Payments

Landmark Opportunity For Startups In Payments: Meet Your New Credit Card.

You Will Have An EMV And NFC Credit Card In Your Wallet This Year

With all the interest in Payments these last few years, the point missed by most is that the brands (Visa, MasterCard, etc.) are in full control of every aspect of the payment system.  They issue cards and ultimately they issue merchant accounts.  Anything else is in a way an embellishment to this system.  Some fail to see that these brands are not the “dumb pipes” that are typically cast on to the Cellular Companies, nor will they be anytime soon.

Is That A Chip In Your Wallet?

This year just about every credit card and most debit cards will have build-in EMV and NFC technology.  See the letter below from the largest distributor of this product- the credit card from Ken Stork at Citibank.

Product Owners Dictate Product Features And Technology

There has been endless debate in the tech world about EMV and NFC as a technology.  It is a robust debate but in the end one that is not quite well placed.  The choice of this technology is really in the hands of the companies that manufacture and distribute the product, the Credit Card- the Banks.

Like it or not they have embraced this technology and have created merchant liability and cost inducements that will ultimately settle the debate.  The technology winner in the past was the raised numbers and letters known as the obverse embossment, later it was the magnetic strip on the reverse of the credit card.  This is slowly being replaced as a requirement by the brands to shift to EMV and NFC built into the credit card.

Merchants will adopt these technologies in the end because the companies that control all aspects of the service have mandated this.  The debate is over.

Landmark Opportunity For Startups In Payments

This shift will open up a huge opportunity for startup companies that face the reality that they do not control the brands nor do they control the product.  Of course it would be great if tech companies did, but they do not.

All of us in the tech world should craft our products and services around this reality.  And unless one builds a new payment system from the ground up, it is most logical to understand the intricacies of how this system really works.

Here on Quora and with about 25 payment centric startups, I have advised to pick one of two paths:

  1. Invent a new payment system from the ground up and own every aspect of it, as American Express and Discover have.
  2. Face the realities that the startup does not own the brand or the product and thus build around this in a meaningful, Practical and Pragmatic way.

Many of these startups that understood what I have said, have done well not to waste talent, time and money on fixing things that are not broken. They were disciplined and did not become unfocused with distractions and abstractions that will impact long term success.  Startups, if they understand history and the Practical and Pragmatic merchant can enter one of the largest business opportunities of our age.  

Startups that are distracted with fixing things that are not broken and spending large amounts of talent, time and money on abstractions will, in the long term, miss this huge opportunity that is staring at them right now.

I can think of over 45 new startup payment business models that can be successfully built around the future of this industry. Not one of the current payment startups notice these opportunities, for if they did, you would have seen it by now.  One hint, most of these opportunities are not central to EMV or NFC but will capitalize on aspects of how this can and will be used by merchants and consumers.

Time is ticking, all wallets, real world wallets, will have these cards, like it or not, by the end of 2014.

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Brian Roemmele

Brian Roemmele, is a mobile payments expert and an avid blogger at Quora. His profile can be found at http://www.quora.com/Brian-Roemmele. Brian is an Apple enthusiast and has deep interests in writing about new technology in payments.

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