Industry Views: Trends and Resolutions for 2014 (Part 1 of 2)

To kick off 2014, we asked payments industry thought leaders in the U.S. and Europe to reflect on the year that turned out not to be the “Year of NFC” and to look ahead at what will dominate prepaid and emerging payments for the next 12 months. We also asked them what the industry’s New Year’s resolutions should be.

Technology gurus point to the potential of Bluetooth over NFC, while retailer apps that include loyalty might gain an edge over payment-centric wallets. Trends and resolutions overlapped, with experts highlighting everything from security and a greater focus on regulation (including influencing it) to better meeting customer needs and focusing more on digital channels. The consensus: There’s plenty of work to do, but payments continues to offer nearly limitless opportunity for those creative enough to take advantage.

Q1: 2013 was supposed to be “The Year of NFC.” But the prediction fell far short of its mark. What will dominate prepaid and emerging payments in 2014?

The focus in 2014 will be on “contextual payments.” Open wallets, such as Isis and Google Wallet, are characterized by their primary focus on payments and desire to reach broad acceptance. However, consumers don’t go out to pay; they go to shop, get a specific service, interact with their friends via social media and enjoy themselves. In other words, they engage in a number of different contexts, many of which require payment capabilities. Those companies that create a digital experience around the specific context stand a much better chance of capturing customer attention than payment-oriented wallets. Integrating payments capability seamlessly then completes the overall digital experience.

As a result, we will see more merchants launching their own apps, whether individual or through MCX, which will focus on engaging the customer early and throughout the shopping cycle, with payment experience pushed into the background. Banks will want to make sure that their issued payment instruments are used to facilitate those transactions.
—Zilvinas Bareisis, Senior Analyst, Celent

In 2014 I expect to see growth in proximity-enabled commerce. To date, the most successful mobile payment solutions have been those embedded into merchant apps via the card-on-file model—a la Starbucks. Companies, such as Uber and Amazon 1-click, have taken it a step further and driven significant adoption by making card-on-file payments so easy they’re almost unnoticeable. Now, with PayPal Beacon and iBeacon, which use widely available Bluetooth Low Energy to enable proximity-based interactions, appearing in stores, two significant things are happening: embedded payment is becoming proximity-enabled and thus even less noticeable; and the merchant/customer experience is moving front and center.

NFC is all about the proximity of the payment credential; Beacon shifts the focus to the proximity of the consumer and, just as importantly, their devices. In 2014, proximity will become a tool not just to accept payment, but to personalize the shopping experience based on shopping history, available merchandise, current relevant offers, and more. And that customized, convenient and easily accessible experience may be just what is needed to get mobile payments to critical mass.
—Ginger Schmeltzer, SVP, Emerging Payments, Fiserv

Look for enhanced payment platform solutions at retail that will drive shopper loyalty by enabling consumers to receive real-time discounts on pre-identified items at POS, such as CPG offerings and eligible OTC medicines. We also see these types of programs being utilized by affinity groups to drive additional value for their members through the revolution of SKU-level tracking and reporting while increasing retailer foot traffic.

In addition, with the emergence of digital content delivery and mobile wallet use finally catching hold with consumers, we will see more product changing hands via tablets, smartphones and computers.

The last thing to keep an eye on will be the true emergence of cryptocurrencies, such as Bitcoin, as viable currency options that will gain momentum as the pricing becomes less volatile.
—Frank Squilla, SVP, Sales, InComm

With each year that passes, it gets more and more difficult to see a future for NFC. After years of hype and expectation, the number of consumers with NFC-enabled handsets remains tiny and the acceptance infrastructure is only slightly less thin, even in the most advanced markets.

However, 2014 will be another big year for the development of mobile payments, and one of the biggest trends to watch will be the impact of the blurring boundaries between virtual and physical shopping. These are not separate channels, and actively support the others; it’s now easy for a consumer to browse a merchant’s stock online, examine in-store (potentially using the mobile app to get further product information), and place a digital order on the way home.

What’s the impact on payments? The more merchants look to harmonize the experience across channels, the greater the need for the payment experience to be equally consistent. We’re closer to paying in-store by digital wallet than many people think.
—Kieran Hines Content Director, Consumer Payments, Datamonitor

Mobile is going to play an ever-increasing role in payments for 2014; however, I don’t believe that NFC will be the vehicle. Just as the desktop software ecosystem morphed during the late ’90s and early 2000s, the payment industry will drive to the lowest common denominator, namely the Web, as it is ubiquitous across devices and platforms. We will see more and more retailers reallocating their digital assets (Websites/Web applications) to become responsive in design with many actually being designed for mobile first. Mobile is the primary experience and the desktop experience is augmentation. Seamless payments are a critical component to the continued evolution of mobile commerce.

I also believe there will be a number of acquisitions within the payments space. Given the number of startups and fragmentation in the market, companies will look to expand their market share and grow revenue through partnerships and acquisitions. There are too many companies focused on niche markets, payment vehicles, etc., for this not to be the case.
—Mitch Rupp, Vice President of Technology, StoreFinancial

I’m not sure we saw 2013 as the year of NFC, but some did. In 2014, we see compliance and the regulatory environment as continuing to dominate the prepaid and other payment sectors. These issues are not going away and educating and working with our regulators has always been forefront for us at Sunrise Banks. We believe there also will continue to be consolidation of players within the industry over the next few years.
—Joan Herman, Senior Vice President, Sunrise Banks

As the worlds of prepaid and new emerging payments continue to merge, it goes without saying that fraud prevention and security will continue to remain the foundation for all solutions—consumers must have peace of mind regardless of what payment form they’re using.

Just as importantly, however, is a dominant focus on expanding the ways prepaid can be accessed and leveraged, including environments where consumers shop and interact on a daily basis. Last year, the natural extension of prepaid into the social media world began, but now online gaming and entertainment is becoming a common use case. In 2014, prepaid will see more of these “new use” examples gain momentum to lead the industry into new and exciting directions.
—Amit Parikh, Global Head of Prepaid and Director of Business Development, Discover Financial Services.

In 2014, prepaid will continue to be the most effective payments product for underserved consumers. Prepaid is a powerful tool in the quest for a world beyond cash—moving underserved consumers out of the cash-based grey economy and into the mainstream of financial services by providing a safe, simple and secure solution and acting as a gateway to additional financial services.

We are seeing governments recognizing the power of prepaid as a tool to help the world’s most economically vulnerable citizens. The momentum that’s been built will propel us further, giving tens of millions of people access to the financial mainstream for the first time and opening the door to sustainable and inclusive economic growth.
—Ron Hynes, Group Executive, Global Prepaid Solutions, MasterCard

It’s hard to imagine a more eventful year in prepaid and emerging payments than 2013, but I think 2014 may shape up to be a worthy challenger. Legal, legislative and regulatory issues will continue to greatly impact the industry. Data privacy will be top of mind, especially given the recent Target data breach. Improving the payments value proposition, I believe, will receive substantially more attention in 2014. Consumers are eager for new technologies and solutions that will help simplify and improve their lives, but growing confusion around emerging payments and the value they provide has reinforced the status quo. That said, my New Year’s resolution for the industry is for more clarity—common standards, customer-focused solutions and clearer value propositions would benefit all!

—Terri Ferrise, Vice President, Financial Services, Cachet Financial Solutions

For more resolutions, click here.