Looking Ahead At The Close Of 2013

To paraphrase the immortal words of Yogi Berra, predictions are really hard, especially when they’re about the future. That’s why we’ve made it our annual tradition at PYMNTS.com to round up a few predictions across a range of topics that others have gone on record with and then to provide our own “yay or nay” commentary in response. We have to say that, try as we might, there were a dearth of profound and thought provoking selections this year; most seemed to sort of “predict” things that are already happening – perhaps proving Mr. Berra was wise beyond his years after all.

So, without further ado and with fanfare, confetti and noisemakers, here is the 2014 PYMNTS Prediction round up.

Mobile-financial.com had a few related to emerging financial services. Here’s one of their top three:

• Companies offering easier P2P money transfer will gain traction
So, who can argue a prediction that says that anything that is made easier will gain traction? So, we wholeheartedly agree! The particular emphasis here was related to emerging economies where moving money between people between and within a country is full of friction. We’ve seen use cases like M-Pesa ignite because people were given access to a scheme that enabled them to easily do that. A big part of the convenience delivered by M-Pesa, though, is the ability for people to access cash in and out networks, making it easy for the transfer of money to happen in the country’s native currency. This is pretty essential in a world that isn’t 100 percent digital, where card infrastructure doesn’t exist and where cash is still the predominant form of payment. We’d even go so far as to say that in these developing countries, the two most important assets to igniting a payments scheme is access to easy P2P payments technology and having a robust cash in and cash out network.

We’re also seeing evidence that players in developed countries are also investing to make P2P MT more efficient too. ClearExchange, which is the largest P2P network in the US, knitting together the banks that control a huge chunk of DDA accounts, has as its mantra the easy and efficient transfer of money between individuals. PayPal has had P2P as an option forever, but requires that the receiver have a PayPal account. Google launched a P2P service in the summer but the big news was made a few months ago when Square Cash launched. They seemed to have hit the easy button, big time, in allowing anyone with a Visa or MC branded debit card to send up to $2500 to anyone with an email, for free. In addition to enabling P2P, it is a pretty clever way of getting registered accounts for Square.

We wouldn’t bet the farm on all of these gaining traction given that an awful lot of P2P money transfer businesses (including a whole bunch of mobile P2P plays) haven’t. But, hey, gain traction, sometime, sure we’ll put a buck on that bet. The more compelling prediction would have been to posit how P2P players turn free and easy into a revenue stream and/or related to that what the real end game is for P2P. It certainly isn’t to act as a free public service for people and at some point there needs to be a business model that pays that P2P piper.

PYMNTS Editor and eReportsGuy Jeff Green has a great piece on how to make money in P2P which you can get here.

Business News Daily published its “6 Ways Retail Will Change in 2014.” Nestled between a few of the “no kidding” ones like mobile wallets will increase, they went out on a little bit of a limb in two areas.

• More affordable mobile solutions will emerge
We agree but only because more affordable mobile point of sale solutions have emerged – and are changing the nature of retail for consumers and those merchants. Integrated solutions that bundle affordable tablets (hardware) with access to a platform, APIs and apps now give even the smallest of merchants the same capabilities as the big guys. This development is democratizing retail as we’ve never seen it and creating a new competitive playing field for all merchants. Now merchants large and small can offer loyalty programs, offers, tailored campaigns, mobile apps and yes, good old fashioned email campaigns, to acquire and retain customers. The more relevant and perhaps bigger prediction for 2014 is who will emerge to really enable those solutions in 2014, where we’ll see it happen (we have some of our own ideas which we will unveil in early 2014) and what will that impact be on the rest of the ecosystem.

• Cross-border e-commerce will expand beyond anything seen so far
We’d agree and even go so far as to say that there are a few players that must have read this prediction a few years back and have invested to make 2014 a year that their game plans get revved into high gear. Alibaba, in particular, seems well positioned to leverage the growing appetite (and pocketbooks) of the Chinese consumer to buy branded goods from outside of China. Its investment in ShopRunner (which is for all intents and purposes an online mall of branded retailers), acquisition of a logistics company and recent approval to operate a mobile network are but a few of the building blocks that it has assembled to capitalize on that opportunity. And, as other developing economies – even those lesser developing economies like those in Africa – gain access to the internet via mobile devices, innovators new and emerging will innovate ways to streamline the way in which commerce is conducted with the billions of people who represent new customers for them.

What would a list of predictions be without one about bitcoin? PC Magazine had a few predictions focused on security, including one that predicted that there will be more retail breaches in 2014. This one on bitcoin caught our eye.

• Bitcoin will collapse in 2014.
To be fair, this prediction is attributed to the head of the Global Research and Analysis Team in Latin America for the Kaspersky Lab citing the wholesale rejection of the currency by most country governments given its use case as the tender of choice for illegal activities and rampant bad behavior associated with a currency used by the bad guys for bad stuff and who often then do more bad stuff like steal from each other.

We agree that it’s tough for governments to wrap their heads around a currency that runs in parallel with their own and which is totally anonymous and that for bitcoin to become a mainstream currency, it will have to be regulated. That’s where we also sort of stop dead in our tracks and skeptically ponder the future of bitcoin. We totally marvel in the clever innovation that is bitcoin, an alternative currency that enables people to move money instantly (and cheaply) eliminating the friction associated with global money movement which today, requires hooks into each and every bank account everywhere in the world. Hard doesn’t even begin to describe that. But for bitcoin to become mainstream, it will have to be regulated and then what’s really left is trying to figure out whether it’s (a) bitcoin the alternative currency that is really the innovation or (b) the technology beneath it is the innovation. And if it is door b, then we need to figure out how to leverage it in a way that enables the same sort of frictionless global money movement instead of frictionless transacting on Silk Road. Once the governments start messing around with regulating bitcoin and the networks and exchanges hire compliance folks and lawyers, it’s less obvious how an alternative currency is better than being able to use an innovative and better global network to move money thru exchanges for instant redemption between people and businesses.

Our prediction is that those who are in the best position to exploit bitcoin’s success will be those who recognize that there’s a difference between the technology that enables bitcoin and bitcoin the currency and will invest in perfecting the former and not the latter. Care to predict who that might be?

PayPal got out in front of the prediction curve early this year and released six big predictions for 2014, including one on bitcoin that sort of affirmed the point of view that we just shared. They also described the leveling of the retail playing field as a mobile revolution being driven by iOS and Android that power inexpensive connected devices that make it possible for consumers and merchants to communicate in real time. Of the six predictions expressed, here are two that were perhaps the most contrarian.

• Traditional retail fights back
This prediction responds to the notion that bricks and mortar stores have been taking it on the chin these last several years as consumers with smartphones “showroom” at their expense and prefer to shop from the convenience of their bedroom, train, car, couch, deck, office during boring conference calls, you name it because they now have mobile devices that make it easy to do that 24/7. In fact, it’s been reported that this holiday season, mobile/online traffic was up and physical foot traffic was down. A Facebook friend marveled that she and her husband were prepared to battle the crowds the Saturday at the mall before Christmas and said that it was the most fun they’ve ever had. It was leisurely, not crowded, filled with sales, and sales people who weren’t harried and rushed. They plan to make it an annual tradition, that is, of course, unless the lack of foot traffic turns into a lack of shoppers which turns into a lack of revenue which turns into a lack of stores to have fun in.

PayPal’s Marcus believes that bricks and mortar will fight back by embracing technology and doing innovative things to bring people into the stores. Not surprisingly, he cited PayPal’s Beacon technology as one of the ways that consumers and merchants can leverage connected devices running the iOS operating system to tailor the shopping experience, including serving up offers, offering special pricing, revealing inventory availability, offering same day delivery and shipping and perpetuating loyalty schemes – all the while pushing payment way to the background as something that automatically happens when it is time to pay for the things that the consumer wants to buy.

We agree. It’s these sorts of innovations that have the potential for merchants and consumers to capitalize on the blurring of on and offline that we’ve been talking about for several years in a meaningful way. The real question is what types and size of merchants will become the early adopters of this technology, will there be a killer app that gets consumers to say “wow – now this is something I can’t live without” and which third party enabler will power it. I predict that I know with certainty who PayPal predicts that third party to be….

• There will be consolidation in the payments industry
It used to be that the sure fire way to determine whether a new venture was “any good” was to look at whether it got funded. No more. There is way too much money on the sidelines these days and now anyone with an idea, never mind a great idea, gets some money thrown at it. The result is thousands of innovators competing for attention, more funding and the same customers. There’s only one problem, and this is something that PayPal alludes to in this prediction – it’s hard to “make it in payments” as a stand-alone company. It is too costly, too complicated and takes too long to ignite in an ecosystem that is getting more, not less complicated.

So, this prediction is correct, the industry will consolidate. Those with decent technology and talent will either get gobbled up at valuations that some might find “rich” to round out their own platform capabilities and roadmaps. Others will be the basis of acqui-hires by those who find it faster and ultimately cheaper to buy talent and maybe a particular technology. The vast majority, however, will find themselves starved for affection (and money) because all of the players with the money and the vision can get their pick of the litter and buy what they want. The big question and fodder for interesting predictions is which sector is ripest for consolidation, how that consolidation will impact the dynamics and balance of power in the payments/commerce ecosystem and whether the payday for these acquirees will be as rich in 2014 as they were in 2013.

Forbes went all out and had 10 predictions for mobile payments. Some of these were contributed by the CEO of Merchant Warehouse, Henry Helgeson and covered the spectrum of the future of mobile wallets and omnichannel and SMBs and mobile.

• Big-Box Retailers Will Lead the [Mobile Commerce] Charge
The prediction here is related to which sector will set in motion the wave of activities and actions that will ignite mobile commerce. Helgeson’s prognostication is that it will be the big guys, suggesting that their target audiences are young, mobile and respond to deals and are most threatened by showrooming. In order to agree or disagree with this, it all depends on how you define “lead.”

It’s true that big merchants more so than ever before, are making investments in an array of mobile technologies designed to acquire and retain consumers, driven by deals and offers for the most part. Few, however, have closed the payments loop although many are making those investments now. Those who have are the smaller and medium sized retailers. They’re more nimble, don’t have the complicated back end systems to integrate with, definitely have a lot to lose to their larger bricks and mortar and online competitors and want to compete but, as stated earlier, now finally have affordable options that enable them to compete with the larger guys across the entire buying spectrum. So, what we’ve seen so far is an embrace of and traction with mobile commerce schemes with smaller merchants, mostly in food services, where repetitive everyday spend drives a habit forming mobile commerce experience that ignites the opportunity for that category of merchant.

So, is Helgeson wrong? Well, it all depends on how you define lead. For sure, 2014 will see more deployments by larger merchants and many more who invest in 2014 for deployment two to three years from now. Again, the prediction worth making is with whom will these investments be made.

Readwrite.com did a few predictions that focused on the broader aspect of mobile, Google Glass and wearables. This one, in particular, was the most thought provoking:

• The concept of “mobile” will die
The interesting insight here is that mobile is actually becoming so embedded in everything we do that it will no longer be necessary to use mobile as an adverb to modify “payments” or “commerce” or “point of sale” – mobile will just be how things are done in payments and commerce.

We agree. It reminds me of the same discussion we had in the 1990s at PwC when eBusiness was “the new new thing.” At that time, everyone treated it as a separate thing. There was the cool stuff – eBusiness – that was conducted on this really new thing called the commercial internet and then there was regular old business. We finally came to the conclusion that eBusiness would just become embedded in business and what would innovate and transform it – so no distinction needed. It took a few years for the “e” to disappear, and we predict it will be the same situation for mobile. In fact, it’s already begun, we’re seeing mobile yield to “digital” and soon it will just be how we talk about payments and commerce.

Finally, Forrester had a bunch of predictions right around the Thanksgiving holiday which focused on technology and their sense of the change it would drive in 2014. There were some fairly obvious ones, such as “digital convergence erodes boundaries” which is pretty safe to predict now that it has, and one which states that “digital experience delivery makes or breaks firms” – we actually saw this over the holiday season where now the blogs are filled with consumer complaints over their disappointment with retailers who weren’t able to deliver an omnichannel experience. But this one I thought most interesting and relevant for payments and commerce.

• Sensors and devices draw ecosystems together
This sort of picks up the theme from the last prediction related to the ubiquity of mobile and connected devices and their “mainstreamed” use in everything from wearables, to automobiles to appliances. The interesting proposition though is the prediction that it will draw ecosystems together. Perhaps it will in some cases – like automotive and technology – but in practice, we think it will destroy many, cannibalize some and create new ones altogether.

Nowhere is this more evident than in loyalty and advertising. Mobile apps that wrap payment around a loyalty proposition have already given merchants a better option to generate a sale than buying ads on search engines or social networks. Mobile devices give them a direct connection to the consumer and a way to target them abased on things that are a lot more relevant – location and past behavior. Over time, ads as we know them today will become less relevant, in spite of the growing inventory of places where ads can be served. Payments will subsume advertising and redefine it, and create new channels for “middlemen” to be completely disintermediated. This same phenomenon could in some ways cannibalize search and the revenue models of social ecosystems like Facebook. The prediction not made but interesting to speculate is how those in these businesses will respond in order to protect their own business models.

So, that’s a wrap on the 2014 PYMNTS.com prediction recap. There’s one final prediction though to make and one which we think is without controversy:

• The payments and commerce space over the next year will be the most interesting we’ve seen in at least the last five and unleash even more innovation.
All of the innovation that key players have invested in that leverage the mash up of retail, mobile, the cloud and data will be in the market doing, not just talking about what they will do one day, the things that create value for merchants and retailers. That will only pave the way for more innovation as entrepreneurs new and existing see even more possibilities and seize the moment.

So, Happy 2014 to everyone! May the New Year be one in which all of your innovation dreams and aspirations come true!