Payment Cards are Dead. Long Live Payment Cards.

Any payment technology analyst will tell you that the payments market has exploded over the last few years. An explosion sounds great, but it also suggest fragmentation. Which is another way of saying that the customer has a confusing array of choices.

Not that confusion is anything new.

Everyone has, at some point, fumbled through a stack of payment cards stuffed in to a wallet or purse in a vain attempt to extract the right one for the purchase in hand.

“Do you accept Diners Card?  No?  How about Access? Oh. Hang on, I’ve got an Amex card in here somewhere…”

So much for taking the waiting out of wanting.

The last few years has seen the emergence of a variety of eWallet services. These on-line services enable the customer to register bank or payment card details just once with the eWallet provider. Once done, the customer does not have to share card data with the merchant as the eWallet provider handles all interactions with the account holders bank or card issuer.

But payment card brands are, just as the name suggests, brands. Vast amounts of money are expended to ensure that merchants and consumers alike are visibly reminded of the brand identity of the product embodied in that plastic card. eWallets obscure that brand, or indeed replace it altogether.

A curious but perhaps inevitable effect of this has been the appearance of “brands” such as PayPal in high street stores. No longer just an on-line entity, PayPal has a growing presence at the retail point of sale too, cleverly insinuating it’s own brand presence where previously only Visa, Mastercard, Amex et al had a footprint.

But just as on-line payments companies like PayPal are moving in to the face-to-face environment, it would be wrong to assume that the traditional card brands are simply watching this happen. eWallet offerings from Visa (V.me), Mastercard (Masterpass) and Amex (Serve) are all competing too, and in exactly the space that companies like PayPal have defined for themselves.

“The analytic possibilities presented by mobile payments data will make current loyalty card schemes look positively quaint by comparison.”

However, the major card brands are not the only competition to the likes of PayPal. Let’s not forget Google Wallet, for example.  Or Square, or Isis. There’s a lot of competition out there, and the stakes are high with the US mobile payments market alone expected to be worth over $90 billion over the next few years.

The key driver behind the growth of these services has been Internet-connected smartphones. All of the major eWallet services include a smartphone app component that effectively sees the phone not just as an eWallet, but as the payment device too, bridging the gap between on-line and face-to-face payments. These apps are able to implement their own security features too, including voiceprint, fingerprint or pin authentication.

Android phones have been available for some time equipped with NFC hardware, enabling the phone to act just like a physical payment card, and there are rumours that Apple’s next iPhone could also be NFC-equipped with Apple releasing a so-called “killer” eWallet app.

So it seems that anyone who’s anyone now has a stake in the future of mobile payments. The convergence and adoption of key technologies continues, and although no clear winners have emerged as yet, the future of payments will surely be mobile.

Smartphone platforms provide an unprecedented opportunity for retailers and payment providers to profile customers, to push individually customised offers and to analyse sales patterns based upon location, historical data and any of the wealth of information our smartphones reveal about us. This data will be hugely valuable. The analytic possibilities presented by mobile payments data will make current loyalty card schemes look positively quaint by comparison.

The winners will combine simplicity and sophistication to create a ubiquitous payment process, and will reap rich rewards in the process.  For now, it’s the simplicity that’s proving elusive from the customer’s perspective. Until that changes, we think most people will prefer to reach for the plastic.

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