The Penny Drops:
Recently I ordered something online from the website of a start up which sells RFID tagged tiles which you can stick onto your luggage, your keys (or as my colleague suggests, your children) to track and find them, on a map. When I came to the payments page, however, I was redirected – not to a bank, or even a Paypal, but to Amazon. And I was able to use my Amazon details to pay for this third party tool.
Think about this for a minute. There are a few businesses out there who routinely take payments off you and probably have built up a fair amount of information about you, apart from having your credit card details and the technology to enable hassle-free (read:one-click) purchases. Apple is one such, as is Amazon.
It’s relatively simple for these behemoths to extend their payments facilities to 3rd parties, as a paid utility, and thereby garner even more information about customers and what they’re buying. This can be tightly coupled, a la Apple (currently), where you need to sell through Apple, or loosely coupled, as in the case of Amazon, where you sell through your own website, but just connect to Amazon for the payment.
The Coming Battle
Banks have so far held onto the high ground of payments simply because it would be impossible for telecoms or tech giants to get into the payments space without help from financial institutions. But as these new entrants to payments mature and grow in confidence, the Banks’ competitive position weakens. With a raft of new businesses also becoming banks, including Telcos, Retailers and others, this opens up the door for a new kind of banking business which is much more familiar with payments and customer’s shopping behaviours.
In sort, traditional banks will face competition for the payments business with both new banks as well as non-traditional players. Who will win? Probably the player who can provide consumers the most simple, intuitive interface across devices, backed by an efficient and reliable system that scales well.
The Task At Hand
Therefore, the immediate challenge for Banks is to get this new and elegant payments system road tested and to iron out all the wrinkles in the technology, user experience, service design and analytics.
There may not be clear winners just yet, whether it be the question of devices, form factors, technology choices or user experiences. But those who get onto the learning curve faster, are increasing their chances of getting it right earlier than others.
After all, even as Banks learn to get their head around the technology and models of online and mobile payments, players like Amazon, Paypal and others are learning to become payment providers.
And as is oft repeated in this age of change and disruption, it’s not that the big eat the small, but that the fast eat the slow.