Thursday, January 14, 2016

When Will the Shakeout Hit Mobile Payment Systems?

Innovative technologies bring a messy beginning to industries, as entrepreneurs tinker in their garages (literally, in many cases) and start businesses to commercialize their products. Think of the car industry, where 253 auto manufacturers operated in 1908. Or the computer industry, where in the 1970s, big names included Wang, Apple, Tandem, Commodore, even Tandy Radio Shack.

Apple Pay
In every case, a shakeout reduced the ranks and consolidation brought the strongest survivors together. For cars, the shakeout began in the 1920s: By 1929, only 44 automakers were in operation--and the Great Depression of the 1930s narrowed that number even further. For computers, the revolution came in the form of IBM, which introduced its personal computer in the 1980s. Brand proliferation continued for a time, but soon the high cost of entry and competition prompted brand after brand to either drop out or be acquired. Same pattern in TVs. And on and on.

So when will this pattern emerge in mobile payment systems? Not in 2016, but soon, IMHO. A key element will be what the biggest brands are doing. For instance, Apple Pay has many bank and retail partners, it's high visibility, and it's concluding deals to launch in more countries. In other words, Apple will be a major factor in shaping this industry's immediate future.

New entrants continue to announce their own mobile payment systems. Walmart recently launched Walmart Pay, which operates through its Walmart app. The world's largest retailer is also participating in a mobile payment program devised by a group of retailers. JP Morgan Chase has Chase Pay scheduled to roll out this year. Target is in the same retail group testing mobile payments as Walmart, but it also is mulling a proprietary system.

Meanwhile, tech standards are in flux, consumers have a LOT of choices, and the roles of various players (banks, retailers, card issuers, telecoms, chip manufacturers, etc) aren't yet settled. Consumer acceptance of mobile payments continues to be relatively slow, in part due to security concerns and the multiple systems competing for adoption.

So no shakeout yet, but consolidation will happen sooner rather than later. And when it does, it will disrupt the marketing plans of every participant (while it shapes the behavior of consumers). Get ready!

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