Confusion on Hot Topics Mobile, P2P and Social Pay
LAS VEGAS — The research by Boston-based AlixPartners exploded on the screen at BAI Payments Connect 2012. Suddenly, out of nowhere, the availability of good mobile services has emerged as a top factor in why consumers choose to change financial institutions, reported Teresa Epperson, AlixPartners managing director.
A stunned disbelief settled over the room. Few of the banking and credit union executives present had seen this coming. But, according to Epperson, the facts are the facts. “There is a revolution going on,” she said.
BAI Payments Connect was not all mobile. A second track of sessions focused on fraud. A third track looked at check imaging. As for credit unions on the scene, Catalyst and Corporate One both had executives in the speaker lineup, and a handful of natural person credit unions were on the scene, including the $2.1 billion, Basking Ridge N.J.-based Affinity FCU in New Jersey, the $72 million Livonia, Mich.-based Catholic Vantage Financial and the $2.3 billion Fairborn, Ohio-based Wright-Patt.
But while there may have been three tracks, the friction and the energy bubbled around mobile. Speaker after speaker hammered home the theme of the triumph of mobility. “The bank branch in your pocket” emerged as the mantra of many at BAI, and yet there also is another reality. So much about mobile remains disputable. Financial institutions need it, but exactly what do they need? Panelists slugged out competing realities at BAI.
Consider person-to-person payments. Listen to Sanjeev Dheer, president of the CashEdge division at Fiserv, and the message is that P2P is already here. “This is a big deal, it represents the possibility for new net transactions,” he said. And the strong implication was that this could emerge as a meaningful revenue source for institutions that are seeing their fee income erode.
And yet Arkady Fridman, an executive at PayPal, said on the same panel that PayPal thought the way to go forward with P2P involving consumer to consumer transactions is by imposing no fees at all. “The value of the data is higher,” said Fridman.
On a different panel, Richard Crone, a consultant, said that a focus on P2P is a mistake. His implication: This is going nowhere soon.
On a fourth panel, Allen Weinberg, payments consultant with Glenbrook Partners, a Silicon Valley research outfit, also dismissed P2P. “It just doesn’t seem meaningful right now,” he said.
Getting confused? That may be the exact right response.
“The marketplace is changing so quickly, but the need is to take action,” said Jim Marous, a senior director at Harland Clarke, a provider of integrated marketing solutions.
A reality in the race to displace cash, is that “cash is frictionless,” said George Warfel, an executive with Fiserv, and what consumers want is frictionless transactions. Create obstacles and make it hard to transfer money out of a P2P account for instance, and that defines failure.
“Customers want to move money easily,” said Weinberg.
Will they want to move money within social networks like Facebook or Twitter? A panel tackled that, and Warfel was the moderator,
“We are a culture of now,” said Charisse Flynn, chief operating officer at Des Moines, Iowa, based payments innovator Dwolla. The generation using Facebook and Twitter is not using checks, and they may not be using banks, she said. But they still need to move money around, and new tools, tied to social networks as Dwolla is, give them the means.
“Social payments are a whole new class of payments,” said Weinberg.
Equally unclear is what financial institutions need to do in response to the emerging social payments niche, but moderator Warfel pointed to an Australian bank that, via a product it calls Kaching, unites the ability for users to pay via near field communications, mobile or Facebook. A multiple bet strategy may be the shrewd one in uncertain times. “They are mashing up all the models and letting the market sort out the winners,” said Warfel, who added, “There is no need to pick a winner. Not now.”
Another transformational area explored at BAI is the emerging field of rewards in a mobile banking environment. That’s another potential revolution. What if consumers could get rid of their stack of loyalty cards and just use a mobile app from, say, a financial institution? asked Shwark Satyavolu, CEO at Truaxiis, a Redwood City, Calif. developer of rewards program statements.
Marous stressed, “This is bigger than just rewards. It’s about leveraging a huge amount of data and looking at the entire customer relationship.”
The use of mobile devices in reward programs definitely is early stage, but, said Tom Breecher, CEO of Cartera Commerce, a developer of card linked marketing solutions, there is mounting merchant interest “in much better targeted offers than, say, a Groupon.” A mobile powered offer just might be that ticket, he suggested.
But there is an undeniable obstacle. Consumer comfort just is not there yet. “Consumers are comfortable paying with a credit card. They aren’t with paying with a phone,” said Breecher. At least not yet. But he also said there is a way to overcome that hurdle.“Give them offers available only on their phones.” If the offer is compelling, the discomfort will vanish, he suggested.
Then there is the indisputable mobile tidal wave. About “46% of us own smartphones,” proclaimed Eric Leiserson, an analyst with Fiserv, who added, “Mobile bill payment today is where online banking was in the early 1990s.”
He did not have to connect the dots. The sense in the room was that just as online banking kept growing until it rearranged banking channels, so too will mobile and mobile bill pay.
Ed Bachelder, director of research at BlueFlame consulting, added, “This is financial institutions’ to lose. They have the inside track in terms of trust,” meaning it is to financial institutions that consumers are likely to turn when they want pay bills with a mobile device. That is why he stressed, “Financial institutions need to push ahead with mobile banking. The speed here is mind boggling.”