Capital One Bank would certainly like to know, along with all their friends in the banking community. In fact, they would really like to control the mobile payment platform you will soon be using. Because mobile payments technology promises to do to the credit card industry (and profits) what Netflix and streaming did for Blockbuster and others (Be Kind, Please Rewind!).
Unlike credit cards, however, there is plenty of competition for the next mobile payments platform. PayPal was just spun off from eBay to better focus on the mobile payments market. Online payment providers like Square hope to play, as do some of the lesser known mobile payments folks like Dwolla or Venmo. Amazon, Starbucks and Groupon all have mobile payment platforms they hope to build by leveraging their well-known brands. Google wallet and Apple Passbook in the new iOS8 want to use their devices to control your wallet.
Not only is this disrupting the payments and banking system, it has led to some rapid advances in technologies such as Near Field Communications, allowing payments with a wave of the phone. Or, perhaps a wave of the payment terminal near your phone, say on a sidewalk or crowded subway. Rest assured, since there is a lot of money at stake somebody has certainly solved the security issues associated with this technology …somebody….solved…anybody?
The banks of course are not going to let this happen without a fight. One idea that has currently gained some momentum in the banking community (which they originally opposed) is moving to use “.bank” domain names, after an American Banking Association group (fTLD) was granted authority by ICANN on September 25 to operate the domain. Banks will be required to show proof of a bank charter or regulatory verification, and adhere to enhanced security and encryption standards to operate in the domain.
While this may make it easier to tell official banks apart from less reputable organizations, it seems unlikely to fully restore trust; companies like Amazon and Apple are some of the most trusted by consumers, while financial institutions are among the least trusted. And this summer’s major attacks against the banking industry are only now receiving significant publicity.
So, who do you trust with your financial information? It is hard to believe that banks will lose the edge as global asset managers and for wholesale payments clearance. But the retail transaction processing may be a different story…in five years it wouldn’t be much of a surprise to see wallets as the thing in people’s drawers holding the disused credit cards and cash, and most transactions being conducted with a swipe of the phone or a swish of the hip.