Well. How about that. You could have knocked me down with a feather. Blimey. And so on and so forth. Check this out…
Yes. It’s true. The Southwest Train ticket machines have finally gone contactless, and only a decade after I first used an NFC phone to pay for something I was able to use an NFC phone to buy a ticket in the machine at Woking station.
Now, let’s be clear. Woking is no stranger to contactless. Within the town boundaries, a wallet is an unnecessary accoutrement. I suppose some people might want to use cash, cheques or cards for cultural reasons, much as hipsters insist on using vinyl records, but they no longer need to. Indeed, only yesterday when my good lady wife asked me to pop to the shop to pick up a few baking essentials, I jumped on my bike and set off, never giving a thought to wallets or wads. I had my phone set to Planet Money and that was all I needed.
On the few and far-between days when I am working at our office in Guildford I don’t need a wallet. When I’m working at home I don’t need a wallet. But when I am working in London I do. Or at least, I did. The two hurdles to handset happiness were Arriva buses and Southwest Trains. But a couple of years ago, Arriva launched their mobile app so I don’t need cash for the buses any more. The only remaining barrier was Southwest Trains. But it’s all different now. I bought my train ticket with Apple Pay for the first time today. In Woking station, if nowhere else, it was #cardmageddon.
What? Don’t Southwest Trains have a smartcard you say? Well yes, they do. But you can’t use it to buy tickets online. You have to go to the station and tap it on the ticket machine and then put in your payment card and then tap it again so it’s hardly worth bothering, especially since I need to press the receipt button and wait for a paper receipt anyway.
May 2017 will be as famous as a September 1958 (the Fresno Drop) in the history of the inexorable march to cashlessness. For this is when I went down to Woking station, after a couple of weeks’ globe trotting, to discover that everything had changed. I am living in a new world. The ticket machines at Woking station now have contactless! I can now leave my wallet at home for good!
A funny thing happened on the way to Merchant Payment Ecosystem in Berlin. Three funny things, actually. I tried to use an app to buy something on the way and I got a message saying “transaction failed”. It didn’t tell me why. I’m sure the service provider didn’t know either, as they just got a decline from the issuer. Some forensic work on my behalf later determined the cause of failure was that the card I’d given the app a couple of years ago had expired. The new card was on my kitchen counter back home, but of course it was my problem to have to go around all the stupid apps on my phone that didn’t use Apple Pay and update update each of them individually.
Then on the plane on the way to Berlin the British Airways cabin crew said that the on-board POS had a problem because it would accept AMEX and Visa cards but not MasterCards. No one knew why. I was desperately hoping that they would put out an emergency call over the public address system “is there a merchant acquiring expert on the plane” (there were about 200 of them by my estimate) but, sadly, they didn’t and so those people prepared to cave into BA’s new policy of making passengers pay for coffee had to struggle by as best they could.
When I got to Berlin I jumped in a taxi at the airport and set off for the hotel where we were going to be discussing all the new stuff going on in the world of merchant payments. We got to the hotel, I took out my card and was actually stunned to hear the driver tell me “I don’t take cards”! Seriously! In a supposedly civilised country and a city that wants to challenge London’s position as fintech hub! So the driver had come into the hotel with me and wait until I checked in so that I could get hold of some cash in order to help him to evade tax.
I drew on these experiences in my opening address to make three main points to the delegates:
Electronic payments are not ubiquitous, but that’s not because of the technology. The taxi driver could perfectly well have taken electronic payments if he wanted to, but he didn’t want to. When I went to dinner the following night, I of course used an app
Evolution in our sector isn’t really about payments, it’s about identity. Since BA know who I am, and since I had to show a passport to get on board, and I have British Airways Amex card and a BA app on my phone, why are BA messing about with chip and PIN at all? Why not just use my BA app to charge to a token on file?
We’re on the edge of the thingternet. Look at IBM’s recent announcement of a partnership with Visa. Everything is becoming a card, everything is becoming a POS. So what happens when I’m driving down the motorway and my card expires and a new one is issued? Does my car stop dead in the business class motorway lane while I have to send a motorcycle courier to fetch the new card from my house so I can type in the new expiry date and the CVV? We’re shoehorning systems into environments they were never designed for so maybe it’s time to rethink and construct a new kind of infrastructure (based on identity, obviously).
While I’m on the topic, by the way, this was my first visit to Merchant Payment Ecosystem despite a number of recommendations from our guys and others, and I have to say that it’s an excellent event. I was genuinely flattered to be asked to chair the first morning and the key panels. The first was with the panel about digital commerce and omnichannel payments with:
The discussion was absolutely first-class. Sometimes it can be difficult to get the conversation going on the first panel of a major event but we hit the ground running on this one. As I explained the audience at the time there were no rehearsed questions and no PR scripts to follow. We had a genuine conversation about a wide range of topics and I can see from the feedback that the delegates greatly appreciated hearing smart people speak their minds. I really hate to paraphrase such a fascinating discussion, but if forced to I would say that there is a shift underway from the POS as a device to the POS as a platform and there is a convergence under way but that convergence is towards the virtual rather than the real. In other words, the checkout and payment experience is converging to the app, not the tap (okay, that’s my bumper sticker and not exactly what the participants said but I think it conveys the sense of the discussion!) and the payment experience will be the same whether in-store, on the phone or at a web site.
The second panel was great too. The organisers did me the great honour of allowing me to cross-examine some of the industry’s most senior people on behalf of the wider audience. The panel was:
Paul Thomalla, SVP Global Corporate Relations and Development, ACI Worldwide.
The panellists allowed me to push them on some of the tough issues facing the acquiring and processing parts of the industry. I made the point that in an environment moving towards instant, push payments the role of acquirers and processors will change substantially. Naturally, since everyone on the panel knew more about this than I did and had already thought of it, they had some great perspectives. I was particularly interested by their views on future value-added services which, it seemed to me, had a lot to do with data. Hence I was left with the impression that some of the big plays coming in this space are no longer about devices or charging bundles or apps but about big data, analytics and machine learning. I also rather liked the suggestion that emerged from the panel that we need to begin to reframe the acquirer as a merchant service provider (MSP).
All things considered it was a terrific event. My colleague Gary Munro (Consult Hyperion’s principal consultant on the acquiring side), who chaired a couple of excellent sessions at the event, has attended for the last couple of years and he knows a fantastic amount about this business and he always recommended it highly.
This will definitely be a fixture in my calendar from now on – a couple of days very well spent and the whole experience was only slightly undermined by the Berlin airport baggage handlers strike on the final day.
I’m sure by now you’ve all read about MasterCard’s acquisition of VocaLink. If not, you can listen to me talking to David Yates, the CEO of VocaLink, about it on the latest podcast in our Tomorrow’s Transactions series, either via iTunes or directly via our web site. It’s very interesting, in my opinion, to hear David’s rationale for the deal and his very positive view of the future that has VocaLink experience in instant payments married to MasterCard’s global presence. And for more on this deal, Karen Webster over at Pymnts spoke to MasterCard’s Chief Product Officer to look into the “why VocaLink and why now” behind the acquisition and wrote a nice piece about it.
With VocaLink’s Zapp proposition, Miebach explained, a consumer can go to a merchant’s checkout, use their mobile device to access their trusted bank’s mobile app, and see a variety of payment options including Zapp’s pay-by-bank offering.
Personally, I think this initial analysis didn’t touch on a couple of issues that are relevant to understanding the deal. First of all, the reason why VocaLink was worth so much to MasterCard rather than anyone else (and thanks to the collapsing Pound was a bargain for them) is that Visa dominates the UK debit market and the push future for “instant payments” at retail presents a debit-like proposition to consumers. Zil Bareisis made this point over at the Celent blog.
Visa controls 97% of the debit card market in the UK. I would imagine that a Zapp-like solution would have more of an immediate impact on debit card transactions rather than credit card spend.
Secondly, if a push payment debit-like in-app and in-browser alternative to the traditional debit card which did not run through the card network but through the Faster Payment Service (FPS) is attractive enough for consumers to want to use then merchants will have to accept it and potentially pay more than they do for existing debit cards (which they will do, because the push product will have more attractive rules and rights) and that will give scope for MasterCard to offer rewards of one kind and another.
Somehow this takeover didn’t make the news headlines, but mark my words it was one of the most significant events in the evolution of the UK payments industry since Reg Varney got a tenner out of that first ATM in Enfield half a century ago. It’s a significant milestone on the road to #cardmaggedon, and it’s not only me who thinks this. Using mobile phones to make instant payments is going to impact the use of traditional plastic cards and plastic card products. Not just because the card will vanish into the phones but because the products themselves will be reinvented for the new age.
As ANZ rolls out Android Pay to its customers, the Australian bank’s chief executive Shayne Elliott has predicted that mobile payments could displace plastic cards in well under a decade.
This is exactly what Anthony Jenkins said (when he was head of Barclaycard, before he was the CEO of Barclays) when he said, as memory serves, that mobile phones would get rid of cards long before they get rid of cash. But I think the change is more profound than he was thinking about back in the day.
The mobile phone isn’t just going to get rid of the 1940s embossing and 1950s card and the 1960s network and the 1970s magnetic stripe and the 1980s chip and the 1990s online card-not-present use and the 2000s 3D secure and keep only the 2010s network tokenisation in devices but it is going get rid of the whole bundling of PAN-based payment with credit and fraud management and merchant guarantee. The push for push, as they say (or, at least, I say) is inexorable.