical connection between the “unbanked” mobile user and the ability to make payments using their phone.
So are we going to replace notes and coins with bits and bytes? Personally, I would say no. Just as there are drivers towards becoming cashless, there are inhibitors as well and simple scenarios will always exist where cash is the easiest and preferred payment method. Maybe this is just my generational view, just as it might have been for my parents who were raised on cheques and saw cards as a convenient new payment concept; I might just be seeing the same about mobile, NFC and social media payments.
Kaching and Pingit are paving the way for innovative new payment initiatives but the move to cashless is simply a matter of convenience. Like Sydney trains, having a nice carriage and user experience is all good but if service is disrupted due to creaky and old infrastructure, then that’s definitely not cool.
If only Australia could “Kach-up” with the rest of the world…
