2022’s Next Big Thing: Solving the ‘Money Mobility’ Problem
December 29, 2021
The great digital shift may be upon us, but money has a problem simply getting around.
Right now, we’re in the tech-enabled equivalent of the banking days of yesteryear, where individuals held accounts at various institutions and moved money by getting cash from, say, their BofA ATM and bringing it to the Citi teller counter to deposit funds there.
“Now we’ve got a phone full of accounts,” Edwards told PYMNTS’ Karen Webster. There are accounts for sports betting, PayPal, banks and even crypto. Oh, and there are the paper checks that still arrive in mailboxes, of course.
And, as Edwards noted, it makes “no sense” to have five different accounts housed in five different places unless you can freely move your money in and out of them instantly.
“It’s getting almost comical,” he said.
The rise of peer-to-peer (P2P) payments and instant payments, too — among the “greatest hits” of the past year — will undoubtedly become table stakes for these apps.
Moving money between accounts, he said, will be 2022’s next big thing.
The ideal setting for P2P is to have choices and to separate how we send money from how it is received. Consumers should get funds instantly but should be able to choose whether the transaction settles in a bank account or a PayPal account or Square Cash.
As for those aforementioned mobile wallets: We’re due for a bit of change in how those wallets are used within commerce. Simply put, using them at the physical terminal, leveraged to non-fungible tokens (NFTs), hasn’t taken off the way some would have assumed.
But we’re headed, said Edwards, toward an experience where the mobile wallet becomes a de facto, consumer-operated point of sale (POS).
It’s true that consumers want a contactless experience, said Edwards, but they are using their cards, housed within the mobile wallets, and not necessarily the phone (hardware) itself to transact.
As Edwards related from personal preference, “I use my Apple wallet everywhere I can — and that money comes off my Apple card … because I’m an Apple guy fully engrossed in the Apple ecosystem.” The overarching considerations for his transactions, and for consumers in general, lie with ease of use, acceptance and incentives (Apple’s cash back offers are competitive, he said).
The time is drawing near, he said, for a reinvention of the checkout experience, where merchants and mobile wallets and issuers work in tandem to keep consumers from standing in line or walking up to terminals to wave their phones.
“They’re going to have to remove the login process at the point of sale [for me to use a wallet at checkout],” he said, thus eliminating the frustrations of double-clicking and touching phones. “If they would add biometrics [so I could pay with PayPal easily at the POS], I could get on that wagon,” he said, as additional frictions tied to authentication would be removed as well.
That freedom from friction toward leveraging the wallet itself as a personal POS will be disruptive to the checkout experience, said Edwards. Simply put, consumers want to be able to check out at different places in the store — and have everything that has been accumulated in the shopping cart be tallied, accounted for and ready to be bought. He pointed to Amazon and Apple’s forays into cashierless shopping as helping provide a roadmap for that disruption. And Uber, he said, has been instrumental in helping make payments invisible.
“If we can figure out how to make all that go away … well, then everybody goes there,” he said.
Ecosystems may also be crafted by including 2021’s “big thing.”
Buy now, pay later (BNPL), where, as PYMNTS has noted, 29 million consumers have used a BNPL option through the past 12 months at least once.
Edwards said the BNPL space, at least for now, is largely a “rapidly evolving FinTech space,” where the pure-plays dominate and banks have yet to gain any traction — and may not get there.
The larger banks, he said, have thrown their efforts, largely, with traditional card-based products (including credit cards) but will likely “buy their way in, eventually” to make inroads into BNPL.
BNPL, he said, “has certainly gotten creative,” but takes its cue from retail and tech giants such as Apple, where one might (and still can) buy a $999 iPhone and break that transaction down into 24 months of equal payments.
As Edwards noted, the conventional wisdom (and his own initial thoughts) might be that BNPL might lead to overspending — the same hypothetical purchase, of, say $400 that is unaffordable in one shot … may not be more digestible broken down across a few months (and then the consumer also buys something else, which starts to lead to a cash-flow crunch).
However, BNPL has proven, he said, that there’s a middle ground between tapping credit and only spending the cash on hand, immediately available — where $400 might seem onerous, but $20 a month feels manageable.
“BNPL has obviously hit a positive nerve with some consumer groups,” he said, “and I would have called it wrong.” BNPL’s value is underscored by the options and flexibility it presents consumers.
Along the way, the green space that confronts BNPL gives new players the chance to open new accounts, to link new ways to pay to the mobile wallets to turn credit vehicles into fully-fledged ecosystems, tied to apps that can be brought into any merchant environment.
Of course, the merchants and the FinTechs can use the underwriting and spending data to help craft other offerings, drawing consumers further into the ecosystems.
High Time for Real Time
More consumers and businesses are aware of faster payments, particularly instant payments, than ever before, Edwards said. And they’re willing to pay for the speed: Joint research from Ingo and PYMNTS found that a third of consumers would pay a fee to get instant disbursements. And smaller firms would prefer to be paid instantly as part of their vendor interactions, especially for ad hoc transactions.
From the consumer’s point of view, he said, the attitude is: Give me my money now. And the enthusiasm transcends all use cases — it’s not about simply getting funds in an emergency.
We’re in the third inning of the adoption of instant payments, he said, driven by the tailwind of P2P, which will in turn help push the seamless movement of money between accounts along. There’s so much money changing hands in the economy, between companies and consumers, between enterprises and consumers (i.e., through disbursements), that the urge to get funds without delay is strong indeed.
“There are still 20 billion checks being cut out there,” said Edwards, “and once consumers get a taste of instant payments — that’s when they’ll hit the tipping point.” The large corporates behind cutting those checks will have to retool their systems and processes to make payments truly real time (as he noted to Webster, there’s real time, and then there’s perceived real time, and many firms just are not there yet).
Getting Ready for the Super App
“This all circles back to the super app,” said Edwards, where everything is in one place again, and we’re moving away from adding a new payments app across what seems like every other month.
Over the next few years, he said, the unbundling and decentralization of everything we do financially has got to come back together.
“It’s a painful process to try and keep track of logins and passwords,” he said. PYMNTS’ research has found that two-thirds of consumers want to have the simplification of a single ecosystem.
“We’re going to see a whole new paradigm, or layer, of in app rules, and in app authentication,” he said. “And faster payments and money mobility will be right in the middle of it.”
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