Mobile Payments Convergence

On-line meets Off-line: Mobile Payments Convergence Signals Tipping Point for Adoption

In Mobile Solutions by Giles Sutherland

Landmark partnership between Visa and PayPal makes mobile mainstream and sets new benchmark for banks hoping to compete in mobile payments.

We often assume it’s a question of “when” not “if” the smartphone will transform consumer payments on a mass scale, but to date we have seen a trend of fragmented services and mostly-low consumer uptake. Last week’s announcement that Visa and PayPal will join forces is likely to change this, finally offering the answer to the question of “when?”

The announcement marked more than just a global collaboration between two payments behemoths. It points to something much bigger.

PayPal HeadquartersPaypal has always been synonymous with digital payments. Not only is it the original pioneer of online transactions, it’s also the engine behind Uber’s automated billing platform, Braintree, and it powers popular US peer-to-peer transfer platform, Venmo. On each of these platforms, Paypal has done what most other mobile payment services have failed to do: deliver such a superior user experience that it actually compels consumers to pay via mobile instead of traditional methods. By formalizing the arrangement with Visa, PayPal can now expand their offering using Visa’s global acceptance network for in-store mobile payments, blurring the lines between remote and real-world payments.

Though it brings a new competitor into the space, it also is the sign that mass adoption of mobile payments is imminent. In response, banks that want to compete will now need to seriously up their game.

In-spite of huge advances in mobile payments in recent years (including tokenization, cloud based payments and HCE), and a rapid expansion of NFC devices and POS terminals, we still have yet to see a critical mass. Even the highly touted ApplePay launch hasn’t lived up to expectations and seems to be introducing even more fragmentation rather than enabling broad scale.

PayPal’s advances have the potential to change that. Unlike ApplePay, Paypal is open and cross-platform. It can live on any OS and serve any bank—thus serving all of Paypal’s customers (almost 200 million of them, and counting). If PayPal can continue their track-record, they may do more than introduce large scale mobile payment adoption—they may create a new standard for what the mobile payment experience should look like in the real world: frictionless, easy, customer focused.

What does it mean for banks driving to compete in the mobile payments space? It means your customers will have higher expectations than ever. They will be looking for:

  • • Convenience
  • • Cross-platform services
  • • A seamless interface
  • • Value-added services

Banks still have a strong hand in the game: after all, customers still value familiarity and accrued trust. Banks have established relationships with their customers. The key will be for banks to translate that trust and insider knowledge into relevant services and world class UX that speaks directly to their customers’ unique needs.

Along the way, Paypal will serve banks by entrenching mobile payments deeply into consumer  minds as the fastest, easiest way to pay, opening the door for banks to deliver new value to consumers—to create products that are truly relevant and add competitive value.

I, for one, am excited to see what happens when Paypal’s strong customer-focus and smart design step into the real world of face-to-face payments, because I can’t wait to see how competitors respond.