Osama Bedier, VP of Platform, Mobile and New Ventures at PayPal, joins the tradition of making predictions for the coming year. I’m always loath to do this, for two reasons:
because it’s a dangerous game as a consultant. Consult Hyperion are working on plenty of client projects that are confidential and relate to new products and services that will be announced during the year and I don’t want to mess up and accidentally “leak” any of these;
because it’s really difficult and wrong predictions come back to haunt you.
In Osama’s case, however, I think at least four of his five key trends are spot on and the fifth is probably right. Let’s join in the New Year fun and have a look at what he said.
Mobile, mobile, mobile. Wallet in the cloud. The digital wallet. Call it what you want, but mobile devices are poised to become a primary form of payment for millions of people around the world… Consider that PayPal saw a 310 percent increase in mobile payment volume on Black Friday 2010 compared to the previous year, and a 292 percent increase in mobile payment volume on Cyber Monday 2010 compared to Cyber Monday 2009. Without a doubt, mobile payments are here to stay and will see significant innovation in the coming year.[From Five payment trends to watch in 2011 | VentureBeat]
This is impossible to contradict and anyone who doesn’t think that mobile is central to the evolution of the entire payments market this coming year is absolutely 100% wrong. I’ve consistently said — for a decade — that mobile payments will be more important than web payments and I absolutely stand by this. I think I might go further and say that the biggest mobile payments story of the year will be the arrival of Android phones with NFC interfaces, and these will transform the payments landscape.
T-commerce. TV will go from a passive (viewing-only) experience to a highly interactive activity as more and more apps are developed specifically for the platform.[From Five payment trends to watch in 2011 | VentureBeat]
One of the very first reports that I ever wrote about payments and the new media said the companies should focus on t-commerce as well as m-commerce because in the medium term these would become the key channels. I was wrong about the TV side of things: it has take much longer to develop than I thought, probably because the sector remains focused on “traditional” business models around subscription and advertising. Surely it’s going to change this year.
‘Appification’. IDC issued a new report that says, among other things, over the past three years the mobile apps space has seen an “appification” of “broad categories of interactions and functions in both the physical and the digital worlds.” And this only stands to continue — in fact, the same IDC report projects mobile app revenue to grow from $4.9 billion in 2010 to $35 billion by 2014.[From Five payment trends to watch in 2011 | VentureBeat]
In the smartphone world, payment apps are going to be big, but I think we all recognise that they are one part of a new value-adding ecosystem that involves vouchers, coupons, loyalty and so on as well as the basic payment itself. This is why I suspect that simply porting exiting payment mechanisms (eg, credit cards) to the mobile platform will not be sufficient to obtain competitive advantage.
A Cashless Society. Now let’s not go crazy here, I’m not suggesting that by this time next year we’ll be living in a cashless society. Far from it. That said, 2011 will undoubtedly see several significant steps that will take us closer to such a world.[From Five payment trends to watch in 2011 | VentureBeat]
I think he’s right about this, even though plenty of other people are sceptical. In many places, these first steps have already been taken and I think the pressure to reduce the amount of cash in circulation over the coming year will come not from the electronic payments industry but from governments, law enforcement agencies, trade unions and others who want to make a start on reducing crime and tax evasion. The trigger, however, is mobile. It is the arrival of mobile payments that makes cashlessness a realistic possibility and means that the industry can respond to these pressures.
Social shopping is clearly poised for significant growth… Among the key drivers of this trend are micropayments and digital goods. Along the same lines of merging physical world experiences with digital activity, the ability to make quick, small purchases for online content represents a huge opportunity for both content producers and providers.[From Five payment trends to watch in 2011 | VentureBeat]
This is the one I’m not sure about, and that’s because while we tend to focus on what’s happening at Facebook and the like, I think we’re still in the very early stages of social media and I don’t think we really understand how the sector is going to develop. The role of mobile, NFC and other connectivity technologies in the evolution of social media is still changing and the disconnection technologies are still awaiting standardisation and mass deployment. So while I agree that social shopping will continue to grow, I’m not sure whether it will change the payments space or simply use the products coming from the payments space (or, to put it another way, will Facebook credits break out into new markets?). Perhaps there’s another possibility for this fifth spot. Over at the Financial Services Club, someone whose opinions I always takes seriously highlights something else:
Major investments in creating agile infrastructures and platforms to respond to regulatory requirements.[From The Financial Services Club’s Blog: Six key technology developments for banks in 2011]
I’m sure Chris is right. The changing regulatory environment is bound to be a big influence on the technology spend for the coming year. New platforms that help to make compliance, in particular, easier to manage will be very attractive to financial institutions. You only have to look at what’s been happening in the cards world to see this.
He noted that PCI compliance has been a significant burden, costing an average of $20,000 for merchants that average only $32,000 in pretax profits; they will gravitate to solutions that reduce PCI scope (tokenization, point-to-point encryption, etc.).[From Tidbits and Sound Bites from the 2010 Chicago Fed Payments Conference — Payments Views from Glenbrook Partners]
Scatchamagowza! Compared to the cost of renting the terminal, merchant fees and other costs associated with accepting cards payments, this is huge. Shaving a tiny amount off of fees won’t tip a business model anything like as much as making a significant cut to compliance costs, so this must be a priority area for investment and new services that can help will find a ready market.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]