It’s difficult to find an industry as segmented as mobile payments. No single platform or application has emerged as the clear favorite, with companies big and small trying to find their position in the market. While this offers consumers plenty of options, it poses a problem for an industry that prides itself on convenience.
Most tech companies look for the widest audience possible, yet mobile payments seem to aim for a sliver of the market and then aim even smaller by the time the app goes into production. Companies look at the payment stack to find layer-specific solutions when they should be working towards a universal interface.
Photo by Mobiles Bezahlen mit Vodafone SmartPass
There’s no doubt that mobile payments are growing at a healthy clip. All the major companies, from mobile phone manufacturers to credit card companies, are getting involved in the hopes of staking a claim. Although only 18% of Americans report using mobile payments on a regular basis, the total value of transactions in 2016 is expected to triple to $27 billion. This is a gold rush that everyone wants to get in on.
While there’s definitely money to be made, the mobile payment industry has been on something of a bumpy road. Companies are chasing the market with digital products that are an afterthought to their core products. The technology is often outdated and a dependency on the cloud has its vulnerabilities. None of this is in the best interest of the customer. Each solution is tailor-made to a specific pool of eligible customers and excludes the rest. The pool of customers shrinks with each competing service. Retailers might accept one or two payment options but reject equally popular options. What’s a customer to do when paying cash or using a credit card is guaranteed to work while their mobile payment platform might not even be accepted?
Competition is essential, yet the fragmentation of the industry is holding back potential growth. For mobile payments to become as common as cash or credit, there needs to be one universal payment platform. If you look at the payment stack, companies want to be a first-layer player in order to control the downstream benefits. That’s what’s going on now and it isn’t working.
Instead of controlling a layer of the stack, all layers need to be removed. At the very least, as Alex Rampell writes on TechCrunch, the top stack needs to be opened up. Imagine a universal platform that’s not tied to a single hardware technology (Bluetooth, NFC, etc.) or manufacturer (Apple, Samsung, Google). Ideally, this platform would have heightened privacy measures and the means to exchange all digital tender types. It’d be frictionless, fast, and built with the consumer in mind. Such a platform could go beyond payments and become so much bigger than anything on the market now. This technology would be harnessed to send personally identifiable information like medical data with the same sensitivity that payment information is sent. This, more so than any existing platform, would be the future.
Hit and Miss
The very mixed results of companies highlight why a universal platform is needed.
Apple launched its Apple Pay digital wallet back in 2014 and data from PYMNTs shows a modest adoption rate despite the enormous installed base. Google Wallet, meanwhile, has been repositioned as a peer-to-peer solution. Samsung Pay and Android Pay are locked in heavy competition for a pool of mostly disinterested users. E-commerce solutions are also lackluster. PayPal’s has been focusing on high-profile acquisitions in the past couple years even though there’s been very little innovation in their product for the past decade. Visa and MasterCard have partnered with some big-time clients, yet haven’t obtained a critical mass of active users.
A universal platform is what customers really need. Companies are trying to stake their claims in the industry while customers aren’t being served in a way that they deserve. Such a solution isn’t impossible once the industry realizes that a universal interface would be the best way for mobile payments to succeed.