The future of Alternate Payment Technologies depends upon Millennials and not Apple

In 2013, we saw the following three retailers/merchants (illustrative) embracing mobile payment methods:
  • Walmart – Scan & Go app for iphone to scan barcodes of goods and pay at checkout terminal

  • Disney – NFC enabled MyMagic+ smartbands for payment across terminals at rides, hotel, etc.

  • Subway – Cloud based mobile wallet app for contactless payment via phone

Come 2014 and we saw some big food chains adopting mobile payment methods amongst others:

  • Wendy’s – Mobile wallet app to generate six digit codes for payment purpose

  • Taco Bell – Nationwide mobile ordering platform to be launched

  • McDonalds – First mPOS solution in Thailand for McDelivery 1711 service using Swiff technology

  • Burger King – iPhone application to allow customers to pay for Whoppers and order & in-store pickup as well

The above merchants are letting millennials or the ‘Gen Yers’ do what they do bestuse their mobile phone. Millennials and Digital Natives are habitual users of mobile apps for everything. If they start doing a lot of mobile payments at the above places they would expect other merchants to do so as well. Especially when it comes to buying something, they would start questioning about non availability of alternate payment methods. This could escalate to a level where Millennials would start asking what is the need to carry cash to pay at a corner store, newspaper stand, falafel vendor or the hotdog vendor.

So Yes, Apple may put the growth of mobile payments on steroids but very soon it will spread across devices and operating systems. As millennials adopt mobile payments on a big scale, Android and other OS will also be a part of the growth.

In 2005, LG launched a phone for kids - the cute, colorful MiGo with geo-fencing, etc. This was after years of planning and research; it was a huge flop. Then there was a 'senior phone' with big buttons, simple UI, etc. Guess what happened to that? It never launched! And then we had music-optimized phones designed like MP3 players and video-optimized phones designed like camcorders, and many other 'segment-specific' innovations. Mixed results at best, especially compared to the grand unification that came with the iPhone - there were no further attempts at this slicing and dicing of mobile handset feature sets to cater to particular groups of users.

We are witnessing a similar pattern in payments innovation, along with the early failures. Kid-friendly banking products with 'parental controls' have come and gone, with and without mobile. There is talk of specialized payments and banking products for seniors and ethnic groups, but none have yet attained critical mass. There is the obvious problem with 'senior-friendly' and 'kid-friendly' products, which is that most seniors and kids don't want to be seen as seniors and kids. However, the problem is more nuanced than that.

There are now plenty of payments startups catering to SMBs, most of them using prepaid accounts under the hood. Some also have a mobile angle to them - and that in itself is a problem. There can be no such thing as having a 'mobile angle' if you want to be successful with any innovative solution. Mobile is not just an angle; it's the backdrop; it's the foundation; it's in the ether everywhere around the innovation. Yet, for a variety of reasons, the payments world is still influenced by the parochial DNA of cards and rails, of regulations and processes, of interchange and rate cards.

The payments and banking world needs to speak a different language internally: of APIs & SDKs, not just KYC and AML; of authentication & identity, not just fraud and CNP; of middleware not middlemen. It will also benefit from a different language externally when talking to the new customer, to the mobile generation of millennials and in fact everyone - regardless of demographics - who is tech-savvy enough to know that most customer services reps probably know almost as much about you when you call as when you call 911. This is the generation that expects instant gratification: if you press a button that says 'transfer money', having to wait 3 days for it to happen is 3 days too late. This is the generation that has a higher bar: you just can't send someone who lives in an apartment a coupon for a lawn-mower; I expect McDonalds to send me a digital mango lassi coupon on my birthday because i signed up for their loyalty program.