Ghosts in the Payments Machine
Today’s payment behemoths are trying to desperately hold on to control of the payment processing infrastructure because they intuitively – if not consciously – understand that the true inevitable disruption of mobile payments is radical disintermediation i.e. total or near total annihilation of existing, seemingly haphazard and completely archaic, business models.
This is apparent in their schizophrenic attempts to simultaneously fight new security standards for e and m-commerce while clinging to very regulations they love to rail against to limit new market entrants. It is apparent in the reports generated by highly paid consultants to strategize about how banks can hold onto, i.e. arm twist their customers, while generating new revenue streams, i.e. fees, to compensate for archaic service models and lost payment opportunities. It is apparent in their acquisitions and attempts to present themselves as “market innovators” and “consumer service organizations”.
If mobile payments play out the way similarly disruptive technologies have in the past, the payments landscape of 2020 and beyond will look radically different then it does today. Some, if not all of today’s industry stalwarts, in spite of their best attempts to survive, will be greatly diminished, shadows of their former selves, if not simply ghosts. Meanwhile, a host of new players with radically different visions of how payments systems ought to work will rapidly grow into expansive financial legends with global footprints.
Sound far fetched? History tells us otherwise. Have a read through a post from 2011 A Kodak Moment. Between 2000 and 2009, Kodak imploded. The decade started well enough for Eastman Kodak. In 2000 it clocked film revenues of $11 billion, had 70,000 employees and 14 factories around the world. Then things started going pear shaped. Come 2009, revenues from the sale of film had fallen to $1.3 billion, the workforce had dropped to 20,000 and the number of factories had gone down to one.
Or consider Digital Equipment Corporate, AOL, Kmart, or even your local travel agency — those of you under 35, may not even know what they are. Technology-based innovation is both the bane and savior of market evolution, indifferent to the fate of those impacted by rapid, sometimes catastrophic transformation. The notion that the today’s seemingly untouchable payment legends will remain intact after the coming decade of market transformation is quite simply, naive. In 1989, I consulted for a company that employed 500 people to facilitate highly-targeted, database managed, email marketing. By 2001, I purchased a software program online that had far greater functionality for $195.
The beauty of this type of imminent and inevitable market transformation is that no one really knows how it will play out. Not the pundits or the prognosticators. Certainly not the CEO’s of major financial institutions. So while American Express touts their “transformative move to tokenization” (quotes mine for sarcastic emphasis) or VISA digs their heels in against the European Commissions payment card reforms, brave entrepreneurs will continue to introduce new payment means and mechanisms, and the rest of us will continue to dance and jockey for position until the initial fallout subsides and the re-visioned marketplace emerges.
Hold on to your hats, this is going to be a wild and crazy ride!