Advances in communications and associated technology are rapidly changing the payment services sector, and financial services organizations, payment companies and electronic payment start-ups are all vying for leadership. Although the consumer spending benefits are clear, the winning proposition among so many entrants has yet to emerge.
The last two years in the payment services industry have seen tremendous upheaval, particularly in mobile banking and payments. Several factors are driving change in the once-staid payment services sector:
Although radio frequency identification (RFID) enabled devices have been around for years, near field communication extends contactless smart cards by allowing higher capacity two-way communication between devices. Beyond contactless payment, near field communication can also form the basis for a more advanced and reliable cashless electronic payment system. The proliferation of smartphones, tablets and other portable devices among consumers also helps to establish near field communication as the foundation for significant advances in electronic payment systems.
Hardly a month passes without a new product or platform announcement, a new industry partnership or a new entrant promising a radically new approach. Key recent developments in the payment services industry include:
The very range of current developments demonstrates how rapidly the payment services industry is evolving and how uncertain the market is. Ultimately, only a few of these innovations will offer the winning combination of consumer benefits, product features and economic advantages needed to survive over the long term.
Breaking into the payment services market is not easy. Financial services organizations, payment technology startups and credit card companies are taking on the challenge for more than just transaction fees; there is far greater value in controlling the consumer shopping interface. Access to customer and market data as well as the ability to target added-value services, advertising and promotions to consumers at just the right time can generate value for all participants.
However, for widespread consumer adoption, any emerging systems will have to compete successfully with the virtually costless – and relatively low-risk – alternatives of paying with plastic or cash. To be successful, systems must add value for the user as well as for the provider.
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