Apple Pay slices the mobile payments market, again
By Robert McHugh, co-founder, Paydunk
It's difficult to find an industry as segmented as mobile payments.
In June, Apple announced that Apple Pay will be coming to the web this fall. A closer read of the announcement quickly revealed its limitations. Users can only use Apple Pay to pay online if they are using an iPhone 6 or later and must own a Mac computer using Apples Safari web browser to complete the purchase. So how does Apple expect to become the top mobile payments solution when the service is only available to such a small segment of the market?
At this point, no single platform or application has emerged as the clear favorite, with companies big and small trying to find their position in the market. While this offers consumers plenty of options, it poses a problem for an industry that prides itself on convenience.
Most tech companies look for the widest audience possible, yet mobile payments seem to aim for a sliver of the market and then aim even smaller by the time the app goes into production. Companies look at the payment stack to find layer-specific solutions when they should be working towards a universal interface.
There's no doubt that mobile payments are growing at a healthy clip. All the major companies, from cellphone manufacturers to credit card companies, are getting involved in the hopes of staking a claim. Although only 18 percent of Americans report using mobile payments on a regular basis, the total value of transactions in 2016 is expected to triple to $27 billion. This is a gold rush that everyone wants to get in on.
While there's definitely money to be made, the mobile payment industry has been on something of a bumpy road. Companies are chasing the market with digital products that are an afterthought to their core products. The technology is often outdated and a dependency on the cloud has its vulnerabilities. None of this is in the best interest of the customer. Each solution is tailor-made to a specific pool of eligible customers and excludes the rest. The pool of customers shrinks with each competing service. Retailers might accept one or two payment options, but reject equally popular options. What's a customer to do when paying cash or using a credit card is guaranteed to work, while their mobile payment platform might not even be accepted?
Additionally, individual's sensitive and proprietary data is being collected and store, then sold to the highest bidder. PayPal recently dropped Seafile as a client because Seafile would not share their user data with PayPal. Leveraging user data for a financial benefit is commonplace and often the most profitable segment of a company's balance sheet. Payment companies can offer retailers and other companies market segmented data based on any number of variables including buying & traffic history. At the enterprise level of ecommerce, it's access to this data that is stalling adoption of Amazon Pay. Consumers and users of digital devices and solutions should have a right to protect their personal information.
Competition is essential, yet the fragmentation of the industry is holding back potential growth. For mobile payments to become as common as cash or credit, there needs to be one universal payment platform. If you look at the payment stack, companies want to be a first layer player in order to control the downstream benefits. That's what's going on now and it isn't working.
Instead of controlling a layer of the stack, all layers need to be removed. At the very least, as Alex Rampell writes on TechCrunch, the top stack needs to be opened up. Imagine a universal platform that's not tied to a single hardware technology (Bluetooth, NFC, etc.) or manufacturer (Apple, Samsung, Google). Ideally, this platform would have heightened privacy measures and the means to exchange all digital tender types. It would be frictionless, fast, and built with the consumer in mind. Such a platform could go beyond payments and become so much bigger than anything on the market now. This technology would be harnessed to send personally identifiable information like medical data with the same sensitivity that payment information is sent. This, more so than any existing platform, would be the future.
Hit and miss
The very mixed results of companies highlight why a universal platform is needed.
Apple launched its Apple Pay digital wallet back in 2014 and data from PYMNTs shows a modest adoption rate despite the enormous installed base. Google Wallet, meanwhile, has been repositioned as a peer-to-peer solution. Samsung Pay and Android Pay are locked in heavy competition for a pool of mostly disinterested users. E-commerce solutions are also lackluster. PayPal's has been focusing on high-profile acquisitions in the past couple years even though there's been very little innovation in their product for the past decade. Visa and Mastercard have bought big-time clients with big marketing and incentive dollars, yet haven't obtained a critical mass of active users.
The future of payments
Apple's ability to generate a huge amount of press about new features in payments can actually help accelerate the mobile payment movement. Using the phone to complete a payment on the web is the first step toward creating more secure payments with multifactor authentication. The next step is to return privacy to the user and to eliminate the storage of personal and financial information in accounts that are held by big businesses. The enormous cloud databases created by these payment companies are simply unnecessary. The link from the web to the phone has already been made. The time has come to take down the sensitive information stored in the cloud and place it locally and securely on the users device where it is safe from online hackers.