Jul 26, 2006

There’s a blind spot in the way our industry looks at payments innovation

A card issuer’s vision of the future: Mobile payments are commonplace, biometrics have wiped out fraud, checks no longer exist, and cash is almost gone. Speaking at a payments conference in Frankfurt, Mark Garvin, chairman of JP Morgan Chase AG, outlined a compelling and relatively near future vision of the payments industry in 2016.

Chase’s vision came together after the company talked to the normal organizations which card issuers come into contact with regularly. Mr. Garvin refers to corporate and consumer banking clients, regulators and infrastructure providers. Their research also focused on “some of the younger Europeans who represent the generation of leaders who will be in positions of authority in the business world 10 years from today.” But what about merchants? This critical constituency does not seem to appear in Chase's vision of the future. The future of retail stores is very briefly touched on at one point, in a single minor sentence: "2016. There are no checks. None. In fact, you don’t see as many cash registers in the stores because expensive coins and currency are rapidly becoming a rarity." I hope bankers don't really believe that cash registers exist simply to store cash.

Injecting a dose of merchant-centric focus into the thought process will have a profound impact on how we see the future of payments. It will completely disrupt most people’s current visions. For the most part, the current generation of payment professionals, analysts, consultants, journalists and other experts say things which make it look like they lack even the most basic understanding of the universe that merchants function in. Hence their inability to respond effectively to the root problems behind all the interchange battles around the world.

Of course, the banking industry does have experience working with merchants. Lots of experience. But for some reason it's not being used in an effective way. It could simply be a matter of putting in place incentives to encourage greater focus on solving real problems for merchants. And the biggest incentive could come from a growing fear of losing out on interchange revenues. The change in focus would have a major impact on how we look at the future of payments.

No comments: