Industry Execs Discuss Emerging P2P, Mobile Payment Models at NJTC Event


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Are banks toast? Are mobile payments a real trend? Will Near Field Communication (NFC) tap-and-go payments become ubiquitous? What will make users adopt person-to-person (P2P) payment systems? These are just some of the questions executives considered during the panel discussion entitled “Payment Innovations: Mobile, Gaming and Beyond” at the NJTC/Edison Ventures FinTech Conference, held at Opera Solutions (Jersey City) May 23, 2012.

The dynamic panel was moderated by Amir Goldman, managing director, Susquehanna Growth Equity (Bala Cynwyd, Pa.), and included executives from many segments of the financial industry who made their best educated predictions about what will happen in the mobile payment space.

The discussion included Neil Platt, executive vice president, banking and payments, for CashEdge (New York), now a division of Fiserv; Aditya Khurjekar, independent consultant and former head of mobile commerce and payments strategy, Verizon Wireless (Basking Ridge); Mehmet Pasa, senior VP, global mobile alliances and investments in the emerging payments group, MasterCard (Purchase, N.Y.); and Flint Lane, CEO and president, Billtrust (Hamilton, N.J.).

Responding to the question, Are banks toast?, few panelists thought banks were finished in the consumer arena, even though they’ve been slow to adopt emerging technologies. “The good news is banks that ‘get it’ are stepping up and devoting more resources to thinking about how they will meet new challenges,” Platt said. Khurjekar was adamant that banks will form coalitions with carriers and others. After all, “Are you going to trust an unknown brand with your money?” he asked.

Though telephone companies tend to be the largest companies in any given country, they are not going to replace the banks, Pasa added. Banks will partner with Google, telcos and other payment companies like Visa and American Express to create better models, he stated.

Playing devil’s advocate, Lane said some banks won’t change with the times. The commercial side of banking may be disappearing, with checking decreasing in volume each year. “They are desperate to replace that income with something,” he explained.

On the consumer side, banks have offered online bill payment at a loss to hold on to customers; however, online bill-payment products haven’t changed very much. “They are being disintermediated by companies like Manilla that are offering a more complete solution, said Lane. “At some point banks are going to wake up and see … that they will have to compete more aggressively to hang on to their commercial and consumer customers,” he added.

Disagreeing, Platt said his company has done a lot of research into how likely customers are to make transactions through PayPal(San Jose, Calif.), for example, versus the bank. Consumers have a much stronger trust relationship with banks, he said. Flint countered that this is partly because PayPal doesn’t offer a compelling bill-payment solution.

Goldman asked the group to consider the use case for mobile payments, and the conversation veered into tap-and-go NFC payments and the possibility of the phone replacing plastic at the point of sale. Pasa commented, “We are saying yes, this is going to happen, but not within the next year.”

NFC is certainly widely available on handsets, he said, with more than 100 of them certified or close to being certified. Some current phones have the NFC chip, the controller and the antenna, but the telco isn’t providing the payments service yet.” Asked if Apple is getting into the act, Pasa said he hadn’t heard of anything.

Khurjekar, however, questioned the program’s viability. “Are you telling me that tapping is easier,” he asked, than swiping? For consumers to accept tap-and-go, “you have to build a proposition that is 10 times better than [what] we have today … any successful new technology is successful because there is pull.”

Taking the discussion to mobile bill payment, Lane said young people want to pay bills on their smartphones, a reality that just has to be understood. “I would guess in this room there are very few people who pay their bills via their smartphones, but members of the younger generation don’t have computers. They don’t want to issue checks. They use their smartphones for everything, so it’s almost a requirement for billers to offer mobile bill payment.”

The panel also addressed the new phenomenon of P2P payments, which replaces writing checks to personal trainers, babysitters and the drycleaner with transferring cash payments to those individuals.

While everyone agreed P2P was a good idea, P2P payment solutions are now cumbersome, being based on either Automated Clearing House (ACH) or a card network. “For the system to really work, it’s got to have real-time money movement,” within a matter of a second or two, Platt said.

Payments must also be affordable, Platt noted. Consumers now view checks and online bill payment as free. Although there is cost associated with them, people don’t see that cost. You are not going to be able to persuade someone writing checks for free to pay $2 a month for a product that is just a little better. “Free” and “real-time” mean you have to get away from ACH and card interchange, he added.

Platt said CashEdge is rolling out a solution using ATM networks to move money. “We’ve gotten it down to as fast as 16 seconds,” he noted. User experience with the product needs to be excellent, he added, something banks aren’t known to provide. “Banks willing to outsource their technology needs have been more successful and have better offerings,” he said.

P2P already works in countries using a single wireless telecom network, Pasa said, because there is a single network and the alternative is so daunting. In these countries, the alternative is to hand a cash-filled envelope to a bus driver who will deliver it on the other end. In other countries, he explained, “we are trying to get the telcos to be interoperable for this.”

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