Payments in 2020: Big Changes or Little Changes?

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David True

President and Board Member, NYPAY 
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I

love opining on the future: it keeps my thinking fresh, and, so long as I remember to use words like “could” and “might,” I will never be wrong. With that in mind I take up Anand Ramakrishnan’s call and offer my thoughts on how the payments world will look in 5 years– and to keep it simple, I constrain this to the United States.

Bill Gates once said, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” I’ll amend his two years to five, and start by saying there won’t be any earth-shaking changes in the next 5 years: payments are too complex, with too many players, for really rapid change. This is why investors love Visa and MasterCard.

What we will see is the blooming of multiple payment methods; each connected with a different use, and many delivered through mobile devices.

Think of today’s poster child for advanced commerce, Uber. With that app the payment is incidental, just the last step in doing what you really want — getting from one place to another.

And so it is with other mobile apps, from Starbucks, which started as a loyalty play and morphed into a payment method, to Chipotle, which is a line buster, allowing customers to avoid the line and go straight to the pickup counter for their non-GMO burritos.

This is where, I believe, forward-thinking retailers want to go — burying payments in commerce. Cathy McCabe, the CIO of UK luxury brand Jaeger, put it well in a recent interview (worth listening to) when she said–paraphrased here– “it’s about wrapping payments into the experience…making the experience seamless…” This is not about replacing a plastic card with a mobile device at point of sale, but doing away with the point of sale altogether.

A future that bypasses physical point of sale will hold less place for NFC-enabled, proximity payments. Outside of a few specific industries such as transit, tapping instead of swiping won’t go very far in the US. As many have pointed out, swiping works really well for consumers.

And yes, I do think a lot of this will be app based rather than wallet based. The distinction is a bit slippery. My Uber app allows me to access my Apple Pay credentials– but I open the commerce app, Uber, not the payment app when I want to transact.

But think about it: if Apple convinces me (and they are a highly-trusted brand) to associate my bank account with their wallet, then it is easy for Uber or any other app to access it. With the right incentive, they get me to pay with a direct funds transfer — leading to faster payments (and cheaper) payments.

Plastic, however, ain’t going away. In 2020 we’ll still have a cohort of people paying with plastic, a fair number of them using the magnetic stripes on their cards. That is in part because we have thousands of card-issuing banks in the US, in part because we have millions of merchants, and in part because of habit–even cash payments show no sign of disappearing.

Returning to my opening salvo, five years from now the US won’t see so much a transformed payments world as one with multiple options. We’ll use mobile apps with embedded payments for some kinds of commerce, and continue with our trusty plastic cards in other cases.

Let a thousand payment choices bloom.

I invite my fellow payment geeks Ron Mazursky, Sam Maule, and Menekse Gencer for their thoughts.

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