2012 Year-in-Review: Emerging Technologies in Payments
December 17, 2012
David Kaminsky
Mercator Advisory Group
As 2012 nears its end, this is a good time to reflect on emerging-technology developments from the previous 12 months. With that in mind, the following are the three most significant items of the year:
3. U.S. EMV Conversion Roadmaps Announced and Started
Although Visa announced its EMV roadmap in August 2011, the other three major U.S. card networks did not announce their plans until this year. MasterCard announced its intentions January, Discover in March, and American Express in July. In addition, both MasterCard and Visa’s first steps, providing PCI relief for early converting merchants, was implemented on Oct. 1. Although merchants this year did not experience significant effects of the beginning of this conversion, what the changes mean for the future are enough to merit mention on this list.
2. Non-NFC Mobile Payment Apps
In 2012, both Google and Isis struggled to establish their mobile-payment products. Google’s initial Wallet launch was disappointing and Isis was forced to delay its tests in Austin and Salt Lake City from the summer until October. However, mobile payment solutions not based on Near Field Communication are growing quickly. Starbucks now processes 2 million mobile transactions each week, which as of November includes Square Wallet-based payments. LevelUp just surpassed 500,000 users. Dunkin’ Donuts launched a mobile payments app, and Burger King is testing its own. While much of 2011 was spent anticipating the promise of NFC, 2012 was spent displaying the value of NFC’s alternatives.
1. mPOS
American Banker recently named Jack Dorsey its “Innovator of the Year,” and with good reason. Dorsey’s Square has revolutionized the card-acceptance market, particularly for merchants who were previously too small to afford standard point-of-sale terminals. After Square paved the way, dozens of competing products were introduced, including offerings from companies such as VeriFone, PayPal, Intuit, and Groupon. In addition to these, a number of solutions have been introduced outside of the U.S., including chip-and-PIN capable devices. The market's growth also is seen in the quantity of payments these products are handling. Square alone is processing transactions at a rate of $10 billion per year, up from $2 billion only 13 months earlier. mPOS makes it possible for all merchants, even the 15-year old baby sitter, to accept card-based payments. This is a value that will not quickly disappear.
So what will this list look like at the end of 2013? Most likely, it will look very similar. mPOS expansion will likely slow down in the U.S., both in new solutions and transaction volume growth, however opportunities exist abroad. Issuers will start providing their customers with chip cards, although the major conversion of POS terminals won’t take place for a few more years. And, in the wake of Starbucks’ success, more retailers will start to develop their own mobile payment apps, resulting in continued growth of non-NFC mobile payment apps. The only question is whether NFC solutions can make more significant accomplishments. With 2013 less than a month away, we will begin to find out soon enough.