jwt: the future of payments & currency (october 2014)
DESCRIPTION
The payments and currency systems are on the verge of disruption. Payments are getting digitized and going mobile, wearable and biometric, while the rise of cryptocurrencies is prompting new ideas about what currency can be. Millennials, not wedded to the status quo when it comes to money, will drive this shift. This report takes a look at the myriad new ways to pay and how the concept of currency is evolving to encompass everything from bitcoin to social media shares. We also spotlight how disruption is opening the way for new players to act as middlemen between consumers and their money, along with results of a survey exploring U.S. and U.K. consumer attitudes toward payments and currency. Note: This is an abridged version of the 62-page report. Go to JWTIntelligence.com/trendletters to download the full report at no cost.TRANSCRIPT
THE FUTURE
OF CURRENCYPAYMENTS &
ABRIDGED VERSIONOCTOBER 2014
2
WHAT WE’LL COVER
Introduction
Trend drivers
New ways to pay
New forms of value exchange
New payment players
Appendix: More about our experts and influencers
The following is an abridged
version of
JWT's Future of
Payments &
Currency report. To download the full version,
please visit JWTIntelligence.com.
3
INTRODUCTION
It seems that suddenly most aspects of the established payments system are on the verge of disruption.
Apple Pay has just arrived, Facebook is reportedly mulling peer-to-peer payments, more merchants are
accepting bitcoin, banks are testing payment-enabled wristbands or creating pay-by-tweet schemes, and
the ranks of “fintech” innovators are growing.
This report examines the rise of new ways to pay and new forms of value exchange, along with new players
in the payments space, and what it all means for brands.
Never in the history of the payments industry has there been a time of such disruption and opportunity across regions. Digital technologies will upset the competitive order and the role that payments play both in the operations of businesses and in the daily lives of consumers.” —BCG PERSPECTIVES, “Global Payments 2014,” Sept. 17, 2014
4
METHODOLOGY
Our trend reports are the result of quantitative, qualitative and desk research conducted by JWTIntelligence
through out the year. For this report, we also interviewed several experts and influencers in payments and
currency.*
Deborah Baxley,
consulting services
principal, Capgemini
Financial Services
Rob Girling,
co-founder and
principal, Artefact
EXPERTS AND INFLUENCERS
Bill Maurer,
dean of social sciences and
professor of anthropology
and law, UC Irvine
Craig Erickson,
creative director and
designer, Artefact
*See Appendix to learn more about these experts.
While technology is opening up myriad possibilities in payments and forms of currency, the mobile wallet and other innovations have taken off in fits and starts. Skeptics say consumers have little incentive to adopt new systems. But Millennials are ushering in a new mindset: They’re much less attached to the status quo than their elders and far more open to alternative ideas.
TREND DRIVERS
TREND DRIVERS
MILLENNIAL MINDSET
DISTRUST IN FINANCIAL INSTITUTIONS
TECHNOLOGY
DATA BREACHES
TRICKLE-UP INNOVATION
HEDGE AGAINST ECONOMIC CHAOS
—NICK BILTON,
The New York Times
TREND DRIVERS
MILLENNIAL MINDSET
DISTRUST IN FINANCIAL INSTITUTIONS
TECHNOLOGY
DATA BREACHES
TRICKLE-UP INNOVATION
HEDGE AGAINST ECONOMIC CHAOS
TREND DRIVERS
MILLENNIAL MINDSET
DISTRUST IN FINANCIAL INSTITUTIONS
TECHNOLOGY
DATA BREACHES
TRICKLE-UP INNOVATION
HEDGE AGAINST ECONOMIC CHAOS
—NICK BILTON,
The New York Times
TREND DRIVERS
Image credits: bitcoin; Apple
MILLENNIAL MINDSET
DISTRUST IN FINANCIAL INSTITUTIONS
TECHNOLOGY
DATA BREACHES
TRICKLE-UP INNOVATION
HEDGE AGAINST ECONOMIC CHAOS
—NICK BILTON,
The New York Times
TREND DRIVERS
MILLENNIAL MINDSET
DISTRUST IN FINANCIAL INSTITUTIONS
TECHNOLOGY
DATA BREACHES
TRICKLE-UP INNOVATION
HEDGE AGAINST ECONOMIC CHAOS
Recent high-profile data breaches have severely impacted consumer
confidence in the payments system and motivated retailers to seek more
secure tools. In the U.S., Neiman Marcus, Home Depot, Supervalu and, most
notably, Target are among the prominent businesses to have suffered data
breaches. These have compromised millions of credit and debit cards, with
Target’s breach affecting up to 110 million people.
Fear of fraud will both drive adoption of new systems and inhibit some
consumers from embracing relatively untested systems.
Image credit: businessjournalism.org 10
—NICK BILTON,
The New York Times
TREND DRIVERS
With less competition and fewer regulatory restrictions, emerging markets
serve as fertile testing grounds for new payment methods and new players.
And with many consumers in these markets unbanked—outside the commercial
banking system—alternative systems like mobile money are flourishing.
Telecoms have led the way when it comes to sending and receiving payments
via basic cellphones. Safaricom, in partnership with Vodafone, launched the
most successful of these services in Kenya in 2007. Nearly two-thirds of
Kenyans now use M-Pesa, and 43% of the nation’s GDP moves through it.
The success of M-Pesa and similar services is prompting new ideas in
developed markets. In the U.S., mobile carriers T-Mobile and Sprint have both
entered into the mobile money space.
Image credits: M-Pesa; T-Mobile
MILLENNIAL MINDSET
DISTRUST IN FINANCIAL INSTITUTIONS
TECHNOLOGY
DATA BREACHES
TRICKLE-UP INNOVATION
HEDGE AGAINST ECONOMIC CHAOS
Digital technology is opening up new ways to pay, many of them more seamless and secure than traditional methods. Foremost among these is the “mobile wallet”—using smartphones to make purchases or peer-to-peer payments—but various other ideas are coming to fruition, including wearables (tapping a watch, scanning a ring, etc.) and biometric technology like pay-by-fingerprint.
NEW WAYS TO PAY
—NICK BILTON,
The New York Times
MOBILE WALLETS
Broadly speaking, mobile wallet users swipe, tap, wave or otherwise prompt a smartphone to pay after
initial setup (providing credit card or bank account information and potentially linking to various loyalty
programs). Technologies vary but include near field communication (NFC), Bluetooth and bar code systems.
For people with little to no access to commercial banks, the advent of mobile money—texting to send or
receive payments using basic phones—has been a godsend.
NEW WAYS TO PAY
61 MILLION+
Active mobile money accounts worldwide
as of June 2013*
*Source: GSMAImage credit: Alipay
—NICK BILTON,
The New York Times
MOBILE WALLETS(cont’d.)
NEW WAYS TO PAY
61 MILLION+
Active mobile money accounts worldwide
as of June 2013*
Image credits: Apple; Amazon; Google
—NICK BILTON,
The New York Times
MOBILE WALLETS(cont’d.)
NEW WAYS TO PAY
61 MILLION+
Active mobile money accounts worldwide
as of June 2013*
Image credits: PayPal; Kuapay; Softcard
—NICK BILTON,
The New York Times
MOBILE WALLETS:PEER-TO-PEERPAYMENTS
NEW WAYS TO PAY
Active mobile money accounts worldwide
as of June 2013*
Image credits: Dwolla; Venmo; Ribbon; Paym
Various startups are looking to digitize peer-to-peer transactions, mostly by way of
mobile apps. Business Insider estimates the global volume of P2P payments at more
than $1 trillion annually, with only “a sliver” made through mobile today.
—NICK BILTON,
The New York Times
BRANDED APPS
NEW WAYS TO PAY
Active mobile money accounts worldwide
as of June 2013*
As banks, tech giants and new entrants vie to dominate in the mobile wallet space, Starbucks
and other brands are creating their own apps, enabling frequent customers to pay seamlessly.
In some cases—notably with taxi services like Uber and fast food brands—the apps let users
both order and pay, reducing wait times or hassle. In other cases, as with Starbucks, the apps
draw users by folding in loyalty rewards or coupons. Brands benefit by collecting extensive
customer data and drawing in impatient, cash-averse Millennials.
Image credit: Starbucks
—NICK BILTON,
The New York Times
NEW WAYS TO PAY
Active mobile money accounts worldwide
as of June 2013*
Image credit: MyCheck
DINE AND GO Some see a role for payment apps beyond the fast food sphere, with patrons at
bars and restaurants harnessing mobile to more quickly and easily settle their
checks. Customers can tap, pay and leave without flagging down an employee;
from the merchant’s point of view, this frees up staff and potentially opens up
tables more quickly.
MyCheck, which has a partnership with
PayPal, launched its app in Israel in 2012 and has moved into a few cities in the U.S., the U.K. and Brazil.
—NICK BILTON,
The New York Times
WEARABLES
NEW WAYS TO PAY
Active mobile money accounts worldwide
as of June 2013*
Wearables—Internet-connected devices worn on the body—promise an even more seamless
method of payment than mobile phones. The vision is that consumers will simply hold up a
watch, tap a wristband or perhaps issue a verbal instruction to Google Glass.
Image credit: Eaze
Glasses: Some mobile-payment players are betting on consumers paying with a gesture, tap
or voice command using Glass or other high-tech specs. Eaze, a startup pushing the idea of
“Nod to Pay,” links to two bitcoin payment systems and plans to add fiat currencies.
—NICK BILTON,
The New York Times
WEARABLES(cont’d.)
NEW WAYS TO PAY
Active mobile money accounts worldwide
as of June 2013*
Image credits: Apple; Artefact
Watches: Several payment apps work in tandem with
early entrants on the smartwatch market. These
include PayPal’s app for Samsung’s Gear 2 and
WearBucks for owners of Android Wear watches.Wristbands: For people willing to link up credit or
debit card information, smart wristbands may have a
long-term role to play as a way to make fast purchases
at events like music festivals or destinations like theme
parks.
—NICK BILTON,
The New York Times
WEARABLES(cont’d.)
NEW WAYS TO PAY
Active mobile money accounts worldwide
as of June 2013*
Image credit: Barclaycard
—NICK BILTON,
The New York Times
BIOMETRIC PAYMENTS
NEW WAYS TO PAY
Image credits: PayPal; Biyo
The Samsung Galaxy S5 enables
fingerprint payment via PayPal’s app
To improve security, businesses are starting to adopt systems that identify and
authenticate people based on physical or behavioral characteristics: iris scans, digital
fingerprints, voice prints, vein or facial maps and so on. The method is also more
convenient for users than typing passwords, although privacy will be a concern for some.
Fingerprint recognition, the most widely used biometric system thus far, will become
increasingly common now that Apple is embracing mobile payments.
—NICK BILTON,
The New York Times
EMAILS, TEXTS AND TWEETS
NEW WAYS TO PAY
Image credit: Popmoney
Today more and more companies—from startups to financial institutions and tech giants
like Google—are enabling person-to-person payments, bill payments and product
purchases via a simple message. For instance, French bank Groupe BPCE will enable
people to tweet money to one another via its S-money mobile-wallet subsidiary, thanks to
a partnership with Twitter.
—NICK BILTON,
The New York Times
WHAT IT MEANS FOR BRANDS
NEW WAYS TO PAY
• Prepare for a “cash-limited”
future
• Cater to Millennials
• Compel consumers to opt in
• Open a personalized marketing
channel
• Security and privacy above all
A growing array of alternative currencies—ranging from cryptocurrencies to local currencies, branded currency and social media currency—is supplementing or even replacing conventional money.
NEW FORMS OF CURRENCY
Money is always only a human creation, kind of a collective illusion … It’s something we
invent as societies and states and communities, and we can reinvent it if we want to.”
—BILL MAURER, dean of social sciences and professor of anthropology and law, UC Irvine
NEW FORMS OF CURRENCY
—NICK BILTON,
The New York Times
NON-FIAT CURRENCIES
Dollars, pounds, euros, pesos, yen—these are all fiat currencies, or legal tender. But even with
the backing of a government, their value exists only by popular consent. So increasingly
people are thinking more creatively about what money can be, from local currencies to
cryptocurrencies like bitcoin, which can function just as well—if not better, in some instances—
as a medium of value exchange. Local currencies are undergoing a
resurgence thanks to the economic crisis
and rising income inequality. A local
currency can help to mitigate the impact
of a troubled economy, stimulating growth
by increasing demand for local goods
while keeping money from flowing out of
the area.
Image credit: Tilt
Local currencies in circulation include the
Brixton Pound and Bristol Pound
in the U.K., the Capivari in Brazil and COjacks in
Colorado.
NEW FORMS OF CURRENCY
—NICK BILTON,
The New York Times
CRYPTOCURRENCIESIn the last year or so, a number of major businesses have started accepting bitcoin, most via
bitcoin middlemen, lending the novel currency greater credibility. And there are now more
than 250 bitcoin ATMs worldwide. Still, most consumers remain fairly skeptical about bitcoin.
NEW FORMS OF CURRENCY
—NICK BILTON,
The New York Times
CRYPTOCURRENCIES(cont’d.)
Bitcoin pros and cons: While they have serious downsides, cryptocurrencies
appeal to users for a number of reasons. They allow people to send and receive
money around the world instantly, without the need for banks as intermediaries.
This means little to no fees for processing transactions, as well as greater privacy,
although cryptocurrencies are not anonymous, as is widely believed. For people
with little trust in government and the banking system, cryptocurrency provides a
way to transact without relying on either.
38%of U.S. and U.K. Millennials are
interested in using currencies such as
bitcoin, vs. 17% of Gen Xers and 7% of
Boomers
NEW FORMS OF CURRENCY
—NICK BILTON,
The New York Times
CRYPTOCURRENCIES(cont’d.)
Experts place the number of businesses accepting bitcoin as high as 80,000
worldwide, a wide majority of which are small merchants. But some bigger players
across categories are earning buzz by welcoming the currency, in some instances
experiencing an initial boost in sales. Most use Coinbase or another bitcoin
middleman, shielding themselves from risk while paying much less in fees than with
credit card transactions.
Image credit: Life on Bitcoin
This crowdfunded documentary
follows a newly married couple trying to get by on bitcoin alone.
Prominent businesses
accepting bitcoin:
• Dish Network
• Dell
• United Way
• Expedia
• Overstock.com
• The Sacramento
Kings
NEW FORMS OF CURRENCY
—NICK BILTON,
The New York Times
ALTERNATIVE BRANDCURRENCIES
Social media as currency: Brands commonly offer incentives in exchange for
Facebook likes or Twitter follows. Now, with social media ingrained into the daily
lives of many, some are evolving this idea by enabling consumers to acquire
products or discounts with social media actions in lieu of cash.
Image credit: Carlsberg
Danish beer company Carlsberg partnered
with bars in Denmark to extend happy hour
for drinkers who posted social media
photos with the hashtag
#HappyBeerTime
NEW FORMS OF CURRENCY
—NICK BILTON,
The New York Times
ALTERNATIVE BRANDCURRENCIES(cont’d.)
Tweet-to-pay pop-up shops:
These temporary locations provide
unique experiences that
consumers are keen to capture
and then share with their
followers, increasing brand
engagement and stimulating word-
of-mouth.
In London, Weight Watchers
created the Feel Good Café, where
visitors paid with social media
shares. And Marc Jacobs launched
a Tweet Shop where guests
received free gifts based on their
social posts.
Image credit: Weight Watchers
NEW FORMS OF CURRENCY
—NICK BILTON,
The New York Times
ALTERNATIVE BRANDCURRENCIES(cont’d.)
Vending machines: Along with pop-up shops, Internet-connected vending
machines are becoming a go-to source for accepting social media actions for
payment.
Image credits: Walkers; Old Navy
NEW FORMS OF CURRENCY
—NICK BILTON,
The New York Times
ALTERNATIVE BRANDCURRENCIES(cont’d.)
Incentivizing good behavior: Some brands have turned positive actions
on the part of consumers into a form of currency.
Image credits: Anthon Berg; McDonald’s
Chocolate brand Anthon Berg set up the pop-up Generous Store, where customers could earn boxes of chocolate by pledging to do good
deeds, and McDonald’s let customers pay with
recycled cans.
NEW FORMS OF CURRENCY
—NICK BILTON,
The New York Times
ALTERNATIVE BRANDCURRENCIES(cont’d.)
Branded currency: For years, loyalty has translated into a currency of sorts, with
merchants offering “Buy 10, get 1 free,” airlines awarding seats to frequent flyers and
so on. These loyalty schemes, including gift cards and coupons, account for more than
$165 billion in purchasing power in the U.S. alone. With that much value in circulation,
some brands are reframing these offers, shifting brand loyalty into a currency in a
more traditional sense. And thanks to smartphones, disparate programs are becoming
more manageable for consumers, who can readily cash in.
Image credits: Amazon; Kik; McDonald’s
NEW FORMS OF CURRENCY
—NICK BILTON,
The New York Times
ALTERNATIVE BRANDCURRENCIES(cont’d.)
Products as currency: Brands have been getting creative with the age-old practice
of barter, turning their goods into currency as part of social responsibility initiatives or
novel marketing ploys. For telecom brands, mobile minutes or data can serve as
currency for consumers hungry for more phone access.
Image credits: KitKat; Vodafone
Social responsibility: To help boost tourism in a
region of Japan that was devastated by the 2011
earthquake and tsunami, Nestlé is enabling travelers
to use special-edition KitKat packs as travel passes
on the Sanriku Railway.
Mobile airtime/data: In Egypt, Vodafone worked with
JWT to introduce airtime as a form of currency. Small
shops or kiosks in the country often substitute low-value
items like gum and candy for small change; in a twist on
this practice, Vodafone created mobile-top-up cards in
small denominations, designing them to fit in a cash
register. These Fakka (“small change”) cards drove an
average 7% rise in revenue per customer.
NEW FORMS OF CURRENCY
—NICK BILTON,
The New York Times
ALTERNATIVE BRANDCURRENCIES(cont’d.)
Ad campaigns: Some brands have turned their products into currencies in ad
campaigns, framing the emotional value of their goods in a new light. To show that
“Heineken opens your world,” the beer-maker tasked a man with getting from Inner
Mongolia back home to Thailand using “nothing but Heineken and a little bit of wit.”
Image credit: Heineken
NEW FORMS OF CURRENCY
—NICK BILTON,
The New York Times
WHAT IT MEANSFOR BRANDS
• Barter reinforces value
• Drive engagement with social
currencies
• Turn loyalty into instant currency
• Embrace alternative currencies
Disruption in the payments and currency sphere is opening the way for new players to act as intermediaries between consumers and their money. We’ll see consumer interaction with banks and other traditional financial institutions wane as newcomers offer innovative or compelling solutions. Consider that 73% of Millennials would be “more excited about a new offering in financial services from Google, Amazon, Apple, PayPal or Square than from their own nationwide bank,” according to Viacom’s Millennial Disruption Index.
NEW PAYMENT PLAYERS
NEW PAYMENT PLAYERS
—NICK BILTON,
The New York Times
BRANDS AS FINANCIAL INTERMEDIARIES
Mobile operators, tech giants and others are making forays into the financial space, taking on
roles traditionally filled by banks and other financial services companies. By doing so, these
companies can track spending patterns and behavior, as well as reduce interchange and
processing fees. The mobile wallet is a key driver. Mobile payment transactions facilitated by
“non-banks” will increase from 1.1 billion in 2012 to 7 billion in 2015, according to a forecast by
Capgemini and The Royal Bank of Scotland.
72%of North American
Millennials would be likely to bank with at least one nonfinancial services company if it
offered banking services*
*Source: Accenture’s 2014 North America Consumer Digital Banking SurveyImage credits: Millicom; T-Mobile
NEW PAYMENT PLAYERS
—NICK BILTON,
The New York Times
BRANDS AS FINANCIAL INTERMEDIARIES(cont’d.)
Image credits: Google; Tech for Korea
Tech companies and messaging services are
well positioned to integrate payments
systems. Google now offers free P2P payments
through Gmail or its Wallet app, and South
Korea’s KakaoTalk recently launched the PayPal-like KakaoPay.
NEW PAYMENT PLAYERS
BRANDS AS FINANCIAL INTERMEDIARIES(cont’d.)
Image credits: Tesco; Walmart
Retailers: Retailers have long provided
financial services, but some are expanding
more assertively into the space. Both Marks
& Spencer and Tesco recently started
offering personal checking accounts in the
U.K.
Walmart has been targeting the
underbanked. This year, the retailer
launched a money transfer service—
enabling customers to send funds to or
from any Walmart in the U.S. and Puerto
Rico—and partnered with Green Dot Corp.
on GoBank, a mobile checking account with
a linked debit card.
NEW PAYMENT PLAYERS
FINTECH INNOVATORS
Image credits: Circle; Plastc; Ripple; Square; Stripe; WorldRemit
The payments space is moving at incredible speed, with new technologies and
startups quickly making headway while most traditional institutions lag in
updating clunky legacy systems. Innovative fintech startups include the bitcoin
bank Circle; Plastc, which is creating a credit card-shaped digital device; and
Ripple, whose open-source, distributed-payment protocol lets users make
instant payments with any currency.
NEW PAYMENT PLAYERS
WHAT IT MEANS FOR BRANDS
• Boost your primary business with financial
services
• Pursue the underbanked opportunity
• Utilize and build your network
MORE ABOUT OUR EXPERTS AND INFLUENCERS
Deborah Baxley, consulting services principal, Capgemini Financial Services Baxley, who joined Capgemini in 2010, is an international payments consultant with 20 years of consulting experience. She has performed strategy work in 14 countries for eight top global issuers and payment brands, two top payment processors and three top bank card acquirers, and has advised companies on product direction and competitive positioning. She was the IBM partner responsible for strategy and change consulting for financial services in North America and led IBM’s credit card strategy in China. She is current secretary and former chair of the Smart Card Alliance Payments Council.
Craig Erickson, creative director and designer, Artefact Erickson’s experience spans large corporate environments and small startups, including data visualization, product UX, typography, games, advertising and identity. Prior to joining Artefact, a technology product design and development company, he was co-founder and creative director of design and development studio SectionSeven. At Artefact, he’s been instrumental in the design of award-winning product concepts, from the connected home of the future to patient-centered decision tools for physicians.
Rob Girling, co-founder and principal, Artefact Girling’s career started at Apple after he won the 1991 and 1992 Apple Student Interface Design Competition for concepts around mobile and personal computing. He then spent 10 years at Microsoft, obtaining several patents and making innovative contributions to Microsoft Office and Microsoft Games, eventually becoming design manager for the user interface, brand and user experience of Windows XP. After leaving Microsoft in 2002, Girling worked as a senior interaction designer for IDEO and as the lead game designer for Sony’s MAG action game. He co-founded Artefact, a technology product design and development company, in 2006.
Bill Maurer, dean of social sciences and professor of anthropology and law, UC Irvine A cultural anthropologist, Bill Maurer serves as director of the Institute for Money, Technology and Financial Inclusion and was founding co-director of the Intel Science and Technology Center for Social Computing. He conducts research on law, property, money and finance, focusing on the technological infrastructures and social relations of exchange and payment. Maurer has particular expertise in emerging, alternative and experimental forms of money, payment and finance, their legal implications, and how they have the potential to challenge the definition and nature of money itself. He received his B.A. from Vassar College and his M.A. and Ph.D. from Stanford University.
THANK YOU
J. Walter Thompson: J. Walter Thompson, the world’s best-known marketing communications brand, has been inventing pioneering ideas for the past 150 years. Headquartered in New York, JWT is a true global network with more than 200 offices in over 90 countries, employing nearly 10,000 marketing professionals.
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