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The Future Of Money

Over 4,200 innovators gathered at the Money 2020 conference in Las Vegas, Nev., which covered the latest innovations in payment and financial services. There were three themes that were woven throughout the conference: 1) simple is key, 2) user experience is important and 3) mobile wallets are the next big innovation in payments. But not all speakers were optimistic on the current state of mobile wallets.

Cyriac Roeding, CEO of shopkick, argued that mobile wallets are a solution in search of a problem. He said, "Most consumers don't really like "pay". It's necessary, but not what people want to do. What people want to do is "shop." Mobile payment by itself is not the solution. Mobile wallet is trying to replace something that is working." His point was that mobile wallets need to more than just enable payment for it to become enticing for consumers to switch from plastic to mobile.

While this may be true for retail -- paying with mobile is not materially different than paying with plastic -- most users would argue that in vending there is a problem to be solved. Approximately 95 percent of the vending machines do not accept credit cards, and prices have continued to rise requiring more bills and change to make a purchase. The problem is real in vending as the consumers are increasingly frustrated with having incorrect denominations or insufficient cash/coin to make a purchase. Payment becomes a barrier to what consumers want, and a barrier to the sale for the operator.

Isis mobile wallet

Mike Abbott, CEO of Isis, unveiled in a keynote its new mobile wallet as one solution to the payment problem. He stated that consumers want simple, secure and to pay faster. The new wallet is simple and intuitive and gives consumers want they want. (Ironically, he had technical difficulties at the drumroll moment when he was about to demonstrate the wallet providing an awkward moment after he just highlighted consumers want “simple.”)

In another session, Rick Kanemasu of Coca-Cola spoke about its partnership with Isis and Coca-Cola's mobile wallet strategy. Coca-Cola conducted a pilot test of 200 machines in Austin, Texas, and then later deployed Near Field Communication (NFC) readers on tens of thousands of machines. Kanemasu said that Coca-Cola looked at the long-term strategy and it made a "bet" on NFC and Isis. Coca-Cola believes NFC provides “the best customer experience.”

Neither Isis nor Coca-Cola addressed how scalable and practical Isis on vending machines would be given the Apple iPhone does not support NFC. An earlier speaker had mentioned more iPhones are sold every day than babies are born. Moreover, about 70 percent of mobile commerce occurs from Apple devices. With NFC required, consumers' problem about having incorrect denomination would simply be replaced by having the incorrect device. A large base of vending consumers still would have frustrations paying, thus making any NFC-based solution much less than ideal.

An audience member questioned that Coca-Cola has 1,000 mobile apps – why not integrate payment into its own app? Kanemasu responded that Coca-Cola figured consumers would use 5 to 6 apps regularly on their mobile phone, and it decided to partner with Isis because it believed that it would be one of the apps that get used regularly.

No clear mobile wallet leader

Isis is just one of the hundreds of mobile wallet providers, and there is no clear front-runner. Many of the other larger companies that presented all had mobile wallets including PayPal, Google, Square and MCX to name a few. It is apparent that payments have gone from the cash era to the credit era and now to the mobile era. It is expected there will be a shakeout and just a few providers will be dominate.

Vending has always lagged behind and has not even moved to the credit era, while the rest of commerce is moving towards the mobile era. For operators, it is essential they understand what is happening with mobile payment especially as they contemplate building out a credit card infrastructure on their vending machines.

Credit in vending is like landlines in developing countries. Mobile communications leapfrogged landlines. In fact, it may be hard to believe, but India has a greater mobile penetration as a percentage of population than the U.S. This provides an important contrast. It is quite possible that mobile payment penetration in vending could leapfrog retail simply because it can leapfrog the credit infrastructure.

In retail, there is a solution that is working (credit) and to transition to mobile will likely take some form of an upgrade or replacement of terminals with little incremental sales to justify the investment. Ed McLaughlin of Mastercard said, “What consumers don't want is a more complex way to do something they did before; they want to do something that they couldn't do before.” There is not much difference between tap to pay and swipe to pay.

In vending, mobile payment can enable a consumer to do something they couldn’t do at most machines – pay with cashless. The vending industry has the unique opportunity to have greater mobile payment penetration than retail similar to mobile communications in developing countries. It is estimated that mobile payment in retail will have 50 percent penetration sometime after the year 2020. With the right solution, vending could get there far sooner.

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