NCR’s Mark Critchett suggests that mobile payments may be overhyped

Last month, I presented at the Wireless Technology Forum in Atlanta, Ga. During the Q&A session, the panel got the following question:

“What’s the consumer value proposition for mobile payments?”

My colleague at First Data, Dominic Morea, spoke up first with a response. Now, as a payments processor, the natural answer that you’d expect from First Data would be: MOBILE PAYMENTS IS GOING TO CHANGE THE WORLD! And who could blame Dominic or anyone from First Data if they responded that way. The more payments being made for a processor such as First Data, the better. But Dominic’s response surprised me. He said:

“You know, there really isn’t one.”

Whoa. A payments processor saying that there isn’t much of a consumer value proposition around mobile payments is like McDonalds saying that there isn’t much of a value proposition around chicken nuggets. But – in truth – Dominic was absolutely correct.

Let me be clear (and Dominic thinks the same way): a mobile wallet (or wallets) is the future. But the concept of the mobile wallet is receiving unprecedented hype. Lost in the magic of mobile payments is that fundamental question “How does this make consumers lives better?” Because, ultimately, no technology survives without undying loyalty of consumers.

For banks and credit unions, we need to think about the mobile wallet beyond replacing the magstripe and replacing a card swipe with a tap of the mobile phone. What is the total consumer experience? Can we improve upon the security equation – both real and perceived? Can we utilize the mobile phone to enable new ways of interacting with the bank, such as remote deposit capture for deposits, or pre-staging ATM or check cashing transactions. Can the enhanced interaction over the mobile device be effectively integrated with all of the financial institution’s channels – mobile banking, online banking, branch, phone and, of course, ATMs.

On the other side, mobile payments offers a scary scenario for banks. The potential for financial institutions to be cut out of the payment process by “virtual accounts” like Paypal or Google wallet, or even new forms of “currency” like rewards points and coupons,  is a real threat and it is keeping some institutions up at night.  Not to mention that using the mobile phone to displace card based payments with ACH based payments at the point of sale has huge fee income implications for banks.

But here’s my main point: if you focus too much on the threat of mobile payments, you’re going to miss the broader value proposition around the assimilation of mobile into the consumer’s purchasing ecosystem.

We know all the stats. Aite Group says about 3,500 financial institutions globally offer mobile banking, and they expect that number to double by the end of the year to result in nearly 40 million mobile banking users in the U.S. alone.

Juniper Research suggests that, worldwide, more than 530 million consumers will be using mobile banking by 2013. Consumers get the value proposition and mobile banking is here to stay. And mobile banking is a great opportunity for financial institutions to connect with their customers and expand their reach.

Financial institutions have to think about making the mobile phone an integral part of delivery channel – not just a one-off complement to existing infrastructure.

As I mentioned on the panel, NCR is working in our retail industry channel on concepts that would eliminate the checkout counter. Under NCR’s concepts, we can replace checkout with a mobile payments device for consumers to scan their products at the shelves. That’s the type of breakthrough, game-changing consumer experience that can last. And that’s how we have to think in the financial services industry.

Here’s a link to the video of the Wireless Technology Forum. I’d love your thoughts on how financial institutions should rethink their mobile wallet strategy.

http://wirelesstechnologyforum.org/meeting-videos/

Mark Critchett is director of marketing for payments and converged channels in NCR’s financial services line of business.