No mention of the winners - PayPal and Bill Me Later. During the time we built and grew Bill Me Later, we estimated that there were 43 different payment options that started and failed. There were quite a few PayPal look a likes back in the late 90's and early 00's. When you look at the two successes, you see the same common theme. They both solved real problems for their customers.

PayPal enabled anyone to become accept credit cards instantly. Prior to PP, there was no easy way for an unestablished seller (on ebay or elsewhere) to accept credit cards. PayPal made it easy to start selling online without the lengthy hassle of applying for a merchant account.

At Bill Me Later, we knew that consumers will buy more and more frequently, when you offer them credit at the point of sale. In fact, this insight is how the credit card industry got started. Department stores started issuing "charge plates" to their customers to enable them to buy now and pay later. Everyone can relate to the experience of being at the department store and getting the option to save an additional 10% or get 90 days same as cash when they use their store card. Eventually, the retailers recognized that payments is a scale game and started to combine efforts into payment associations. When we started Bill Me Later, we wanted to bring credit to the online point of sale in the most frictionless experience possible. All the banks trying to provide credit at the online point of sale, all had really lengthy applications and disrupted the online point of sale experience. We focused on integrating credit seemlessly into the online point of sale experience and found that when it is easy to do and intuitively named, consumers would organically select the payment option because we gave them instant credit.

So, many of the failing new payment options were trying to solve either very niche needs or overhyped needs. Payments is a scale game. Payments have very thin margins relative to the potential losses involved. The only way a new payment option can succeed is if it can plot a path to scale and reach scale before a loss event crushes it. For PP, it was eBay that drove scale. For Bill Me Later, it was a combination of the higher margins from the credit P&L and acceptance by the top 500 merchants (particularly Walmart and Amazon, and then PayPal/eBay) that enabled us to reach scale.

Most payment options have to start with the consumer (buyer) first. They need to find a value that the consumers need. Today, everyone seems to be chasing a more secure payment option, because of all the data breaches.

However, solving this problem isn't a consumer problem. The credit card issuers have removed that liability from consumers, so they don't feel the real financial pain of a data breach. Sure they get a new credit card (number) when their cards are breached, but this is a small inconvenience.

Today, using a credit card is pretty darn easy. They will only be replaced when either the banks push the liability back to the consumer or someone invents something that is easier than whipping out your credit card. I would contend that using your phone isn't much easier than the credit card. And if the only differentiator is a more secure transaction, that won't be enough to change consumer experience.

The only notable experience that I have seen that might be easier than credit cards is what Square has devised for their point of sale customers. When you as a consumer (buyer) have the square
app and they recognize you at the POS, it's a pretty darn easy experience and I believe it creates a more personal experience with the buyer and seller.

That said, I don't believe the next generation payment solution will involve the phone. It's more likely to be biometrics. More specifically, facial recognition. What's more convenient and personal than the merchant actually knowing who you are and not requiring the consumer to use any credential to authenticate themselves.

I am waiting for the day when I can walk into a store, like my grand mother did 50-75 years ago and say "put it on my tab".