Will NFC continue to struggle in 2013? Will Apple fall in the battle for smartphone supremacy? How optimistic should we be about mobile wallets looking forward? There have been plenty of bold predictions made for the payments industry in 2013, covering contactless, EMV, regulations and everything in between. Market Platform Dynamics CEO Karen Webster takes a look at some of what’s been predicted for the coming year, and who might look like a genius a year from now, and who might be eating their words.
Key Quote: “The NFC payments debate will slowly die in 2013.”
Summary: David Marcus, president of PayPal, made plenty of waves with this prediction in mid-December, sharing the popular view that NFC doesn’t offer enough to change consumer behavior. “Is tapping a phone on a terminal any easier than swiping a credit card? I don’t think so,” Marcus writes. PayPal has dabbled with contactless payments in the past, but its PayPal Wallet largely functions as an NFC-free platform.
Karen Webster: Woo-hoo! Been singing this tune since 2006. Marcus is right that until NFC delivers a value proposition to merchants and consumers that moves beyond “tapping is better than swiping,” NFC will remain on life support just about everywhere in the world. There might be exceptions, of course. In Poland, for example, NFC has better prospects because paying with plastic is pretty new for consumers and banks are making contactless their first cards, merchants are buying terminals for the first time and consumers are being given devices (cards + phones) with chips. But, in most other places where rip and replace is the path to NFC, and everyone has gotten comfortable with swiping or dipping, watch for merchants to sit on the sidelines and wait it out — EMV-mandate and terminal refresh cycles and all — and consumers to yawn or just ask what the fuss is all about.
Key Quote: “[Apple] might be the safest stock to own right now.”
Summary: This prediction comes to us via Mark Rogowsky of Forbes who makes one of the boldest and most specific 2013 predictions we’ve seen, writing that Apple stocks will close the 2013 year at $800. Apple is currently valued at $513.11, so why does Rogowsky see massive growth? “Look for a cheaper iPhone (around $400 to carriers), faster product refreshes to become the norm (as with the 4th-genertion iPad), and a deal with China Mobile later in the year,” writes Rogowsky. He also sees Apple battling Android for the global smartphone market share.
Karen Webster: I will leave the stock market forecasts to those who are far more astute on those matter than I, but it seems hard to believe that Apple is going to do anything in 2013 but secure its position in the mobile commerce ecosystem as the player to beat. Smartphones and smart-devices are the devices that all consumers want to own, and Apple’s move into lower priced versions, e.g. the iPad mini, just further fuels their growth. But, what locks them into position more so than that is the fact that there is essentially one version of iOS across all devices and the hardware is standardized too. That means that developers are motivated to write to the iOS since they can capture the biggest number of consumers with smartphones with just one code base. So Android may have the line on cheaper phones in the market today, but until they solve the operating system and hardware fragmentation problem they will continue to struggle to get the kind of developer adoption that they need to make their devices more desirable than Apple’s.
3) The Dodd-Frank Reforms Will Work
Key Quote: ”The rolling series of scandals surrounding global megabanks makes it difficult for anyone to keep a straight face when executives insist that our largest banks must maintain their current scale and scope.”
Summary: This is likely to be one of the most controversial predictions on the list, but according to Simon Johnson of Slate, there are real reasons for optimism surrounding Dodd-Frank in 2013. Johnson’s reasoning includes indications that the Fed has already said no to some major bank mergers, the changing tone of many government officials and the poor example set by European banks. Johnson is also effusive in his praise of the FDIC, labeling them “a bastion of sensible thinking on financial-sector issues.”
Karen Webster: Being from the great state of MA where we just elected a Senator who will end up on the Senate Banking Committee and who has said that she absolutely will press for the breaking up of banks, I’d rather not touch this one! But, my brave colleague, David Evans, MPD Founder and Financial Services regulation guru, is fearless on this topic. He says, “Yikes! If the anti-bank crowd wanted some last nails to drive into the reputation of the megabanks, the price-fixing and manipulation of the LIBOR (and it looks like many of the other ‘BORs: you got the Eurobor, the Tibor…) is more than they could have asked for. Rigging the interest rates for hundreds of trillions of dollars of derivatives LIBOR alone covers $300 trillion plus in notional value — and for mortgages and other loans for millions of consumers makes the financial crisis debacle look minor league. But it doesn’t just make the mega-banks look bad: their regulators look like they were napping while this was going on in full daylight. And if a pro-capitalist generally bank-liking guy like me says this, you know that the big banks are going to have a tough time getting a break from regulators or governments for a long time coming. Add this to the top of the list of why the banking business needs to be reinvented.”
4) Mobile Wallets Will Be All Hype
Key Quote: “You can expect the talk to continue in 2013, but not much else.”
Summary: Predicting that NFC won’t take off in 2013 is one thing: forecasting a mobile wallet stall is quite another. But according to Odysseas Papadimitriou, CEO and founder of Card Hub, that’s what we should expect. “The market is simply too fragmented, there are still too many security concerns, and the requisite infrastructure is not yet in place for merchants to accept smartphone-based payments,” Papadimitriou claims. He also doubts that people are prepared to be “walletless.”
Karen Webster: Mobile wallet stall in 2013? Uh, not on your life. For as surely as the sun rises in the East and taxes will rise for just about everyone in some fashion in 2013, mobile wallets will continue to be an important topic of conversation in payments. And, although I don’t think that 2013 will be the year that we crown the mobile wallet king or queen, I do think that it will be the year when several of the big players put on the full court consumer adoption press to get wallets populated and add consumer accounts to their roster. But let’s clarify what we mean when we say “mobile wallets.” This prediction was referencing mobile being used at the physical point of sale and the being used with a digital “container” that aggregates multiple payment methods, loyalty cards, coupons and the like. Now I agree it will continue to be a tough slog for most – but we’re certainly going to see PayPal, in particular, leverage its Discover partnership to drive physical point of sale mobile wallet acceptance and use. In addition, we’ll likely see the Square/Starbucks partnership expand beyond Starbucks, and we can expect the wallets enabled by Paydient come into the market. At the same time, “veteran” mobile apps players like LevelUp and Starbucks will continue to gain traction, while newbies like Cardfree will focus on specific vertical applications of its mobile wallet. As for whether consumers are prepared to be walletless, it will be a LONG time before any of us are walletless, since it will be a long time before all of the place we like to shop are mobile payments enabled but that doesn’t mean that we wont want to — and like to — and will use our mobiles to pay when it is available and convenient to use.
5) Curated Commerce Will Continue To Evolve
Key Quote: “Shopping for a lifestyle or look is another richer, more engaging trend we’re seeing across eCommerce industries.”
Summary: Rakuten, one of Asia’s largest eCommerce sites and a growing force in the U.S., makes the prediction that “curated commerce” will become and even bigger driving factor in the online retail industry in 2013. Rakuten notes that visually heavy sites, such as Pinterest, give people a way to create and combine very personalized shopping and social experiences. “Not only does this fuel personal expression in shopping, but other shoppers will use these collections to inform their own purchase decisions; it’s an evolution of the powerful personal recommendation,” they write.
Karen Webster: I agree — but to a point. The good news about shopping online is that you can about find just about everything you want or need. The bad news about shopping online is that you can find just about everything you want or need. You can spend your entire day surfing for stuff, comparing prices, looking for the same thing at other sites that might not have inventory, etc. And then, once you find that one thing, then you have to go thru the whole process all over again to find the things that go with it. The success of OneKingsLane or Zulily or The Fancy can be attributed to having a curator organize and assemble “picks” that narrow down the range of options for consumers and then allow you to buy what you see. Lots of retail sites have followed suit, offering “stylists” who assemble outfits, rooms, table settings, etc. so that consumers have an easy way to buy, and the operative word is buy, the stuff that all goes together, and feel more comfortable buying those things since “an expert” has done the hard work of locating and matching those items. What isn’t helpful, I think, is seeing “pins” of stuff that doesn’t tell consumers where to buy things. Fashion and Pinterest are examples of sites that organizes really interesting outfits, but basically gives you no information about where to buy the items you see. So, while they do a great job of curating, they do a lousy job of sourcing — which I find not only unhelpful and useless but annoying. I think most people that I have talked to do as well. Who wants to be teased???
That said, there is also something to be said for online marketplaces that don’t necessarily curate and edit the selection of goods, but offer you a one-stop place to search and buy whatever you feel like looking for. eBay and Amazon are two examples of marketplaces that have done a really great job of putting the worlds goods under one URL. Places like 1st dibs do the same for antiques and vintage jewelry. It sure saves time when you have some idea about what you’d like to buy but just need a convenient way to source it.
So, I think that commerce on line in 2013 will be about curation, but actionable curation from marketplaces that make it easy to source goods and “expert-driven” sites that edit down the world into a few interesting choices.
6) Identity Security Will Be A Big Issue
Key Quote: “The race is on to protect every endpoint, every device and everything connected to the Internet.”
Summary: Verizon looked into its crystal ball to predict five business-tech trends for 2013, and one of their forecasts for the next year involves identity security. As more people share more information from more sources, the ability to protect that data will become increasingly vital. David Small, senior vice president and chief platform officer for Verizon Enterprise Solutions, writes, “While the Internet affords us countless opportunity it also comes with a price. No longer is strong security an option; it’s a mandatory requirement for all organizations.”
Karen Webster: Well, maybe, but history tells us more likely this concern is overblown. Face it, credit and debit cards in the U.S. really aren’t all that secure. We give our card numbers out all the time and there isn’t a lot to protect us. But it works by and large, fraud rates are low, the system is able to eat much of this for credit and a lot of debit, and by and large consumers don’t worry enough about this for it deter them for getting and using cards willy nilly. And, then, back in the mid to late 1990s lots of people were obsessed about Internet security. There were two competing standards — the heavy duty-rock solid one and the “it ain’t as good but it works” one. It “works well enough” won and security hasn’t been much of a barrier to the growth of eCommerce. Should we worry about security at these end points? Sure. Should be sweating big time over airtight solutions? Probably not.
7) Prepaid’s Popularity Is Here To Stay
Key Quote: “Prepaid cards are an obvious choice since they offer basically all of the same features and functionality as the combination of a checking account and debit card.”
Summary: This prediction also comes to us from CardHub.com’s Odysseas Papadimitriou, who uses several stats from the Federal Reserve and the Mercator Advisory Group to back his claim. Papadimitriou notes that prepaid cards have doubled since 2009 – up to seven million in the U.S. now – and that the amount of money placed on cards increases 33-50 percent every year. He calls Mercator’s projection that consumers will load $117 billion onto prepaid cards next year “low,” and cites the Durbin Amendment as another reason for prepaid’s growth.
Karen Webster: This is simple. Lots of “experts” seems to have overstated the growth of prepaid since the beginning of prepaid a decade ago! So last year wasn’t so great, but next year! Maybe this is sort of like predicting financial crisis — if you predict if every year, and live long enough, you are bound to get it right. More likely, Mercator and others are wrong yet again. It’s not hard to figure out why. There isn’t a great business case for prepaid, there are too many mouths to feed, and consumers aren’t sticky — therefore it’s really hard to make money. The fact that so many consumers convert their GPR prepaid card balances to cash as soon as they can also tells you that not everyone thinks prepaid is better (and cheaper) than cash. Sure, Durbin and its whack to DDA economics have made it less attractive for a lot of consumers to have checking accounts which, in turn, gives prepaid a lifeline, but that is hardly the match that is going to spark the roaring prepaid fire. Government benefit programs will give prepaid a boost, but this sector will need more creative approaches than that to ignite this product once and for all.
8) EMV won’t make it in the U.S.
Karen Webster: Here’s a prediction that no one has made, but I will offer as food for thought in 2013. I will go out on a limb and say that EMV as a technology standard won’t make it in the U.S. Yes, I know that there is a liability shift expected in 2015, but that date will shift since there is no earthly way that merchants in the US will be able to comply – and there’s precedent everywhere in the world for that to happen. Once it does, then I say it is Katie bar the door. Merchants will make the point that the problem that EMV was intended to solve a decade or two ago in Europe doesn’t exist in the U.S. today, and a smart alternative will emerge to leapfrog the EMV deployments as they are currently envisioned. It is hard to imagine the U.S., on a wholesale basis, spending tens of billions of dollars to implement an “old” technology. Rather, this smart alternative will pave the way for a global standard that will enable the global compatibility that it is argued EMV would provide. This also means that the future of NFC in the US will remain uncertain, since there won’t be a critical mass of terminals at merchants for some time to come.