Everyone knows that mobile payments are the next big thing. And it might be: mobile culture is booming and smartphone numbers continue to climb. But this market is still very fluid, and different market actors mean different things when they talk about payments. In a presentation for a conference last week we identified six different types of emerging digital payments, at different stages of their transition to the online and digital world.
- Parallel currencies: virtual worlds currencies such as Linden dollars
- Marketing currencies: Airmiles, club cards
- Complementary currencies: local currencies such as the Brixton pound
- Non-fiat currencies: grey unofficial currencies such as Argentina’s so-called “blue dollar”
- Stored value systems: gift cards, transit cards, and so on
- P2P transactions: enabling digital transfer of money between individuals.
On top of this, of course, there are players who are using an effective online presence to cannibalise existing payments players (a lot of PayPal’s business comes through making online transactions simpler than credit card companies can). And then of course there are the ‘wallet’ companies such as Google, who effectively promise to put a digital wrap around some or all of the above.
Money is inherently abstract; as Terry Pratchett once observed, it’s really only about confidence. In a pre-digital world that confidence was maintained by the state producing coins and notes, guaranteeing their value, and enforcing their use by law, or by banks agreeing to honour the paper claims made on them by customers. The digital world opens up this monopoly, as it has done in other sectors, and it also extends the payments moment backwards and forwards in time by adding information to it.
But for all of the technology trends that are pushing the market, there are others that might hold it back. The internet is becoming a darker place, with increasing spamming, phishing, and fraud. The notion of putting everything ‘in the cloud’ may become less appealing to consumers than providers imagine. At the same time there is increasing hostility to corporations and political elites, which may push people away from mainstream players and mainstream currencies (part of Bitcoin’s appeal). Alternative currencies prosper in depressions. And as austerity programmes increasingly look like a war on their people by governments using their currencies as a weapon, the alternatives look more appealing.
For marketers and innovators there are still opportunities here to create new propositions. In particular, those that have existing loyalty schemes are already in the currency business. In the short run, digital and mobile payment success can come from saving consumers time and money. In the longer term it is about re-shaping value – and sharing that value with consumers.