Today, there are a number of payment protocols -- from those used to facilitate payments by check, credit card, or bank account. Recently, we have seen technology companies like Samsung, Google, and Apple release their own proprietary payment services.
Myth #1: Apple Pay and its competitors will save us
While Apple Pay and other mobile payment services have high promise, their adoption has been very low. According to Goldman Sachs, in 2017 only 8%, 6%, and 3% of people use Apple Pay, Samsung Pay, and Android Pay on a weekly basis, respectively.
Because these providers are built on top of the existing credit card infrastructure, they offer limited benefits of taking out a card and tapping or swiping. Interestingly, while other countries have adopted entirely new payment methods, like M-Pesa in Ksenya, the West is stuck trying to innovate within a very narrow band.
Myth #2: Money transfer services can expand to provide frictionless payments
Venmo has been a massive success with millennials--it’s their go-to method to pay or get paid from friends. And recently, Venmo, which is owned by PayPal, announced that their wallet is accepted at over 2 million retailers.
That said, there is a catch: Venmo charges merchants a fee when a consumer does a checkout with Venmo’s digital wallet service. And again, for the consumer, there is limited benefit to using Venmo versus a traditional card.
Square, the company started by Jack Dorsey, has also recently entered the card space. Square Cash cards started out as prepaid cards but now function more like a traditional debit card.
Both companies are expanding to offer more financial products, but none has revolutionized the industry.
Myth #3: Payments inside of apps are the future
In China, WeChat has grown into a goliath. The app started off as a simple messaging app but has blossomed into a much bigger platform. In 2016, there were $5 trillion worth of mobile payments in China and amazingly, 94% of the market was owned by two companies: Alipay and WeChat Pay.
Indeed, there are over 100+ mini-apps available inside of the Tencent’s WeChat app!
Although there is huge adoption in China, there has been relatively little success in North America and Western Europe. Both Facebook and Snapchat’s payment features feel like afterthoughts, and, like above, they have yet to remove any friction.
The biggest apps of the last decade -- Uber, Lyft, Airbnb, and so on -- have all had a very nice embedded payments experience, but, ultimately, are linked to a user’s debit or credit card.
How to Get to Truly Frictionless Payments
By now, your question is likely: So, how do we get to truly frictionless payments?
We should look at the new technologies, like the blockchain technology that underpins Bitcoin and Ethereum, that can provide the answer.
For example, Ripple is rebuilding the entire payment stack leveraging the blockchain and the internet. The company has over 100 partners and has live deployments today, with solutions that use XRP, its own cryptocurrency, or fiat currencies.
There is also PumaPay, an open-source and blockchain-based payment protocol. PumaPay enables both ‘push’ and ‘pull’ transactions. A ‘push’ transaction is what we are used to: sending money to those who provide us with a good or service.
PumaPay’s ‘pull’ is the opposite: it allows an approved vendor, who meets the specific terms of a smart contract, to pull money out of a consumer’s account. This enables cryptocurrencies to support recurring monthly subscriptions, direct debits, pay-per-use, and other unique business models.
In live deployments, banks are seeing settlements happen in as little as 5 seconds. This is as compared to 2 business days for traditional currency settlements, or, more than a 30,000 times improvement!
Just as digital cameras quickly replaced film cameras for the majority of consumers and use cases, the payments industry is at a junction where it needs an injection of entirely new technology -- not more products built on top of legacy rails.
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