Money to-go or the Fintech revolution
Money in all its forms has been used as a medium to convey the value of things. It is today used to store and exchange a value that exceeds its own value.
Money as we know it has been around for more than 3 000 years but it did undergo several transformations. Coming a long way from the symbolic shells in ancient China to its current form of hard currency and electronic bits. But in its history, money has known a key revolution with the transition of most modern money systems to fiat money — Fiat money is a legal tender that holds more value than itself — after centuries of relying on gold as a shared exchange value.
Our concept of money has radically changed. We are today buying and selling tangible commodities using intangible and symbolic money, printed paper, tokenized plastic cards or our mobile phone.
The digital revolution is bringing us everyday newer technologies that allow instant communication and information transfer at unseen until now speeds. Today’s consumer is used to be connected everywhere. He can communicate with almost anyone around the world and any information he might need is just a finger-slide away. Why wouldn’t then consumers expect the same from their money?
Satisfying these needs and offering more convenience to the consumer by allowing him easy access to his money should be the core strategy for any company in the financial and payment industry. However, it seems that the actual offerings are lacking real innovation. Some of them are experimenting with mobile products, but unlike shopping which has reinvented itself to adapt to the different environment that is the internet, and then the mobile internet; online banking and online payments are still much like their offline equivalent: confusing and far from user friendly.
Today’s online payments are still much like an offline POS payment at the local supermarket, with the only difference that instead of sliding a card in a card reader the information is entered in an online form by the consumer. This process which is called card-not-present payment is guided by the same basic concepts and underlying infrastructure of its archaic predecessors.
Online banking and online payments have developed in the late 90s and early 2000 when the internet business was young and was the eldorado for most people and the far west gold for many of today’s billionaires. However, more than 10 years later, it hasn’t changed much and it doesn’t offer any added it didn’t back then. Online consumers are thrown in front of a patchwork of applications that are little to not aware of each others. Jumping from screen to screen to manage what is basically one and the same thing: Money.
I remember, not that long ago, the frustration when one couldn’t get information on his checking accounts if they were opened in a different branch of the same bank. At that time, it was common to have to switch between desks if you wanted to cash-in a check and get information on a mortgage in the same day. Today, I’d feel the same frustration when I have to go through an endless series of screens when I want to make a wire after checking my transactions history.
Probably the main reason behind the lack of innovation in online banking and online payments is that they were designed based on the same concepts that rule their offline equivalents. Since their early development phases, online payment providers have focused on the payment but although some of these companies have a banking license, none of them has actually money management in its portfolio. This capex-intensive business vertical was left to the banks with their extensive network of branches and ATMs. Unfortunately, this move has de-facto excluded more than 2 billion people who don’t have access to banking. Add to this the limited access to the internet in developing countries and you get a large dark spot on the map that nobody is thinking of exploiting for now.
There is light at the end of the tunnel
The last decade has been a very busy one for the money industry. With the development and large adoption of internet, new consumer trends have arisen, calling for new ways to pay and transfer value. Due to this intrinsic relation between consumers habits and payments, changes in the concept of money and the way we use it seems to be more dynamic than ever. After the internet revolution, some years ago, the latest development in mobile internet predict a new shift that might shake the business standards. The payment industry is of course already witnessing deep changes and new products for mobile payments are already hitting the app stores.
Pingit — A Barclay’s bank app that allows the online direct payment directly from your phone — launched earlier this year and has already more than ½ a million downloads, 120 000 of which were made in the first 5 days after its launch. Another example is Square, the mobile payment company that is claiming more than 1 million merchants using its payment platform.
Oddly enough, the companies that revolutionized online payments do not seem eager to get into the mobile payments arena. Most of them lack a real innovative mobile payment solution. The reason behind that fact can be a strong risk aversion or a deep misunderstanding of how the mobile can be utilized in the banking and payments industry, and what opportunities it can bring.
Are the pioneers of online payments turning their back on a market that might be an even bigger goldmine than the fixed internet revolution a decade ago?
With the entry of new players in the market, online payment providers seems to be slowly going out of lethargy, forced to get up to speed while their market positions are threatened. They are multiplying press releases announcing new products showing the change in their business models and the diversification of their market in going mobile or in offering offline payments solutions. What was a nice-to-have complication might be today the only thing sitting between them and bankruptcy. The banks and payment providers’ failure to innovate and stalled decisions is exposing them to lose market shares to new players with disruptive customer management and user interface design. Examples of this “invasion” are of course the superstars like Square or Google but also smaller alternative player such as Simple or Stripe.
With technology anything can be done, it only takes innovation and creativity. In Kenya, the mobile-phone operator Safaricom has developed a mobile payment solution that is adapted to its market, but it didn’t stop there. Aware of the nature of the specifics of the money supply distribution in the country which is currency intensive. It also invested in disruptive ways to manage cash in and out. For anybody that has been to Kenya or any less developed country, you can have noticed that at the local drugstore you can also use the phone as a service, Safaricom just translated the same concept to payments by allowing cash-in and cash-out the mobile wallet accounts in more than 30 000 stores. Reaching more than 17 million people with a minimum investment.
Money is the last bastion resisting the 360 degrees shift towards a more customer-centric business model the internet has imposed. However, Moore’s law might catch that industry sooner or later and technology will make it seamless for us to receive, move and manage money regardless of regulations and compliance challenges.
