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Will the Mobile Payment landscape mirror of the American political scene?

dolandMobile Payment are in a bubble in the US.  Geographically, that is. Blue states are typically the most common mobile payment (and technology) consumer friendly locations.  Red states are typically reliant on plastic and more importantly cash (less technology) to make a payment.  This technology adoption follows the 2016 US Presidential election voting trends.

With the result of the Election and the Republican party winning an election fought on miss-information and half-truths, its interesting to reflect on how the next four years will impact technology innovations and Mobile Payments.

The campaign was won partially on the promise of bringing back jobs in the industrial sector and others that are being taken over by technology.  A comparison in the mobile payments industry, is like promising new building for banks branches in the US because it will provide more jobs, even though most Americans are performing their banking activities online.

Can this rebuff of technology and progress in the real world also happen in the mobile payments ecosystem?

The growth of mobile payments can only be successful if it covers the nation and we get more and more customers to change their consumer behavior to scan their phone at the terminal, rather than swiping a card (or even carrying cash).

The result of the election has clearly shown that technology advancement and innovation doesn’t always move as fast we think and many members of the community often perceive technology advancements threats.

So, how does the Mobile Payments Industry prevent technology moving too fast and leaving 51% of America behind, while maintaining a steady growth pattern of consumer adoption and technology improvement in the near and short term.

Is there already an inbuilt emergency brake?  In the shape of the Chip & Signature process?  I heard a statistic the other day, that it takes 38 seconds to complete a EMV transaction request on a terminal.  That is indeed not a technology improvement.  In Europe, it a sub 10 second process to complete the cycle.  Its interesting to look at other markets around the world.  In Europe, The Netherlands and Sweden are much smaller countries but have diverse demographics in cities’ and in rural areas but are moving faster towards a cashless environment than anyone else and have done it within a very short time.

Mobile Payments is totally the future of payments for many Americans living in progressive cities but its going to take much longer to cover the entire United States.  The US smart phone coverage is a pretty good indicator of this, we saw over the last 10 years’ smart phone coverage has expanded to all corners of the US, even if the model of the phone are several years behind.

It’s a pretty good bet the mobile payments will be the most popular way of paying in the future, but for now there is still a part of American society that want to walk slowly into the future and use the traditional cash or credit card payment option, which are perfectly fine.  However, unfortunately they’ll have to figure out mobile payments, because it maybe the only way to pay in 5 to 10 years’ time and banks and technology merge closer together.

 

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Can FinTech get the unbanked, banked?

Can FinTech get the unbanked, banked?

kenyan_farmer_phone

Isaac Mkalia, 20 years old, a teacher by profession is checking his Mobil phone.

There have been many articles written about the unbanked in America and how the problem can be solved with financial technology, or FinTech.  With companies like, Apple and Google creating technology ecosystems that are making life easier to do many things, including Point of Sale transactions (via mobile) and online transactions, and maybe in the long term banking.  The solution to get the unbanked, banked should be glaringly obvious.

But, maybe it’s not that easy, is it really just technology that can solve the problem?  The “unbanked” is typically a term for people who do not use banks or banking institutions in any capacity. It is also used to describe people who are relaying on personal checks or cash for their banking activities.   An “unbanked” person generally pays for things in cash or alternately a money order, which is more expensive and can’t be used everywhere.

Why do Unbanked people need to become banked?  Well, from a banks perspective, they want to have more people using their services that they make money from.  And from a society perspective, its generally accepted that you can achieve more, like getting a mortgage and paying bills electronically with a bank account.

It’s been reported that many unbanked people that lack theses banking capabilities, have a mobile cell phone. They are often a pre-paid low cost phone that aren’t always connected to the internet.  There is where FinTech can help.  As the technology keeps developing, phones are getting better and faster and that means the phones we have now will become obsolete and passed down to unbanked people of society, giving them the opportunity to access the internet easily.  Mobile phones have enormous processing power and will eventually be the primary device for banking and finance activities for many of Americans.  However, it’s still early stages, the use of mobile banking is growing, users can access the app at any time.  It’s still not our first option for banking. 

To provide a little context to the severity of this issue, nearly one-third of the population in the US (106 Million) are either under unbanked or under banked.  The FDIC (Federal Deposit Insurance Corporation) state that around 17% of American’s are underbanked.  Meaning they use a bank account in addition to an alternative financial service like, payday lenders – which we now see the CFCB introduction new legislation that will probably put a lot of payday lenders out of business or payroll cards.

With the expansion of cell phones in the US, it has also provided a mechanism for the underbanked to facilitate financial transactions.  The FDIC also state that 87% have mobile phones as actually used for their financial service.  And 40% of underbanked consumers with mobile phones had done mobile banking in 2013.

One of the fundamental issues with the adoption of consumer’s mobile wallets is the consumer’s buying behavior (for example – what they are doing at the payment terminal – getting your wallet out of your pocket?).  Consumers aren’t familiar with the process of using their phone to make a purchase, its still quite foreign to users, even early adaptors.  But, as time go on, consumers will eventually change their way of paying and this will drastically open up the world of mobile first for everything, especially banking and paying for bills and services.

In reality, we can see cell phones as luxury goods.  That is, something that the majority of society use as a mini computer in your hand.  It has only really been the last 2 or 3 years that the Mobile Payments and Banking world has exploded and most of the phones in the market are not even capability of performing financial activities.

Federal Governments and Non Profits

There is also a lot of involvement form government and industry bodies.  Non-Profit organizations, such as BankOn and Pew Research Trust are doing in-depth research into the extend of the unbanked issue in the US and are looking at small and large companies to help solve the issue, or at least contribute something to the discussion.  I was recently at a Pew Research Trust Symposium on Mobile payments and the unbanked and there are many different aspects and ways to view the solution, but what is clear is that all parties need to work together to solve the problem.  This research is so insightful for large organization that want to understand the customers’ needs at a much deeper level.

This means that big companies can clearly make a change to the underbanked.   Phones that are cheap and widely available would make a huge difference for the unbanked to be able to have access to secure funds.

Seeing banking technology in practice

The greatest example of the unbanked population using technology to solve an everyday banking problem is in Kenya and the payment method, MPESA.  MPESA didn’t adapt to the use of smart phones or a new app to enhance the user experience.  The Kenya solution is somewhat dependent on the messaging platform of the telecommunication company which is more independent.

Several companies and groups have tried to bring this to US, but with not much success.  But the current structure this cannot be replicated in the US, because of the following reasons;

The existing banking landscape – The Kenyan banking system is not as advanced as the US and therefore the day-to-day banking with physical banks and even setting up a bank account is not easily accessible to millions of Kenya’s.   Therefore, an easier solution is needed.  In the US, there are Bank Branches in just about every major city, with many options for banking customers.

The lowest level of technology – One of the most successful parts of MPESA is the it’s not a complex solution and it doesn’t require a software update every couple of months.  It can be done with the use of any basic cell phone.  The thirst for new technology and services in the US restricts a universally applicable banking solution that allows any users with the lowest level of technology to participate in the program.  The concept of disruption has many great advantages for customers, but often disables a countrywide solution as there is a fear of being overtaken by the next solution.

The solution solves a problem (not enhances a current set-up) – MEPSA solves a problem in a market that the unbanked are more common than the banked.

Companies like Apple, Google and Microsoft have the software and hardware power to embrace all members of the community as individuals who are contributing financially and not being swallowed by predators’ companies looking to make a short term profile.  As mobile banking and mobile payments grow in the US and the world, all parties must take into account all members of society, especially the underbanked community.

Reference 

– http://money.usnews.com/money/personal-finance/articles/2014/04/10/options-for-the-unbanked

 

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Is there anything NFC can’t solve?

nfc

NFC has made a massive jump into our mainstream life since the launch of ApplePay.  There are not many who are unaware of the technology change in our buying behavior patterns, or more accurately what is about to come to our buying behavior.

There is also a movement from wristband provider Jawbone to leap into the payment space with the current partnership with American Express, that sees the wristband becoming a payment device like the AppleWatch or a NFC enabled Wristband at an event.

If you extend NFC to others parts of your life, like  to the internet of everything – accessing your house, paying for things in your community

What about receiving shipments from Amazon or Google, or accessing your new car and starting the engine with your wrist band.  There will never be the chance or misplacing your keys again.

I cant wait to see what happens next with NFC

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Supporting Local Businesses via Crowdfunding

In my neighborhood, there is a new huge pharmacy being built in place of an old Chinese restaurant, which doesn’t make sense because there are already two other pharmacies and a supermarket on the street and caters for our needs.  I have a problem with this.

I love small businesses and people who create things and sell them to the community.  I think helping to promote small businesses and keeping the community running in its own ecosystem is such a unique thing and makes the best neighborhoods in the US, but more and more big businesses are changing this.

I want to create a process that allows small companies staying in business with community support.  The idea centers on a similar process to KickStarter, where it allows individuals to contribute funds to an idea or project to help gets made.  This research investigates the idea of helping existing businesses to grow and stay local with all the big business competition driving into all neighborhoods.

The community benefit of local independent stores is huge.  It allows your neighborhood and community to be tighter linked together so you as a shopper can promote locally made products and services.  A recent study found that there is a 39% difference between independent retailers and Nation Chains in the local re-circulation of money into the community.  This is a big advantage for the local community and fostering locally owned businesses and recycling the money among their neighbors.

I also think there is an opportunity for the community and technology help drive local businesses.  It works in a Kickstarter style way where local consumers and community members can contribute funds to an existing local business and return for a slice of the business.  Kickstarter and other crowd funding sites are focused on getting new businesses off the group and running, but as a community we neglect the existing businesses in neighborhood and often they go out of business because they have greater competition from larger brick and mortar businesses.   Imagine an environment and platform where we can easily support our local businesses and recycle money back into the community.

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The end of Swipe?

The ease of POS purchasing via swipe maybe finished in the US.  With over 40 Million credit cards stolen in recent days, the ability to ensure a transactions is fully secure, has to be the highest priority for all businesses. In Europe, 99% of Credit Cards have a chip embedded into the card to enable a Chip & Pin transaction which prevents the likelihood of fraudulent transactions.  This is worked successfully for many years, with issuing banks and acquirers seeing the focus towards fraud move online. The logistics of small and large businesses changing their current point of sale devices with pure Chip & Pin devices is pretty outlandish, so I think  the trend will move towards Chip & Pin in the future, but for now, the risk is still there