In a well-researched recent study, one industry expert wrote about the evolving technology facing the financial industry and predicts the consequences for the various stakeholders: banks primarily, telcom, card networks, handset manufacturers, merchants, and of course, consumers. The report – titled, “Emerging Mobile Payments Landscape: a study of the proximity payments ecosystem and its inhabitants while building a business case” – is a thoughtful and precise paper, outlining the strategies and challenges for not just the industry, but specific players like PayPal, Square, Serve, ISIS, Google and others.
The changing landscape in a financial system based firmly on 1950′s technology has far-reaching consequences. First and foremost, the big bank model we’ve come to know and love will have to adapt. The paper begins by declaring that the entrenched status quo better wake up if they want to survive the already-begun wave of innovation in mobile payments capabilities:
“Those who question the significance of the threat posed by these technology upstarts to the entrenched incumbents may not find comfort in the seminal book “Innovator’s Dilemma” authored by Clayton Christensen. He posits that well run companies are slow to react to disruptive innovations to its value networks. With the emergence of mobile payments, banks are at the cusp of a revolution, brought on by both technology and shifts in customer payment modalities. At a time when declining interchange revenues (to the tune of $6.6B per year) brought on by regulatory changes compel banks to look for new revenue streams, mobile payments offer a ‘blue ocean’ opportunity.”
This point should both scare and inspire banks and their leaders. It should scare them because there is no doubt that the numerous innovative start-ups in this space (with Nooch right there with the best) are driving the future. That has been true of not just mobile payments, but also of mobile in general. We can sometimes forget that many of Google, Facebook and PayPal’s best technologies/features were only added after they acquired a less-prolific company with an innovative improvement. Small, agile companies are being led by a bright new crop of entrepreneurs who have an almost innate understanding of the Age of the Internet, where communication, engagement and commerce are expected to be ubiquitous and seamlessly integrated into their lives.
It should inspire them because this disruption should have been seen coming for decades. The shrinking of the planet and the increased interconnectedness necessitated a more efficient, reliable and adaptive financial system. And the wonders of the internet – granted only 20 years old – are only now beginning to be realized in the old-school banking world.
They must understand that the world isn’t changing… it’s changed. The technical possibilities brought about by social networks (a sociological phenomenon), mobile computing (a technical phenomenon) and an increasingly digital consumer (an economic phenomenon) offer too many advantages to ignore.
But it’s got to be done right. And today’s consumer – especially the Gen-M we’re all getting used to – has vastly different expectations and habits than the “I-still-use-paper-checks” generation. In other words:
“Customers are no longer willing to change behaviors; they expect products and services to adapt to their needs… The banking industry is in the midst of a seminal shift, where banks are waking up to the realization that banking is no longer just about product, services and technology. Rather, it’s about simplicity and providing an experiential journey for its customers. The primacy of customer has been reestablished. By… improving the overall customer experience, banks can enchant their customers and create lifelong fans.”
Which is exactly why Nooch is bringing the most customer-oriented solution to the Mobile Payments space. For example, there have been several iterations of SMS-based person-to-person money transfers. But they all required the user to master various keywords, text commands and formats in order to send money. And they had to know their recipient’s phone number (at least, and often much more info than that, such an account number). But come on… who among us – especially ADD Gen-M’ers – is going to take the time and put in the effort to do that? Ergo, dustbin.
Nooch, on the other hand, is learning from the past and iterating the most consumer-focused P2P product. Here are three ways Nooch has improved the user experience:
- Senders just need the recipient’s name. By utilizing the new social network phenomenon – which compiles immense amounts of data like names, profile pictures and friends – Nooch users can find their recipient with only their name. Connect to Facebook, find your friend, tap on their face. Nothing could be simpler.
- One really good feature. PayPal is really, really good at one thing: facilitating online merchant transactions. Square is really good at small-dollar PoS transactions. But when they or others (i.e. Dwolla, Venmo, others) try to load up every feature they can think of, the product looses relevance and becomes diluted. Nooch is not going to have a “tip calculator” icon on the home page of its app. Why should it? Honestly, it takes longer to actually calculate the tip using that “feature” than just doing some estimation in your head. I’m not going to use it, so I don’t want to see it. Especially not on the main page of the app. Nooch offers simple P2P money transfers for situations when you need to give a friend cash (for anything, a bet, lunch, debt, birthday, whatever) in a non-merchant setting. No need to conquer the globe. Just provide a superior service that is reliable, simple and affordable.
- Nooch is designed to be a mobile product. PayPal requires all users to sit down at their computer for certain functions like changing account info or loading a new bank account. Well, what if you’re not in front of your computer? Not very helpful. All Nooch functions can be performed right from… well, wherever you are.
“Non-traditional players are more focused at owning the customer experience.” Banks “must ensure an optimal overall customer experience, regardless of volume. Most importantly, it must learn to engage customers where they are encountered, and not force them to switch channels for resolution or acknowledgement.”
Exactly. As mentioned above, consumers don’t want to change what they do. They already use credit (or increasingly, debit) cards and they like it. It is extremely simple and quick… just hand it over and swipe, and sometimes sign. So why would a consumer all of a sudden start trying to use an app (however sexy or functional) on their cell phone to “beam” money to the merchant, who must also commit to such a change by investing in the necessary hardware/software to even accept the payment.
They need a more compelling reason and it must be relevant to their daily life. Nooch solves a problem that every college student faces almost every day: not having cash on you when you have to give someone cash. They don’t write checks, and they don’t like ATMs. They usually resort to the ever-hated IOU. But why? Why isn’t there a simple way to digitally send that cash and just be done with it. We don’t need a fancy inventory control database system, or a special receipt printout, or even 100 reward points or prize. We just want to give the money quickly and with as little pain as possible.
BUT, none of this means that Generation-M doesn’t care or think about the security of their personal financial data. Sure, people under 30 probably never read the iTunes updated ToS and most wouldn’t think twice about giving their name or interests out on the not-so-anonymous-anymore internet. Security matters. Just look at Sony this year. Millions of profile’s data was compromised and stolen presumably to be sold on the black market to off-the-radar advertisers (i.e. spammers.) The costs to business and consumers alike can be staggering: companies around the globe lost $1 trillion from data loss in 2008 alone, according to a 2011 McAfee report.
Nooch takes a proactive approach to mobile commerce security. Nooch takes advantage of Geo-location (a very recent innovation in the average mobile device), device-linked accounts, multi-factor authentication, social networks – along with traditional security processes like private, co-located secure servers, PIN technology, PCI compliance, SAS-70 certification, VeriSign certification, government grade encryption, and more – to deliver the most reliable service on the market.
When you dig deep, though, it becomes clear that mobile commerce will actually be exponentially more secure than the retiring modes of commerce it is supplanting. A recent FBI report indicated that credit cards alone represented the majority of the total $315 billion U.S. financial fraud loss. Check fraud is still rampant, and even growing.
But mobile payments companies like Nooch offer the latest in digital security, encryption and other novel approaches that put the criminals and fraudsters on the defensive and block virtually every traditional fraud scheme. To learn more about Nooch’s security and what threats face the world of mobile commerce, see Nooch’s Whitepaper, “Mobile Security: Protecting Your Money in a 21st Century Environment.”
P2P Mobile Payments should be something users should spend very little time thinking about. That’s what Nooch does, and that’s what we do very well.
Part Two in Nooch’s series, “Mobile Payments: Why P2P is here to stay,” will discuss the landscape from the banks’ perspective. How can banks jump on board and enhance their own value with so much mobile competition?