CHICAGO–Traditional U.S. payments players should adjust their industry approach to address evolving consumer preferences that are causing dramatic market changes to occur, an executive from the Federal Reserve Bank of Atlanta told attendees here May 19 during a panel discussion at the Federal Reserve Bank of Chicago’s annual conference.
“The payments system is facing daunting challenges today,” said Richard Oliver, the bank’s executive vice president. The industry’s approach “that worked in that latter half of the 20th century does not apply now, as nonbank players are fostering innovation we’ve never seen before, and that forces change.”
Oliver outlined several ways the traditional industry players such as the payment brands and banks can change their approach and even work with the companies that are spurring innovation. He used Square Inc. as an example.
Payment executives criticized Square founder Jack Dorsey last year during a panel discussion at NACHA’s annual conference, Oliver said (
The industry needs to “explore collaborative opportunities,” Oliver said. “As the environment changes, the [approach] has to change, and this is where we struggle.”
Dorsey introduced a product consumers found useful, which is an approach the traditional payments companies are not necessarily adept at accomplishing, Oliver said.
The old approach was to “provide consumers with the products we thought they should have,” Oliver said. “We tried to put products out there consumers didn’t want to use.”
One such product was the debit card, which Oliver said consumers were not ready to embrace when it first debuted in the 1980s. Companies now need to engage more with consumers and the general marketplace to learn and decide what works and resonates, Oliver said.
“Don’t take anything for granted,” Oliver said about evaluating the marketplace. “Overconfidence can have serious repercussions.”
Traditional players also should consider spurring innovation, whether in technology or some other capacity, as the marketplace evolves, Oliver said.
“Innovation is a must to survive” in a changing environment, Oliver said. “It may involve a difficult culture change, but it must be done thoughtfully.”
Oliver issued a similar warning two weeks ago here at the Smart Card Alliance’s annual conference (
“Technology turns are happening more rapidly than ever before,” Oliver said then. “Unfortunately, our ability to update [older] technology doesn’t happen quickly.”
Oliver referenced a recent Fed workshop on mobile payments that showed the traditional players’ ability to agree on new ideas with merchants, mobile operators and other entities interested in growing that market.
Workshop participants agreed on several foundations to a successful U.S. mobile framework. These included an open mobile wallet that supports multiple payment credentials in a secure container and implemented using contactless Near Field Communication technology and enabling mobile phone applications (
“It’s a whole new ballgame now,” Oliver said about the U.S. payments landscape. “It’s going to require people to think differently.”
What do you think about this? Send us your feedback.
