The Future of Money
What is the Future of Money? Will we live in a cash-less world by 2020?
We wanted to inspire thinking around not only mobile payments, but the true nature of money, currency, and understand the motives and behavior that drives it. Check out our Future of Money Infographic showcasing our train of thought, also available as a deck for easier reuse.
It’s amazing how studies forecasting mobile payment penetrations could be so disparate. Pew Research report on The Future of Money claims that by 2020 we all be solely making mobile payments and cash will cease existence, quoting “the majority of the respondents supported the scenario that by 2020 most people will have embraced and fully adopted the use of smart-device swiping for purchases they make, nearly eliminating the need for cash or credit cards.”. While a study by University of California revealed that most Americans don’t plan to use mobile payment systems.
Whilst both studies might be skewed, it’s hard to predict the future 8 years out. No matter what industry we look at, the pace of evolution keeping accelerating. Looking at the history of money, it slowly evolved from bartering, to standardizing coins, paper money, the creation of banking institutions, but technology drastically accelerated the pace the past few decades, with credit cards, e-commerce, person-to-person transfers, and virtual currencies.
Similarly, the pace of mobile penetration within the telecommunications industry opaqued every other medium; and not only eclipsed telephone lines, but presently [is the US] 50% of all mobile phones are smartphones.
With two booming trends, it is only natural that mobile payments will emerge as well - and it is. From the merchant side to the consumer side, we need amazing innovation in the market every day. Perhaps kickstarted with Jack Dorsey’s Square: amazing simplistic approach to mobilize credit card payments and bring the point-of-sales to the masses. Or perhaps the fact that Google launched the first mainstream mobile wallet?
Google Wallet vs Mobile Payments
These emerging technologies are topic of conversations at every fortune company - not just because the way payments and experiences are changing, but because the very nature of money and currency could evolve.
Visionaries dream of cash-less societies - some more radically than others - and different surveys show different predictions. The truth is that we will get there - we just don’t know exactly when. There are many problems to solve such as global acceptance, trade, roaming, and standardized approach to technology and ecosystem.
This technology ecosystem is pretty complex, with options ranging from simple SMS/USSD, to mobile apps, and hardware integration such as NFC and RFID. Most agree that the future is all based on NFC, which is secure, fast, reliable, simple, but also it is the most expensive option since the entire ecosystem has to be upgraded. There are a few companies trying to get a head-start with NFC, like Facebook’s new spinoff company “Presence”, or new promising startup Flomio, that provides a simple NFC-as-a-service solution that allows integration with Stripe and can get a business receiving mobile payments in minutes.
But technology is not impediment for entry; while everyone is waiting for the holy grail [aka NFC]. Some companies are chasing the NFC standard, like Google, ISIS, or Visa, whose launching V.me in Europe this fall, and partnered with Samsung to make an impact at the London Olympics.
But some companies built very successful solutions for today’s consumer. Starting the popular Starbucks Mobile App, a simple pre-paid account that ties to your Starbucks card and allows for simple barcode scanning. Nothing too innovative, but an amazing testament to the power of mobile payment: one in every four transaction is done via mobile, accounting for 26 million transactions and over $100 million in 2011.
Another innovator in the space is TGI Fridays, who is using a service called TabbedOut which allows customers to sync their app to the store PoS, browse menu, order, watch their tab and pay their bill from their mobile phone.
Most people speculate that Apple will enter the mobile payments area strong. They have already applied for patents that could lead to an end-to-end system that would include mobile marketing, mobile payments and mobile retailing. Back-of-the-napkin calculations show how easy they could become a trillion-dollar company overnight.
… And while some contenders opportunistically enter the market, others actually exit. Nokia just announced that they will exit the mobile payment services in India knowns as Nokia Money, to focus on handset manufacturing. According to a company spokesperson “the mobile financial services business is not core to Nokia, so we plan to exit the business.”
Beyond these large players, there are a few smaller ones worth noting. Two of our favorites are: Zoosh, which aims to deliver all the benefits of NFC (near-field communication) with any device that has a speaker and microphone. Instead of relying on NFC chips, Zoosh uses ultrasound to perform secure mobile transactions. The second is Geode from iCache, popular kickstarter project that that stores credit cards, loyalty cards, gift cards, and membership cards and protects the information with biometric security; then uses an onboard universal card and e-ink barcode screen that allows to use any card, anytime, anywhere.
Then of course, the visionary Square; a unique innovative small device that started by connecting to any iPhone through the audio jack, and allowing anyone to accept credit card payments. Square is currently processing about $5 billion a year, behind PayPal, which is expecting to do $7 billion in mobile payment volume this year. Amazing achievement for a small startup that competes with massive giant who processed $118.7 billion in net payment volume PayPal did last year.
Talking about Paypal, they are going all in on mobile payments. They launched a point-of-sale integration already live at over 2,000 Home Depot stores, a tiered suite of online, offline and Mobile Payments options for small businesses, and an intelligent wallet, with personalized deals and flexible payments that let you choose a payment method seven days after a transaction. Paypal truly understands the unique value proposition of mobile payments: leverage the digital channels, cloud, big data, to provide intelligent-interactive-value-add at the point of purchase. If you think about it, mobile payments are almost inconvenient: they take extra steps to set up, open apps, enter pins, it’s actually a hard sale for people to switch over from a swipe-and-sign credit card. So why should someone switch?
What are the key benefits?
- Flexibility & Convenience
- All your cards in one place: credit, debit, loyalty.
- Choose method of payment, even after the purchase.
- Interactivity & Recommendations
- Personal Financial Management (PFM), recommending the optimum payment method. Since the wallet has the knowledge of all your cards, ARP, limits, rewards, it can recommend which car to use for each transaction.
- Furthermore, if you take the time to personalize your goals, objectives, the wallet could help you accumulate points, save, and reach them by optimizing every transaction.
- In the future, integration to PoS will allow to do this at the line-item level.
- There will always be one and only one optimal way to pay.
- Payment method becomes logical as opposed to emotional.
- Real-Time & Inversion-of-Control
- Real-Time interconnectivity will allow for reverse bidding auction: all lenders will have the chance to bid with their best terms to win your business.
We’d love to hear your thoughts! Agree, disagree? Do you see different uses within other verticals? Please share and keep the conversation going.
This post was originally published on May 2, 2012.