Today I’ve been in Beetsterzwaag, Opsterland, Netherlands, about 150 kilometers from Amsterdam at an offsite strategic retreat with the ICS (International Card Services) team. Initially part of Bank of America’s presence in the Netherlands, ICS today is an independent subsidiary of ABN Amro NV, but works in the provision of a range of card services around issuance, promotion, processing and so forth. ICS has around 3 million customers today, and the session we had was around the implications of mobile payments in the form of NFC, P2P and other initiatives such as cardless loyalty program implementations.
What emerged was a very interesting realization in respect to opportunities in the mobile payments ecosystem that hadn’t fully occurred to me until this planning session.
More than just a payment
While I’ve often discussed the contextuality of payments and the massive opportunities that companies like Google are trying to leverage in respect to messaging around payments (before, during and after the payment event), it is interesting to think about different payment executions. We need responsible partners in the ecosystem to start handling not just straight through payments, but multiple variations on a theme, understanding the various parties and implied contracts involved.
P2P Direct or Merchant one-off payment
The simplest payment journey to conceptualize is when you walk into a retail store and pay a merchant according to the cost of the purchase, or when you have a service event where you simply take your NFC phone and execute a live person-to-person payment. Today you can already use PayPal Bump to execute a live phone to phone or person-to-person payment, but in the future, I’ll just put my phone into send or receive mode for an NFC payment and the respective individual’s wallet will do the rest (discounting all the back-end complexities, of course).
This is a fairly simple execution – take a payment from one person, send to another via either NFC, bump or a wallet. We can use location services, authentication and NFC to simplify and secure the phone to phone interaction, or we can use an App like PayPal to transfer to a unique individual via their phone number, email address or similar. The ability to split payments amongst a number of individuals, such as paying for a bill at a restaurant would also fall into this category.
The value here is the simple execution of a person-to-person transfer without requiring adherence to the current bank-led wire transfer or ACH equivalent which requires a routing number, an account code, the bank address, etc, etc. The opportunity for NFC phone to an NFC POS or another NFC phone is also obvious.
The credit facility or installment plan
Another powerful in-store implementation will be the ability to offer a real-time credit facility to back a payment. It might be a line of credit, a personal loan facility or a 12-month, low-interest payment plan with regular monthly payments. The ability to offer you real-time finance options that are more competitive than using a competitors hefty credit card APR program is pretty compelling at the point-of-sale, and can steal you away at the most critical moment – when you are about to pay for a big ticket item.
Mobile offers payments providers this sort of contextual opportunity, which currently is too difficult or erroneous to do with a plastic card and traditional advertising offers. Give me an offer in-store and help me execute the line of credit in real-time. Powerful enough to get me to change payment partners right in the midst of a transaction.
The Contract Payment
In this scenario we may have an upfront payment, but the full transaction is only effected with completed, successful delivery of the required goods or services. In business we have constructs like an LOC (Letter of Credit) which facilitates such payment contracts, but in the individual merchant/service provider and consumer space, these sorts of payments contracts are implied and managed informally. However, there may be an opportunity for this to be managed in an semi-automated fashion through the payments ecosystem.
Whether it is time based for hurdle payments to occur as specific milestones are reached, when physical goods are delivered, or when a contracted service is rendered – there is an opportunity to simplify the payments journey by authorizing the subsequent payments via a mobile device or online.
Facilitating the platform
As we move increasingly to person-to-person electronic payments, the ability not only to execute an individual one-off payment, but also variations on a theme with either a payment agreement/plan or a underlying credit facility adds value to the P2P ecosystem.
Today we have the likes of PayPal working on P2P, individual merchants offering some payment facilities, but we don’t have an emerging player combining these different capabilities and relationships to create journeys supported by a range of more flexible, automated payment variations.
When you mix analytics, always on IP layer or the cloud, a mobile device, location and the ability to offer a variety of payment mechanisms, the future of payment journeys looks very, very interesting. Payment journeys offer massive opportunities for reinventing and simplifying the way we currently interact in this space.