For years we’ve been debating why mobile payments haven’t taken off faster. Debaters point out issues with the number of players in the value chain, business model challenges, competing technologies, lack of a compelling value proposition, security concerns and more. All of these points are valid: Business models are all over the board, and there is much work to be done to standardize interfaces and technologies, and also resolve the other issues.
At this point in their evolution, however, it is becoming clear that mobile payments can and do work—Starbucks, Dunkin’ Donuts and Uber are great examples. Is it really necessary for consumers and merchants (not to mention financial institutions) to need mobile payments to want to adopt them? My question is…
“Are mobile payments really a solution looking for a problem?”
Consumers are creatures of habit and are accustomed to paying for products and services with a certain set of payment products, in a certain way. For example, a consumer may habitually use online bill pay for utility bills, checks for rent, a debit card at the grocery store and gas stations, an American Express at retail stores and a Visa on Amazon.com. These habits are comfortable and familiar, and historically very hard to change. So any new solution must be better in some way and compelling enough to change those stubborn habits. It’s got to be a game changer—just because a solution is technically possible doesn’t mean that consumers will want to use it or that merchants should adopt it.
But, does the solution have to actually solve a known problem? Steve Jobs, arguably one of the most famous innovators, didn’t necessarily focus on solving problems but rather on transforming experiences. Only when presented with that new experience did consumers realize that they had a problem … or at least a way of interacting with the world that was inferior to the new experience being offered.
This kind of innovation is happening in mobile payments, too.
Consider how Uber’s mobile app has transformed the experience of hailing a cab in many major cities. (If you haven’t yet tried Uber, trust me, you should.) Hailing and paying for a cab is fairly straightforward—find a taxi stand or a busy street, flag down a cab, go to your destination, hand over your cash or card. Now I have the Uber mobile app that enables me to hail a cab, shows me where the cab is on the map and tells me how long I’ll have to wait, which is usually only a few minutes. The fare and tip are paid automatically via my pre-registered account information. So in a hassle-free, highly automated way, I order a cab, go to my destination and walk away without ever having to negotiate the fare, calculate a tip or produce a card or cash to pay. The drivers win, too, because they earn a higher percentage of the fare than with standard dispatch companies and can control their own schedules.
Uber is a transformative experience for consumers and merchants. I now use Uber wherever it’s available, because I just can’t imagine going back to the old way of doing things, even though it worked just fine at the time.
Innovating is not always about solving a problem, although that is certainly good motivation. The point of many innovations, like mobile payments, is to create compelling new experiences that transform the way we live our lives every day.
So, mobile payments may NOT be addressing a particular problem. But, if mobile payment solutions offer compelling new ways to pay for products and services and are enthusiastically adopted by consumers and merchants, does it really matter?
Ginger Schmeltzer is senior vice president of emerging payments at Fiserv Inc. (NASDAQ: FISV). In this role, Schmeltzer leads development and execution of enterprise-wide initiatives to facilitate the delivery of new payment services, with a focus on the rapidly evolving mobile payments market. Prior to Fiserv, Schmeltzer served as senior vice president of digital channel management at SunTrust Bank. She also spent eight years at Edgar, Dunn & Company, where she led the development of its mobile financial services practice. Schmeltzer can be reached at ginger.schmeltzer@fiserv.com.
