Global Payments Cold War - Heats Up in 2012

There's a technological cold war going on in the global payments space. One that has been bobbing along for over 15 years. But the average Joe is unaware of what's going on "behind the scenes". This battle is for market share, a battle between magstripe, EMV, NFC and now virtual wallets. Naive merchants are saying they're just going to have to wait and see who the winner is before making any major plans. The astute merchant says ALL of these technologies (and likely even more) are going to be here for another 20+ years, and they'll need to support them all. That means PoS systems, and online check-out pages, will continue to evolve like a Swiss Army Knife e.g. I can’t wait to see the first spoon, tweezers, tooth pick or saw hanging off a retailers terminal:)

I feel like 90% of the content shared at mobile conferences today is simply marketing hype intended to fluff up one's personal agenda. But nobody is really looking out for the merchant, and nobody is looking out for the consumer, and nobody seems concerned about the impact on our global economy when proposing total gutting of existing infrastructure with simply different technologies that are essentially unnecessary.

2012 - The year the Payment Paradigm began to shift!

I predict 2012 will be the year we all remember as "the year the payment paradigm began to shift!" Granted Jack Dorsey (founder of Twitter) did launch his ground breaking service (Square) back in May of 2010. Nevertheless, this is going to be the year the mass market will remember and the year consumers began to see relevant products hitting the marketplace from the "big boys", namely: Intuit GoPayments and PayPal Here. And if adoption rates continue to climb at such a rapid pace, we should expect to see many more "thoroughbreds" entering this race this year and next.

“Mass Market Joe” and “Mass Market Jane”

According to the US Census Bureau 1.4 billion credit cards are circulating here in the US. The Federal Reserve reports that $1.9 trillion is spent on those cards each year. Yet according to Forrester, only 7% of this is spent online. And they forecast by 2016 this percentage will only grow to 9%. The person I call “Mass Market Joe” or “Mass Market Jane” is the consumer who is spending 93% of $1.9 trillion offline. Who are they? I believe they are the consumer who simply does not trust the internet. The 2010 Census found that 80% of US households have a PC connected to the internet, yet 64% of American’s surveyed said they’ve abandoned a shopping cart check-out because they felt the site was either asking for too much information or they had security concerns.

The Mass Market Lacks Online Trust

The mass market simply does not trust the internet channel. And why should they? Every day Americans see horror stories in the news of identity theft and credit cards scams orchestrated by high-tech online fraud rings (annual fraud losses have hit the $ billions). http://www.forbes.com/sites/kellyphillipserb/2012/02/20/irs-warns-taxpayers-to-avoid-scams/

GDC Expo, March 7-9

Online sales represents only 7% of total US retail sales. http://techcrunch.com/2010/03/08/forrester-forecast-online-retail-sales-will-grow-to-250-billion-by-2014/. The Federal Reserve reports that credit cards are used more than 20 billion times a year in the U.S., with the total value of these transactions at about $1.9 trillion. A growing majority of Americans 64% report they have not made an online purchase from a specific website because of security concerns. When asked to explain why they did not make that purchase, 60% said it was because they were not sure if the site was secure, 51.4% were worried about providing information requested, and 48.4% felt a website requested more information than was necessary for the transaction. The pool found that 69.3% research potential purchases over the Internet. All this may be spun into good sounding news, but at the end of the day, the bottom line is this - after all our efforts to grow eCommerce it still only represents 7% of the total annual US credit card spend.

Top-3 Mobile Fraud Attack Vectors

1. Stolen Credit Cards: Fraudster buys a new phone using a stolen credit card. Then uses the phones for 30-45 +/- days until the victim spots the fraudulent purchase on their bank statement.

2. Account-Takeover: Fraudsters “hacks” the victims phone account online (phish username::password) so and provisions addition phones on the victims “family” plan. They then use these phones for 30 +/- days until the victim spots the fraud on their cell-phone statement.

3. Corporate Accounts: Same scenario as #2 only this is within corporate accounts, not personal accounts.

iDate-West Conference (SLS Hotel, Beverly Hills)

I just attended the iDate-West conference last week down in Los Angles. And anything and everything “mobile” seemed to be hot-hot-hot in the dating and social networking spaces. According to Courtland-Brooks, browsing and application usage on mobile phones have both risen 110% over the past 12mo. And according to Morgan-Stanley, by the year 2014 mobile devices will overtake PCs as the primary device people use to access the web. That really is not that far off into the future…