Big Day for Payments: Plastic vs. Digital

Only in the ever changing world of payments.

It is more than a bit ironic that on a day that Isis Mobile Wallet announced that they were going live with their carrier-backed digital payments initiative, a unique card-based solution named Coin announced their alternative solution to the overstuffed wallet.

The question is . . . which solution has the greatest chance for near-term and long-term success?

Maybe both will garner the support of the key involved parties. Maybe neither. Maybe another company will take the Coin concept mainstream sooner than the planned introduction. The one thing I am pretty sure of is that it is further evidence that financial institutions need to place multiple bets on alternative solutions to avoid being left behind.

Despite all of the talk in the industry around mobile payments, acceptance of new digital innovations and platforms has been anything but a smooth ride. In addition to the seemingly insurmountable challenge around consumer's concern with security/privacy, getting merchants, consumers, financial institutions and even carriers on the same page has been close to impossible.

At the end of the day, the biggest challenge may be the perception by many that there is no reason to fix something that isn't broken. The current card-based process for making payments, while not perfect, is relatively easy and definitely firmly entrenched in the consumer's daily life.

What is Coin?

Coin is a .84 mm thin plastic card-like device that can store any of your current cards (actually, 8 of them) and behave like the cards it replaces. Instead of carrying an assortment of debit, credit, gift, membership and loyalty cards from various institutions, you simply use the dongle provided (like the one used by merchants accepting Square) to capture your card information on your phone, take a picture of the cards and use the Coin app to load your Coin card.

While only 8 cards can be loaded into the Coin card, an unlimited number of cards can be stored in the mobile app and switched in and out of the card as desired. "You don't need eight cards every day, so your phone is kind of like your drawer, and your Coin is kind of like your wallet," explains Parashar, founder and CEO of Coin. 

When you are ready to pay or use a loaded card, simply press a button on your Coin card to select the card you want to use (electronics imbedded within the Coin card itself), present your card to the merchant like you have done in the past, and the rest of the process is the same as it is today (see compelling video below).

Coin is Secure

For those concerned about the security of the card should you leave the card behind (only happens to me about 4x a year), the Coin card uses Bluetooth low energy technology to inform you on your phone that you left your card behind. Better yet, the card completely disables itself if your phone and card are away from each other for more than 10 minutes. 

For those concerned about someone scanning another person's plastic into the app, Coin says that the app only accepts a card that includes the user's personal information. Further, the Coin app is protected with 128-bit or 256-bit encryption and the company is pursuing PCI compliance. The app is also password protected.

Coin is Cool

Coin Retargeting Ad

From the video alone, it is clear that Coin is cool. I personally love it because it is another example of incremental innovation, based on simplifying a person's life seamlessly. It combines something that I am very familiar with (traditional magnetic swipe mechanics) and leverages very high tech digital technology to lighten my wallet. The public seems interested as well since, in the first 48 hours, almost 2 million people viewed the demonstration video on YouTube, making this financial product the number one trending video.

No new hardware is needed since the device uses a traditional (or new form) credit card swiping device.

In other words, Coin has done what mobile payments is hoping to do (eliminate wallet bulk) without changing my payments behavior. And until NFC, Isis, PayPass or any other mobile payment alternative gains the needed momentum to become omnipresent in my life, an incremental improvement works for me (even though I still love the integration of my Moven debit card and PayPass with mobile receipt and payment analysis).

Initially, the Coin card is expecting to be released in either black ('Midnight') or white ('Snow'), with additional colors being introduced later (sound familiar?). The app will initially be able to run on both iOS and Android. Obviously, the Coin card would not be used for online purchases.

While not the best way to judge a new payments alternative, even the Card website is cool. Here is a link to the product's FAQ page (be sure to read all of the questions . . . some are helpful in daily life).

Coin Crowdfunding

While already having raised funds from venture capital firms (and interestingly the backing of former Google Wallet head Osama), Coin hoped to raise the $50,000 it says it needs to start producing the card by pre-selling the cards to the public beginning immediately for $50 on their website. This method of pre-sale was to gauge the acceptance of the concept up front and underwrite the initial  offering. It is expected that the card will be priced at about $100 at introduction which is scheduled for next summer.

According to representatives from Coin, the start-up surpassed their initial goal for funding . . . within 40 minutes. In addition, the buzz in the industry (while not always the perfect barometer) was unprecedented. Obviously, the consumer wants an alternative to the fat wallet, that is easy to use, acceptable everywhere and avoids a steep learning curve.

To kickstart the process (pun intended), Coin is offering a $5 referral incentive for those who pre-order Coin. Once a person orders Coin, they will be provided a unique URL via email which can be used to tell friends and family about this unique payments solution. For each referred party (up to 10) who also pre-orders within 90 days, a $5 credit will be applied (up to covering the $50 cost of the service.

No Platform is Perfect

Just like the card-based platform Coin is hoping to simplify, the solution is not without some potential drawbacks. For one, while the concept of connecting the smartphone and Coin card for security is a significant benefit, there may be some challenges during normal use when the bluetooth connection is lost (during airplane mode) or the card is out of contact with the phone for extended periods. Coin says that reactivating will be simple.

Additional issues include the normal concerns around any card-based system such as potential skimming even though there is encryption, durability of the card (said to be 2 years of 'normal' use) and the fact that the Coin card is not waterproof. It is still to be seen how durable a computer embedded, less flexible card will be (especially in my pocket).

From my perspective, there is one more drawback . . . Coin won't be available for at least another 6 months. Knowing the unpredictable payments world, the introduction will probably correlate with an announcement by Apple regarding their entry into the payments battlefield.

A Word About Isis

As mentioned in the beginning of this post, another significant announcement occurred today with the long awaited launch of the Isis Mobile Wallet. According to the press release, customers with one of the more than 40 'Isis ready' smartphones can receive an enhanced SIM card from their wireless carrier and download the Isis Mobile Wallet for free from Google Play. The Isis Mobile Wallet will allow customers to pay at contactless payment terminals.

Unfortunately, with only 200,000 local and national merchant locations (out of 8 million merchant locations in the U.S. market), this solution will continue to face an uphill climb. In other words, this might be a potential mobile solution if you live in the right place with the right phone.

Not surprisingly, the newswires were buzzing with discussion and stories about payments innovations today. It just wasn't about Isis.

Additional Resources

Coin Website (with video)

Inside Coin's Techie Vision for the All-in-One Credit Card: CNET (Nov. 2013)

Coin, The Electronic Credit Card, Reaches It's Pre-Order Goal in 40 Minutes: TechCrunch (Nov. 2013)

Coin Tries to Make Credit Cards History - Forbes (Nov. 2013)

Mobile Payments Growth: Just The Tip of The Iceberg?

A new report from Business Insider Intelligence on the state of the mobile payments industry shows that, while the volume of mobile payment transactions still represent just a small percentage of overall payments on the surface, the level of growth is significant and quickly shaping the entire payments industry.

Both consumer and merchant uptake is exploding as smartphone users are quickly adopting mobile wallets, payment apps, etc. to facilitate offline and online purchases and as businesses are turning smartphones and tablets into full-featured POS terminals. The next critical step is to persuade the masses to become users of the payment technology available.

When Amazon and eBay launched their online shopping sites in 1995 and 1996 respectively, the notion that over half the U.S. population would make purchases online would have been scoffed at. Yet in 2013, the number of online shoppers in the U.S. will reach 189.6 million, according to eMarketer. In this case, the majority of the consumers were resistant to change until they made the switch and realized the benefits. The same applies to mobile payments.

The key is to examine the current payments industry growth trends, motivations of current users, the reasons for the gap between awareness and usage, and how financial institutions, retailers, network operators and equipment manufacturers can work together to convert reluctant consumers into loyal users. As mentioned by many of my fintech colleagues recently, it goes beyond a mentality of "If you build it, they will come". There is a need to solve for the concern around mobile security as well as develop incentives for usage.

Defining Mobile Payments

For the purpose of the study being reviewed, 'mobile payments' were defined as when a mobile, internet-connected device (smartphone, tablet, smart watch, Google Glass, etc.) is used to facilitate a transaction that might otherwise have taken place using a physical credit card, debit card, check or cash at a physical (not online) store. 'Mobile transactions' (for the purpose of this study) are a larger category that included mobile payments as well as mobile commerce and e-commerce channeled by an app or mobile website (e.g., Amazon's mobile app).

Mobile payments and transaction innovation is currently be led by start-ups and tech companies, who are prompting legacy payments players and card companies to reevaluate their current strategies and increase their own pace of innovation. 'Coopetition' has become the norm as companies team up with each other as opposed to building a mobile strategy from scratch. These partnerships (and individual initiatives) are pushing innovation forward quickly, making the industry fragmented yet ripe for consolidation.

Mobile Payments: Still Relatively Small on the Surface

Like an iceberg, there is much more to the mobile payments than what the can be seen on the surface today, with a U.S. mobile payments forecast of $30 billion in 2013. According to the research compiled by BI Intelligence, this forecast represents an average annual growth rate of 118 percent since 2008, but still will only account for 2 percent of the $3.3 trillion debit and credit card volume in the U.S. this year. It was also found that other global markets (such as Africa and the Asia Pacific regions) are seeing a much larger percentage of mobile transactions.

In both the U.S. and other global regions, the growth in mobile transaction volume has been driven primarily by the growth in smartphone adoption (especially in areas of underdeveloped banking systems). Not only has the smartphone impacted the consumer side of the payments equation, but also the merchant side, where attachable card readers transform smartphones and tablets into cash registers, making card purchases easier.

The Gap Between Awareness and Usage

In a recent research study conducted by Accenture entitled, Driving Value and Adoption of Mobile Payments: Consumers Want More, it was found that while consumers know that mobile payments are an option, they still prefer not to make them. In the study, 41 percent of North American smartphone users were highly aware that their phones could be used as a payment device, yet only 16 percent had done this.

Similarly, the BI Intelligence research found that, similar to most disruptive technologies, the adoption of mobile payments to date has been driven by both the underserved and the early adopter segments. From the merchant perspective, firms like Starbucks, Apple and Home Depot are helping both awareness and usage.

On the consumer side, new apps and 'mobile wallets' from firms like PayPal, Google and Square are helping mobile payments acceptance. But, while consumers are highly aware of these mobile payment applications, and find the convenience and money-saving incentives appealing, many are holding back from using mobile payments because of security and privacy concerns. Consumers worry about their liability if their phone is lost or stolen and express concern that the risk will escalate as the phone evolves into a mobile wallet.

Security and Privacy Concerns Hinder Growth

According to the Accenture study, 45 percent of respondents who do not currently make mobile payments said they were concerned about security, while 37 percent had worries about privacy. 

These findings were in line with another study done earlier this year by Chadwick Martin Bailey entitled, The Mobile Moment: Barriers and Opportunities for the Mobile Wallet. In this study, 73% of those households that were familiar with the concept of a mobile wallet but were forgoing using the capability mentioned security as the reason for non-use. The specific reasons for security concerns included identity theft (70%), theft of phone and personal information (60%), interception of personal information during transaction (57%), hacking of mobile phone (52%), hacking service provider (34%) and getting charged for an accidental transaction (19%).

Chadwick Martin Bailey Mobile Wallet Research, 2013

Potential Beyond Payments

As we move from mobile payments to mobile wallets, many studies indicate that there is the potential to offer more than just payments. According to a recent study from mobile marketing firm Vibes, nearly 85 percent of smartphone owners would like to receive non-payment services from a mobile wallet, including loyalty card storage, coupons, personalized offers and other marketing materials (similar to the Apple Passbook app). Interestingly, the study finds that only 19 percent of those surveyed believe they had been offered any such content.

Again, the Chadwick Martin Bailey research from earlier this year collaborated with the findings from Vibes, illustrating that several additional features would be viewed positively by households who understood mobile payments but had decided not to use this functionality. In fact, the 'perfect' mobile wallet combination from the perspective of non-users was payment functionality combined with the ability to store loyalty cards and other sensitive documents (insurance cards, drivers license, etc.). 

While mobile offers were not scored as high as storage of cards in the CMB research, the Accenture research found that 60 percent of consumers who already do mobile payments would do so more often if they received instant coupons. In addition, 36 percent said they would provide personal information in exchange for such rewards and 46 percent would increase payments if they received location-based offers

Chadwick Martin Bailey Mobile Wallet Research, 2013

The Future of NFC

Near Field Communications (NFC) is a technology that allows devices to communicate with each other at close range to facilitate payments and other transactions. Despite years of debate on the pros and cons of the technology (especially in the U.S.), there are more and more who believe NFC will be a non-starter as a payments technology. It's not that the technology is disappearing (NFC chips are being placed in virtually all new Android phones). It's just that acceptance has never gained steam:

• Google Wallet recently dropped the requirement that NFC technology be required for its wallet app to run. Google wallet has recently developed an app for the iPhone and becoming device and technology agnostic.
• Apple (and PayPal) recently released new close range technology (Beacon) that use low frequency bluetooth communication that is available on virtually all smartphones. This technology also requires significantly less hardware upgrades from the merchant and is faster and has more functionality for the consumer.
• Beacon technology could eliminate the checkout entirely, providing real-time offers, product information, facilitate payments and remove any security devices before leaving the store.

The Future of Mobile Payments

Despite a lot of noise among financial technology insiders and the payments industry, mobile payments and mobile wallets are far from becoming mainstream. As expected, mobile payments are more commonplace with younger demographics and higher income categories as well as having greater potential for those who are underbanked. In other words, the potential for mobile payments in the future is high, but is far from guaranteed.

While our industry continues to be focused on the next shiny technology breakthrough in payments, consumers are more concerned about security, privacy, convenience and the improved 'value' of using their phones to make payments. In other words, "Will the customer experience be better than what I have now?"

Financial institutions, merchants, network operators and technology providers must answer the above concerns and provide education on the way to best move forward . . . from the consumer's perspective. This education is made more difficult with the multitude of different payments solutions being introduced and the overall 'noise' in the marketplace. 

Finally, recent research indicates that both current mobile payments users and non-users can be provided incentives to increase their use of mobile payments. This can be in the form of transaction incentives, mobile coupons, geolocational offers, etc. that are incorporated into the mobile payment experience. 

Today's digital consumer expects their mobile devices to improve and simplify their lives. Until the providers of mobile payments can achieve this goal on a broad spectrum, mobile payments will look like more of a tip of the ice cube vs. tip of the iceberg.

Additional Resources

There's Virtually No Ceiling to Mobile's Potential in the Larger Payments and E-Commerce Markets - Business Insider (Oct. 2013)

Gartner Says Worldwide Mobile Payment Transaction Volume to Surpass $171.5 Billion - Gartner (May 2012)

Driving Value and Adoption of Mobile Payments: Consumers Want More - Accenture (2013)

Consumer Intelligence Series: Opening the Mobile Wallet - PriceWaterhouseCoopers (2013)

The Mobile Moment: Barriers and Opportunities for the Mobile Wallet - Chadwick Martin Bailey (April 2013)

Kaching Ushers In New Era of Mobile Banking

The Commonwealth Bank of Australia has broken new ground in the advancement of mobile payments by introducing a new iPhone application that allows users to pay friends or businesses using Near Field Communication (NFC), Facebook identification, an email address or a mobile phone number.

Kaching (pronounced like the cash register sound Ka-Ching)  will initially only be available for users of the iPhone 4 and 4S (with soon to follow Android support) using a specially designed case with built in NFC chip. With this case, the phone will allow the user to simply tap and pay at a PayPass terminal. 'This banking breakthrough marks a significant milestone in the evolution of how people pay and receive money from each other," stated Commonwealth Bank of Australia chief information officer Michael Harte.

According to a CBA spokesperson, the use of a specially designed NFC case is only an interim solution until iPhone, Android and other smartphones introduce new versions of phones with NFC integration built in. In what some believe could be the beginning of the end for plastic credit and debit cards and potentially even cash, this form of electronic payment would be conducted 24x7 in real time if both sides of the transaction are CBA customers and one to two days if the payment is made to a customer of another bank.


CBA has more than 6.2 million online banking customers and is the seventh largest bank in the world. According to the bank, more than 16 million logons from a mobile device were made in August (a 229% increase from last year) with close to 80 percent of these from an iPhone.

The integration with Facebook is a first in the payments world, but is felt to be a logical extension due to the acceptance of Facebook and the very strong smartphone usage by Facebook users. The iPhone application even integrates other iPhone features such a GPS function to find branches and ATMs.

Kaching iPhone Mobile Payments Screen

The Kaching app will include password encryption technology to ensure a lost or stolen phone would not be compromised and not banking information will be stored on the phone. Payment recipients will also be protected, with all un-retrieved funds credited back to the payer after 14 days the bank said.

While this technology or integration has yet to be introduced in the United States as a mobile banking application, it is expected that new virtual banks such as BankSimple and MovenBank will leverage this technology as part of their rollouts. According to Brett King, founder of MovenBank and author of the bestselling book Bank 2.0, the use of Facebook for payments or even to complete the new account application process is not so far fetched as security and acceptance of Facebook continues increase. In addition, King believes virtual currency like Facebook credits  may replace today's physical currency ('The Bank of Facebook: How Will Facebook Interact With the Global Economy' Fast Company Expert Blog by Brian Solis).

NFC support is increasing in the U.S. with the launch of the Google Wallet last month that allows for consumers to pay in select stores with phones running its open source platform. NFC is expected to gain much wider acceptance with the anticipated integration within the next generation of smartphones, especially the iPhone 5.

So, is this the beginning of the end for credit cards, debit cards, checks and cash? Will this introduction hasten the full scale introduction of new banks and bank platforms that leverage new technology and payment  methods? Will branches and ATMs even be needed in the future?

I would love to hear your thoughts.