The events have evolved to be about the same size, although BAI doesn’t show the growing pains Money 2020 does. Both venues are great for bumping into old friends and having great conversations about the future of banking and payments with the people that are making it happen.
Not surprisingly, Apple Pay was hot topic at both shows. We spoke to a number of bankers and listened to a lot of vendor sales pitches. Despite the startup vendor noise, the most important Apple Pay issue for all but the largest institutions isn’t NFC terminals and EMV upgrades.
Card Providers continue to not have a plan
Card Providers continue to not have a plan to support Apple Pay and don’t appear to have any sense of urgency to resolve the issue. Institutions should be looking for backup debit and credit card providers that actually have a mobile strategy and are interested in helping institutions serve their customers. Apple and Google are executing bold strategies, arguably. The major card networks and processing providers have a plan and are on board with the industry momentum. The merchant POS equipment providers and their VARs also are executing a strategy relatively in sync with the rest of the industry. And most certainly, Chase, BofA, American Express, Wells, and Citi are on board.
It seems only the companies whose business models are based on vendor lock-in haven’t gotten the memo. Changing a core banking system is one thing, but changing credit or debit card providers is less sticky. Institutions waiting on a plan from their providers (or even pricing!) should know they’re not alone and there are providers that will get them in the market.
If vendors can’t get tokenization to work for Apple Pay, why should we expect them to have a plan for EMV?
Hoping for Congress to take action isn’t a safe strategy
One vendor at BAI was making the case that the industry would lobby Congress to slow down EMV thus stalling Apple Pay. That’s possible I guess, but hoping for Congress to take action isn’t a safe strategy. Plus, since the EMV migration process timeline came from the card networks, not Congress, I think it’s unlikely a Republican-led Congress would impose strict regulations on voluntary industry guidelines. Furthermore, merchants and institutions are losing millions to credit card fraud and enraging consumers as breach after breach happens. I don’t see much momentum for slowing tokenization efforts.
Lastly, it’s clear from these shows that mobile banking has continued to become a commodity offering like ATM, online banking, and mobile check deposit. After many conversations with bankers and vendors alike, we continue to be convinced that the next frontier for banking innovation is improving the sales process (account opening, loan origination, and all the selling process around that). As the US economy picks up steam, institutions can no longer wait to grow lending. Furthermore when interest rates rise, the deposits institutions are sitting on get expensive.
We’re placing bets in this space as many of you know, and we’re helping clients invest here too.
Like many payment geeks I downloaded the iOS 8.1 upgrade this afternoon then ran out to try Apple Pay with my 15 year old son.
The results were strikingly different than my adventures with Google Wallet and another NFC wallet on my Nexus 7 last year.
Just like last year, I decided to go buy candy (and a flu shot!) at Walgreens, Staples, and if desperate McDonald’s. Last year, readers didn’t work at all at Walgreen’s or Staples. Gruff employees had no idea what I was trying to do with my device and I was holding up the checkout.
This year with Apple Pay, my purchase at Walgreen’s was so smooth it was disorienting. It worked just like the demo video at the Apple launch. The only hiccup was that it was so smooth I forgot to change my default card to use my personal debit card. I ended up buying candy on my American Express Corporate card. (It’s a good thing I’m the CEO).
Staples, on the other hand, was an utter failure. I tapped my phone, tapped my phone, woke it up, tapped it again and got nothing. The irritated clerk said, “What kinda card you are you trying to use?”
I said, “Debit.”
He said, “That reader doesn’t work with debit, try credit.”
As the line started backing up, I switched the default card to my American Express. I tapped it again. Nothing. Again. Nothing.
I pulled my debit card from my wallet and swiped it to pay the old fashioned way.
As we were leaving, my son said, “Dad, it’s no wonder it didn’t work. Have you seen their computers? They’re like older than me.”
Based on my Walgreen’s experience, I think Apple Pay will be working smoothly for shoppers as retailers get their act together. When it becomes more than a novelty, which I think a few Apple ad campaigns will likely ensure, laggards like Staples will get their act together.