[Dave Birch] I heard the phrase “alternative payment technologies” at a meeting today. I wonder what it means? Payments News noted a report out from Pelorus about alternative payment technologies in the US, predicting 15-fold growth over the next five years. The alternatives they look at include contactless (which I would argue shouldn’t be seen as alternative any longer), smart cards (which are what contactless payment cards are, even in the US), SMS (which is about as mass market as you can get, although I just can’t see taking hold for payments in the developed world), biometrics and NFC. But I’m wondering what they are an alternative to.

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The answer seems to be that they are alternatives to the bank-issued, magnetic-stripe powered plastic card. But a more interesting question would be to ask which technologies will provide an alternative to existing business models, not an alternative to existing technologies. In other words, are any of these technologies disruptive? I’d be curious to see what other people think, but my feeling is that both biometrics and NFC have the potential to disrupt business model whereas contactless smart cards (and SMS payments) do not.

My five year predictions, for what they are worth, is that mobile payments will integrate with contactless because of NFC, that biometrics will stay a niche and that the U.S. will start issuing chip cards to deal with CNP even though they won’t use chip & PIN at POS.

My opinions are my own (I think) and are presented solely in my capacity as an interested member of the general public. [posted with ecto]


  1. For merchants on the Web who want to be accessible to a global consumer, the APO (Alternate Payments Options) landscape is a very fragmented one, with many regional PSPs having surprising mindshare in their markets.
    The link below is to a page on our site that shows a subset of the payment methods that merchants should consider accepting if they want to be accessible to consumers outside of North America. It’s from our PayByCash (paybycsh.com) service.
    We currently provide payment acceptance via mor than 50 different methods, with more being added every month.
    Once you look outside the US the APO market is staggering, with a surprising amount of ecommerce done that way.
    Best regards.

  2. I heartily agree that the context we should be using is how technologies can drive alternative business models that make sense to both consumers and merchants — and how that affects usage for all payment types. The separation of ‘technology’ from ‘method of payment’ is necessary.
    Biometrics are a great example. We’ve seen the implementation from a payment perspective of biometric solutions driving ACH transaction volume. (Whether it makes enough sense for both merchants and consumers on any grand scale remains to be seen…).
    This is the context that traditional (“bank-issued, magnetic-stripe powered plastic card”) payments providers need to have to understand the real value of “alternative payment technologies.”

  3. Dave: Contactless payment space is indeed fascinating – and indeed your observation that NFC has the potential to be disruptive is an important one. Maybe the banks have already made that observation – and that could be the reason that they are NOT making a rush towards that solution.
    Btw we are betting that banks don’t have to let contactless payment be disruptive. Tyfone has come up with a payment solution through memory cards – check out http://www.tyfone.com and look at the flash demo on the front page. These cards can be issued by banks to be used in any phone with a memory slot. And as you may have observed memory cards in phones will be as ubiquitous as color screens in the next couple of years – they already are in more than 30% of the phones shipped in 2006.

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