"How long do you estimate until judgment day? It seems like there's so much activity in this area that it'll take quite a while to shake things out....
I know that with the resources Google can throw at it, they'd have to be considered a contender, but Square gets a lot of ink and is impressive in real life performance. How would you handicap the race?"
I don't. Gambling doesn't excite me, and however much I'd like to anticipate even a glimpse of the payment landscape of the future, I recognize that the topic is deeply complex. My own part-time observations simply can't lead to predictions that are any more reliable than gambling bets.
What we do and don't know
What "The Payoff" can do, though, and consistently does, is update you every other week with the most important news from the field of payments, and provide a little insight into the potential impact on your own operations. I don't know whether Google Wallet will emerge a winner, and I have grave doubts whether the insiders at Google or PayPal do, either. What I do know is that it's ripe time to think about how adoption of some innovator's digital wallet by half your under-thirty-five-year-old customers will affect your business.
Market disruption of that sort looks likely in the next half-decade, even though I don't know which specific payment brand will achieve it.
Mike also provided a link to a nice brief commentary by Linda Bernardi on Starbucks' recent announcement that the cafe chain is investing $25 million in Square. Bernardi rightly makes the point that Square's technology isn't successful in isolation: it utterly depends (for now) on Apple mobile devices and the marketplace around them. Square sure looks as though it has everything in place to boost revenues and its own brand to much higher levels.
What other players are winning the trust of a major market actor, adequately financed, actively expanding business, operationally competent, and capable of scaling? Those are five criteria Bernardi mentions in her description of Square. At least a couple of those show up in each of these cases:
- Sybase, now backed by SAP's muscle, is extending its strength in mobile technology to include payments. One important rollout this summer was in rural Bangladesh. This is a common theme in payment systems: many companies based in mercantile capitals run pilot programs halfway around the world, where they can better control the experimental conditions. This is one of the reasons we have been writing often lately about information technology in Africa.
- Starbucks' product competitors are issuing their own m-commerce solutions. Dunkin' Donuts, for example, "has its own mobile payment app for iOS and Android." Big-box retailers Wal-Mart, Target, and others are co-operating on a more ambitious, but less mature, smartphone-based "Merchant Customer Exchange".
- Dwolla's message once was that no one could beat its low consumer prices. Lately, it has grown more sophisticated about getting out the word that it is fast, reliable, highly programmable, and even fun and good-for-you. Notice that Dwolla recently announced a collaboration with Stripe, another payment-system provider whose programmability and ease-of-entry are widely admired.
- Zooz, which largely competes in the same niche as Stripe, partnered with MobiCart this summer, and claims to be ready for Series A financing.
There's another side to the digitization of payments. The systems portrayed above have impressive capabilities, and will increasingly attract consumers and vendors. On the other hand, many people are already comfortable with older systems like cash and checks. These older systems aren't static, though. We're on the verge of cash's "digitization": technology will soon be cheap enough to replace paper currency with "smart bills" that know where they've been and what they've bought. Digitization won't just out-compete older payment systems; older payment systems will increasingly become digital.
I don't dismiss Mike's question at the top of this column. Truly, I'd welcome knowledge of whether Google Wallet will be a winner or loser. At the level of the economy as a whole, though, it doesn't matter. Someone is going to reshape payments. "The Payoff" will be along for the ride to keep you informed of how it happens.
Special thanks to colleague Kathryn Soraiz who helped in research for this posting.
Last modified on Saturday, 01 September 2012