At the 2017 Mobile Payments Conference in Chicago, one of the most memorable presentations was moderated by Brett King, Founder of Moven and host of the BREAKING BANK$ radio show on Voice America. On the panel was Travis Dulaney, Co-founder & CEO of PushPayments and Dan Gonzalez, VP of Payment Industry Relations at the Federal Reserve Bank of Chicago. The main topic was faster payments. And, more specifically: when and how can the US get from where it is currently to the frictionless utopia many other countries are now enjoying?
First, a look at fast payments in other countries
China is currently the hottest mobile payments market in the world. “There are entire cities within China right now where cash is virtually not used,” King said. “And, plastic isn’t being used either – people are using mobile payments every day.”
To put it in perspective, China is projecting to do $5.5 trillion (U.S. Dollars) in mobile payments this year, which is about 50 times the amount in the US, according to reports. About 92% of mobile payments are handled through two technology platforms – Alipay, a third-party mobile and online payment platform established by e-commerce company Alibaba Group, and WeChat Pay, which belongs to the country’s leading social messaging platform.
India is another country where mobile payments are poised to explode. Between 2017 and 2021, India’s mobile payments transaction value is expected to see a compound annual growth rate (CAGR) of 138.7 percent, resulting in nearly $2.6 billion (US Dollars).
Why’s the US lagging behind in mobile payments?
The United States has been the most sought-after payment ecosystem in the world for a number of years. So, what’s the reason China, India and others are leapfrogging ahead of us? “I’m a believer that our own maturity is our biggest Achilles heel,” said Dulaney. “Within maturity comes circulation, policies and legacy systems that have been around for a while and like it or now, we’re hooked into [that ecosystem].”
The bigger players, he says, like the processors (e.g. FIS) and even companies like Visa and MasterCard can’t get out of this legacy ecosystem easily. Gonzalez concurred and added that unlike the other countries that have a small handful of payment companies, we have more than 10,000 financial institutions in the U.S.
How the faster payments task force can resolve our quandary
The final segment of the session focused on the Faster Payments Task Force, a group of more than 300 diverse payments industry stakeholders convened by the Federal Reserve System. In July, the group published its highly anticipated recommendations for developing and implementing a safe, ubiquitous, faster payments system in the United States.
Dulaney and Gonzalez, who are both members of the task force, weighed in on why they believe the recommendations are a viable step in the right direction.
“This task force is taking a different approach than ‘build it and wait for them to come,’” said Gonzalez. “It’s comprised of a variety of stakeholders, including many non-banking companies, and it’s very collaborative, asking, ‘Let’s find out what consumers want and then let’s build it.’”
The host concluded the session asking the panelists to predict where they see the state of mobile payments in the US 5 to 10 years from now. “Real-time payments are coming,” said Gonzalez. “We already have them in closed loop communities [e.g., gift cards], we need to figure out some of the interoperability issues [he and Dulaney are advocates for open APIs], but good things are coming.”
Dulaney echoed Gonzalez’ conclusion, adding that the Federal Reserve Bank will work out the kinks and get us to instant payments. “Within the next 10 years, payment will no longer be an act. It will be integrated with the goods and services we acquire,” he said. “Uber is a perfect example. It is a digital wallet that you can catch a taxi with. In the payments world, friction is the problem. If you eliminate it and make it about what you want to acquire: we have adoption, we have lift off.”