With all the innovation in technology and business, as well as new consumer behavior, it’s sometimes difficult to separate what will shape the future of payments from what is just hype.
By closely examining where new technology and consumer simplicity intersect it may be possible to tell which payment innovations are ready for prime time – making the picture a bit clearer.
Hundreds of great ideas are generated every day, but only a few may have the right combination to get traction and scale right now. With that in mind, here are a few predictions for the payments industry in 2012.
Mobile payments to ring louder
The mobile industry is shifting into “third gear,” with smartphone penetration reaching global scale and well on the way to becoming the dominant connected device for 2 billion+ people over the next few years. The smartphone market in India saw a growth of 21.4 per cent, over the last quarter and 51.5 percent year-on-year (IDC Q3 2011 India Mobile Phone Tracker Report). With the increasing adoption of smartphones and 3G becoming a reality, the outlook for mobile payments is optimistic for India.
A global mobile payments study by McKinsey & Company in 2011 revealed that of those surveyed in India – 11 per cent said they were likely to make mobile payments once to several times a day, 30 per cent said they use mobile payments once a week and only 8 per cent said they would not use mobile payments in 2012.
Add mobile innovations like the iPad, which has already become the fastest adopted electronic device in history, and mobile is really hitting its stride. The future of computing is happening now, and quickly reaching a level of scale to enable global innovation.
The true power of the connected mobile device lies in how dramatically it is changing consumer behaviour and disrupting existing franchises. Mobile applications are redefining the way we interact with service providers, for e.g. to plan our travel. Previously, travelling across cities by train would mean standing in a queue with hundreds of others to buy your tickets. Indian Railways first launched their IRCTC online portal to help consumers book their train tickets from the comfort of their homes. Now with IRCTC’s mobile app for train ticket bookings, you can plan your holiday on the move and pay anytime anywhere.
Don’t think that mobile devices will be your future identity? Try spending an hour walking around without your phone, wallet, or keys. I barely made it to the end of the street before panic set in. That was not the case just two years ago.
A fuller integration of the online and offline commerce worlds
Indian infrastructure has leapfrogged their western counterparts in installing and adopting new mobile infrastructure, and now quickly adopting range of use cases for mobile phone. We are in the era of the connected consumer. All of us are now rarely more than few feet from a connected device at any given time – and we are taking full advantage of this connectivity. We are using the internet to do everything from check cricket score, download ringtones, compare prices, pounce on deals and read reviews in real time before we ever set foot in a store to make a purchase. All this disrupts conventional retailing, but the news is not all bad. Merchants who can cater to these connected shoppers can developer deeper, more loyal and more profitable relationships with their customers.
But this blurring of lines between offline and online commerce is about more than just letting people use their mobile devices to shop.
Social commerce has seen some exciting developments recently that show more ways that the online and offline worlds are becoming more closely integrated. We just watched Louis C.K. disrupt the media industry by profitably producing and selling a comedy special directly to his audience through his website, clearing more than $1 million in 12 days. Zynga, the creator of FarmVille went public at a multi-billion dollar valuation, thanks to its ability to sell digital tractors and barns to its ever-expanding user base.
It’s also not hard to imagine more social commerce innovation, such as person-to-person payments of non-cash currencies (“Help me fly for my grandmother’s 90th birthday by lending me your miles”) or creating fundraising movements (“Take a photo of me running the Mumbai Marathon so you can donate directly to my cause”). The possibilities seem endless — and are incredibly powerful if you think about it.
As our online and offline worlds continue to merge, the war of commerce will land right on the doorstep of Indian merchants who have resisted taking the leap into online. Local retailers should understand that as their customers spend more of their life online they will be increasingly comfortable buying from retailers who do not have a physical presence in India – as long as they can find the best selection, the best price and the most convenience.
Indian merchants of all sizes will need to adapt, while at the same time making sure the online world doesn’t drown them in fraud. Louis C.K. isn’t crazy to go direct to his fans — those who don’t know their customers and communicate with them regularly will take a beating from competing on margins in this connected economy.
Birth of alternate commerce devices
I’m a big believer that a key driver of payment innovation is going to be the enabling of alternate commerce devices. We’re seeing requests for payment capabilities on everything from gas pumps to refrigerators. As all devices become “smart and connected,” it provides more consumer choice and enables the digital wallet in the cloud to show its true value.
Imaging a day when our wallet intelligently figures out how you should pay for things. In the near future, we will see this come to life in many forms globally, and the “a-ha” moment around digital wallets will make sense to many. As payments move to the cloud, essentially anything with an “on” switch and an IP address can become a payment device. Think about Samsung’s Wi-Fi enabled refrigerator or Wi-FI enabled cars from manufacturers like BMW and Audi. It’s a small jump to turn them from Internet enabled to Internet-payment enabled.
And, this experience is already making its way into living rooms of consumers in western markets with t-commerce (commerce from your television).Yes, teleshopping has been around but In the near future, you should be able to buy from your TV as easily as changing the channel Imagine the ability to watch a Chennai Super Kings game with an option to buy your favorite team’s cricket jersey from the comfort of your couch.
These are exciting times for consumers, and it’s bringing a ferocious level of change to a payment industry that needs it. 2012 will provide enough innovation to give this industry a good shake. It’s exciting to have a front row seat!
