With all the innovation in technology and business, as well as new consumer behavior, it’s sometimes difficult to separate what will shape the future of payments from what is just hype. Hundreds of great ideas are generated every day, but only a few may have the right combination to get traction and scale right now. With that in mind, here are a few predictions for the payments industry in 2012.
Mobile payments to ring louder
The mobile industry is shifting to “third gear”, with smartphone penetration reaching global scale and well on the way to becoming the dominant connected device for more than two billion people over the next few years. The smartphone market in India saw a growth of 21.4 per cent over the last quarter and 51.5 per cent year-on-year (IDC Q3 2011 India Mobile Phone Tracker Report). With the increasing adoption of smartphones and 3G becoming a reality, the outlook for mobile payments is optimistic for India.
A global mobile payments study by McKinsey & Company in 2011 revealed that of those surveyed in India, 11 per cent said they were likely to make mobile payments once to several times a day, 30 per cent said they would use mobile payments once a week and only eight per cent said they would not use mobile payments in 2012. Add mobile innovations like the iPad, which has already become the fastest-adopted electronic device in history, and mobile is really hitting its stride.
The true power of the connected mobile device lies in how dramatically it is changing consumer behavior and disrupting existing franchises. Mobile applications are redefining the way we interact with service providers, for e.g. to plan our travel. Previously, travelling across cities by train would mean standing in a queue with hundreds of others to buy your tickets. Indian Railways first launched their IRCTC online portal to help consumers book their train tickets from the comfort of their homes. Now, with IRCTC’s mobile app for train ticket bookings, you can plan your holiday on the move and pay anytime anywhere.
Do not think that mobile devices will be your future identity? Try to spend an hour walking around without your phone, wallet or keys.
A fuller integration
Indian infrastructure has leapfrogged their western counterparts in installing and adopting new mobile infrastructure, and is now quickly adopting a range of use cases for mobile phone. We’re in the era of the connected consumer. All of us are now rarely more than few feet from a connected device at any given time — and we are taking full advantage of this connectivity. We are using the internet to do everything — from checking the cricket score to downloading ringtones to comparing prices to pouncing on deals and reading reviews in real time before we ever set foot in a store to make a purchase. All this disrupts conventional retailing, but the news is not all bad.
Social commerce has seen some exciting developments recently that show more ways that the online and offline worlds are becoming more closely integrated. Louis C K disrupted the media industry by profitably producing and selling a comedy special directly to his audience through his website, clearing more than $1 million in 12 days. Zynga, the creator of FarmVille, went public at a multi-billion dollar valuation, thanks to its ability to sell digital tractors and barns to its ever-expanding user base.
As our online and offline worlds continue to merge, the war of commerce will land right on the doorstep of Indian merchants who have resisted taking the leap into the online world. Local retailers should understand that as their customers spend more of their life online, they will be increasingly comfortable buying from retailers who do not have a physical presence in India — as long as they can find the best selection, the best price and the most convenience.
Indian merchants of all sizes will need to adapt, while at the same time making sure the online world doesn’t drown them in fraud.
Birth of alternative devices
I’m a big believer that a key driver of payment innovation is going to be the enabling of alternative commerce devices. We’re seeing requests for payment capabilities on everything from gas pumps to refrigerators. As all devices become “smart and connected,” there would be more consumer choice, thus enabling the digital wallet in the cloud to show its true value.
Imagine a day when our wallet intelligently figures out how you should pay for things. As payments move to the cloud, essentially anything with an “on” switch and an IP address could become a payment device. Think about Samsung’s Wi-fi enabled refrigerator or Wi-fi-enabled cars from manufacturers like BMW and Audi. It’s a small jump to turn them from internet-enabled to internet-payment enabled.
And, this experience is already making its way into living rooms of consumers in western markets with t-commerce (commerce from your television). Yes, tele-shopping has been around, but imagine being able to watch a Chennai Super Kings game with the option to buy the team’s cricket jersey from the comfort of your couch.
These are exciting times for consumers, and it’s bringing a ferocious level of change to a payment industry that needs it. 2012 will provide enough innovation to give this industry a good shake. It’s exciting to have a front row seat.
The writer is the country manager of PayPal India. Views expressed are his own.