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Commentary: Are banks getting blindsided by the mobile tsunami?

Big box retailers have been struggling to grow their business in an increasingly mobile world. Mainstream media is already pronouncing the imminent death of big box retailers like Best Buy. What is being overlooked is the explosive growth of mobile commerce that is transforming the retail industry. 

Consumers are increasingly shopping from their smartphones and tablet devices. And retailers are rapidly innovating to stay relevant in a mobile world and attract mobile consumers.

To facilitate mobile shopping, they are investing in everything from mobile-optimized websites to companion mobile apps on smartphones and tablet devices. They are leveraging QR codes for sharing product info and driving media campaigns. They are delivering mobile coupons and embracing social media channels for branding, as well as for building purchase intent. They are learning to adapt and thrive in the new mobile world.

But are the banks ready for the disruptive change being driven by the mobile tsunami? While they have gone after the low-hanging fruit such as mobile banking, and while some of them offer remote deposit capture, there higher stakes on the table in mobile payments.

Mobile payments are still in their infancy and they look poised for explosive growth. At this stage it looks like the banks are ceding market leadership to intermediaries.

Consider PayPal, which is making strides with its mobile payments platform. Leading POS retailers such as VeriFone and Ingenico have endorsed their payments platform. In addition, major retailers including Home Depot, JC Penny and Office Depot are also rapidly aligning behind PayPal’s alternative mobile payments platform.

Other mobile payments vendors including Google Wallet, Intuit and Square are battling for market dominance. Even the telecom carriers plan to launch their own mobile payments initiative called ISIS. Over time the market for mobile payments will consolidate around a few clear leaders; banks are unlikely to be among them.

The challenge for banks is that as mobile payments accelerate, they risk losing the direct relationships and intimacy they have built with their customers. They may get confined to the boiler room or the back office while new market intermediaries engage with their customers and get their mindshare.

Some banks are fighting back to ensure they own their customer relationships by providing innovative mobile solutions. Consider Pingit, the mobile payment system launched by Barclays Bank as a rival to PayPal.  Pingit allows users to easily and rapidly make and receive payments via a mobile phone number.

Imagine making a quick payment to someone with Pingit — splitting a restaurant charge or returning a borrowed $50 bill!

Initially launched as a mobile payments platform for the small business market segment, Pingit has now been rolled out to all businesses including the company's corporate banking clients. Businesses are assigned a Quick Response (QR) code which is linked to a corporate account with Barclays.

Isn’t it time for banks to deliver service innovation that capitalizes on this disruptive change? What do you think?

Harish Bhat is managing director at ESQ, a leading provider of business transaction management solutions. His extensive background in IT includes work with NCR and Tandem and skills in business development, product and strategic alliance management and more. Look for his regular blog, "On the frontlines."

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User Comments – Give us your opinion!
  • Abraham Paul
    Various Money management products using phones, both Mobile as well as fixed will accelerate empowerment of large section of people especially in the developing countries who do not avail banking facility as of now.

    However, many of these Pay by Phone facilities shall be adapted for its great convenience by other sectors of the society also that can be disruptive to some extent to banking industry.
    Overall it cannot much adverse impact as huge volume of Pay by Phone transactions will be of low value and ultimately, the cumulative e-payments at the points of service will have to move through the banking process for as the virtual money accumulated need to be transferred to other accounts and also for converting it to hard cash.

    Please read my following blogs:-
    Phones can save fuel, time and effort and cost of printing money htt:// p
    Universal Money Management by phone
  • michael hong
    Banks are taking wait & see attitude as there still are many conflicting/different payment standards and types in the market. The only most visible and financially successful services are the mobile payment acceptance terminals such as Square and mobile VeriFone POS and PayPal which offers its own payment network in addition to its own mobile payment terminal solution. All of these services require consumers to use their existing credit cards, debit cards or bank accounts and thus banks continue to stay relevant in the mobile segment. Therefore, from banks perspective, there is no need to rush into this very nascent (admittedly high potential in the future at some point in time) service segment yet.
  • Philip Cohen
    The banks will ultimately succeed via the "mobile" offerngs of Visa and MasterCard. Anyone who thinks that anyone not directly integrated into the retail banking system will ultimately win this race is delusional.

    PreyPal's "mobile" success is confined to the imaginations of John Donahoe and the eBay Dept of Spin; ask a cashier at Home Depot how PreyPal "mobile" is going at POS ... LOL
  • Harish Bhat
    Michael-you make a good point. Banks own the customers and have the reosources to mount their own offensive.
  • Harish Bhat
    Philip-It is early days in the mobile payments arena. Right now Paypal has good mind -share and is gaining momentum. But there are many fast moving competitors jumping into the fray. And the market will play out over time.
  • Philip Cohen
    From another observer of the clunky PreyPal on eBay’s own forums:

    “I just ordered an item [online] from When I completed the “fill in the blanks” stuff, I had a choice of payment. There was the usual charge card form and then three offerings with logos:

    Pay by Visa
    Pay by Google Checkout
    Pay by PayPal

    “Funny, isn't it, which one was last. I thought there was some kind of arrangement between eBay and, a platinum-like anchor store on eBay.”

    Funny isn’t it too, which one is at the top of the list; online retailers apparently are smart enough to distinguish the wheat from the chaff after all. But, the real question is, now that Visa’s is available (MasterCard’s offering still on the way), how much longer with that PreyPal logo continue to appear at all? Any one want to take bets on a time frame?

    Goodbye PreyPal (at least off eBay), it has not been nice knowing you …

    eBay / PayPal / Donahoe: Dead Men Walking
  • David Hanson
    Seems like a strange exchange based upon payment industry knowledge.
    I'd suggest there is only one angle to see this from, which is that of the smartphone user only, and what he / she wants.
    Being a male I'd also suggest that the most relevant factor is the opportunity to stop me from queuing... as this makes me either frustrated, or leave without purchase.
    Whoever solves that problem first with greatest share of the retail space wins, regardless of banks, intermediaries, or specific retail applications.
    Clearly this will not be a specific retailer - otherwise I would have to have an application for each retailer I visit.
    So the next question is who I trust in this space (Banking / payments / mobile / internet). Who has the most credibility on the internet with my payments?
    Traditionally banks have been way behind on this, and clearly PayPal has a very global trusted brand.
    Since I may chose to pay for certain items in different ways, using different cards - this does not fit the interests of the Banks, it is far more suited to the agnostic provider.
    Finally, what know brand options are there
    Google / Paypal / Ebay - fine understood big players
    All the banks & card providers
    Mobile phone operators ? - seem to deal with billing quite well
    Others - would need to be a big brand - lets say Tecso
    On balance - Paypal ticks more boxes for me than any other
  • Philip Cohen
    David, you should then be buying lots of eBay stock; who knows eBay might catch up to Amazon one day; after all, they were both ~$40 five years ago ...

    But, again, before you commit to that margin loan for all those eBay shares, best you drop into Home Depot and ask a cashier how the clunky PreyPal "mobile" is going at their physical POS .. LOL

    And, just for a laugh then, some comment on PayPal’s off-eBay products: "The New Way To Pay In-Store" (at Home Depot), PayPal Here, SmartPay, PayPal Digital Wallet, PayPal Debit MasterCard, PayPal Local and Watch With eBay ...
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