Will tech companies like Google, Apple, eBay/PayPal, Amazon, Microsoft, Square and Intuit move in on the role traditionally played by banks? It is a distinct possibility in the not-too-distant future, as digitized transactions, mobile payments and offers, and digital wallets usher in a debit-oriented environment that loosens traditional ties to credit cards and bank branch activity — not to mention merchant advertising.
That’s the message from several panels at NACHA’s Payments 2013 this week in San Diego. Much of the shift will lean on Browser and Web-based purchasing that we associate with the likes of Amazon today, which will account for roughly 60 percent of digital transactions by 2015, or $12.08 Billion per Javelin Strategy & Research. The rest of the $20.7 Billion digital spending pie will come from Browser- only purchasing ($6.4 Billion), App-only purchasing ($1.9 Billion), and Mobile POS payments (.4 Billion).
Javelin head James Van Dyke suggests that a lot of it depends on the consumer acceptance of mobile wallets. In June 2012, one-third of mobile users were already receptive to receiving rewards or offers based on location, he said. This will quickly jump with the rise of smart spending tech via bar codes, NFC and mobile proximity tech. And if today’s experience in market leader Europe is any guide, it will lead to “multiplying financial relationships,” especially among Digital First younger people.
PayPal Head of Financial Innovations Dan Schatt colorfully suggested that the days of consumers as “cattle” are over. They are more like “free range chicken,” he says. But alternative payment companies like PayPal –which is often regarded as a disruptor –actually represents new kinds of growth opportunities for financial institutions and brick & mortar stores.
Banks, for instance, can take deposits from Coinstar loose change-to-cash machines that hook up with PayPal and are located in thousands of grocery stores. “We generate more interchange revenue, not less,” says Schatt. “So long as you are connected to the Internet, there are so many ways to surface data and five consumers compelling experiences,” he says.
The new environment is also related to loyalty and understanding the consumer. It can level the playing the field for smaller merchants by providing higher quality service. “It is the tech arms dealers versus Amazon,” Schatt says. But he also notes that PayPal is just part of the equation for a company like eBay, whose efforts are oriented towards being “the center of someone’s life.”
Schatt noted that eBay has bought over a dozen companies related not only to banking, but also discovery and engagement such as Red Laser and Milo in recent years. Payments are just a very small piece of a very compelling reason to spend and frequent retailers.
Visa has similar ambitions. It isn’t just about supporting banking needs anymore. “We power all monetization,” notes Jennifer Schulz, Visa’s head of Global eCommerce. “If we can’t support client needs, we will fall behind.”
That means opening up the Point of Sales to produce highly relevant data beyond the “total consumer profile data, which has been around for quite a while,” says Schulz. “Over the next 15 years, POS won’t be looked at in the same way.”
Today, Schulz notes that POS systems are generally focused on the negative side of revenues –reducing risk from bad payments and fraud. But in the future, they”ll be more oriented towards generating loyalty and revenue generation.