Mobile payments are in a period of relative calm. Banks, Apple, Google, PayPal, and Samsung have adopted the networks’ NFC and tokenization standards, and NFC acceptance is steadily growing on the coattails of the U.S. EMV migration. MCX has disintegrated into a few inconsequential, merchant-branded wallets.
For banks, it feels like the perfect time to shift from defensive efforts against frenzied tech-led attempts to disintermediate their customers to internal efforts to strengthen customer relationships.
But just when you thought it was safe to go back to your cubicle, Amazon announced Amazon Go, a retail experience that eliminates waiting in line! A short time later, it announced an agreement to acquire Whole Foods, a platform from which it can launch all its in-store strategies. Suddenly, the 2010–2014 era mobile payments topics of NFC versus cloud, bank wallet versus merchant wallet, and Visa/MC versus Amazon, Apple, Facebook, Google, PayPal, and others are once again relevant.
History has proven that consumers are very slow to adopt new payment mediums unless they are fully integrated into shopping experiences.
Consider the examples of Amazon’s e-commerce wallet, the iTunes wallet, the emergence of PayPal as part of eBay, and Starbucks’ wallet. In each case, payment was integrated into the shopping experience of a thriving marketplace full of high-demand products, and in each case, consumers adopted new payment solutions readily. If Amazon Go is successful as a shopping experience, it will become part of the Whole Foods Experience and be copied by retailers around the world In the process, checkout will migrate from the point-of-sale to the cloud, a development that threatens to circumvent the traditional payments ecosystem and the not-yet-in-place NFC ecosystem.
Imagine the smartphone and the payment terminal are no longer the center of payment innovation, and rather the merchant’s prescribed customer experience drives the ecosystem. What should the banks do in this scenario? They’ve deferred acceptance technology to the networks, and merchants simply aren’t excited about solutions designed to retrofit onto the networks’ legacy technology, even with unification behind the NFC standard. How can banks add value to the new payment experience? There are only a few choices:
Do nothing and hope Amazon Go fails, knowing that if it is successful, banks will be conceding control of the customer experience to merchants,
Go back to the drawing board with Visa and Mastercard to piece together yet another retrofit solution constrained by legacy infrastructure.
Directly engage with merchants, and enable the new ecosystem with a combination of marketing, loyalty, financing, authentication, know your customer, and compliance solutions.
You can call us crazy if you like, but only one of these solutions looks like it is offering merchant customers a product that meets customer needs.
Chase had already embraced this approach, even before Amazon brought Whole Foods into the fold, yet it seems to be going at it alone. This is yet another opportunity for banks to innovate and add new value to the payment ecosystem they once ruled, or they can once again hide behind the networks and attempt to aggregate enough consumer volume to compel merchants to accept whatever solution they can cobble together. Which strategy seems better to you?
