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Future-Proofing Payments Talk About Payments Webinar June 28, 2018 Douglas King Payments Risk Expert Federal Reserve Bank of Atlanta The views expressed in this presentation are those of the presenters and do not necessarily reflect the views of the Federal Reserve Bank of Atlanta or the Federal Reserve System. 1 Connection Information Webinar link: https://www.webcaster4.com/Webcast/Page/577/26124 Choose to listen with your PC speakers. If you are having trouble hearing through your speakers ―Call-in number: 1-888-625-5230 ―Participant code: 5507 3484# Ask a question: Click the “Ask Question” button in the webinar tool. Email rapid@stls.frb.org 2 Retail Payment Risk Forum’s Mission Detect and identify, assist and encourage… Identify: What? Risk, in existing and emerging retail payments Help how? Contribute to mitigating payment risks by: Researching products, services, and systems Collaborating with industry Convening Take On Payments weekly blog takeonpayments.frbatlanta.org/ 3 3 Agenda A look back at debit before looking ahead Mobile phones as disruptors Is mobile the future of payments? Questions & discussion 4 Is Predicting the Future for Fools? 5 Technology Makes Predictions Even Tougher! My grandmother could have never imagined today’s book experience. Mid-1980s November 2007 Early 1990s July 1995 Today 6 Timeline of Debit: Pre-2000 Bank of Delaware kicks off debit card pilot program. Angelo’s and Starmarket (Massachusetts-based grocers) install POS debit systems. City National Bank (Columbus, OH) first markets a card with a debit function. Testing of POS debit at many of the large gas station and supermarket chains. Debit terminal installations begin rapid growth. Signature (off-line) debit begins to prosper as banks add Visa and MasterCard to their ATM cards. 7 Debit’s Value Proposition: Issuance Source: A Guide to the ATM and Debit Card Industry–2006 Update, Federal Reserve Bank of Kansas City, 2006 8 Debit’s Value Proposition: Acceptance Source: A Guide to the ATM and Debit Card Industry–2006 Update, Federal Reserve Bank of Kansas City, 2006 9 Debit’s Rise to Prominence Started Very Slowly But then skyrocketed over the past 18 years! Debit Transactions as a % of Noncash Payment Transactions 48% 50% Thirty-four years after the Bank of Delaware’s debit card pilot, debit transactions finally achieved more than 10 percent of all noncash payments. 26% 30% 38% 35% 40% 10% 0% 2% 1995 11% 19% 20% 2000 2003 2006 2009 2012 2015 Sources: For 1995: The Use of Checks and Other Noncash Payment Instruments in the United States, Federal Reserve Bulletin, August 2002. Other years: Federal Reserve Payment Studies (various years). 10 The Mobile Phone Has Been Transformative Especially for this baseball fan! 11 Mobile Phones Are Rapidly Displacing Digital Cameras Digital Camera Shipments (Millions) 25.0 35.4 62.8 79.0 121.5 115.5 98.1 24.2 0 As the phone’s picturetaking capabilities have improved, digital camera shipments have plummeted. 43.4 20 64.8 40 43.4 60 59.8 80 105.9 100 100.4 120 119.8 iPhone introduced 140 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: CIPA (Camera & Imaging Products Association). 12 And the Same Is True for MP3 Players Apple iPod Unit Sales (Millions) 26.4 14.4 22.5 20 2003 4.4 0.4 2002 0.9 10 0 Apple’s own MP3 player, the iPod, was only in the market for 12 years before being discontinued. 35.2 2009 39.4 30 42.6 2008 40 50.3 54.1 51.6 50 54.8 iPhone introduced 60 2004 2005 2006 2007 2010 2011 2012 2013 2014 Source: Apple (via Business Insider) 13 But What About Mobile Payments at the POS? Far from transformative, but still early Source: Why Americans aren’t using their phones to make payments in stores, Yahoo Finance, May 25, 2018 “Though BI Intelligence projects that US in-store mobile payments volume will quintuple in the next five years, usage is consistently lagging below expectations, with estimates for 2019 falling far below what we expected just two years ago.” 14 Mobile Payments Timeline 2011 QR Codes 2012 NFC 2013 2014 NFC 2015 2016 NFC + MST QR Codes 2017 NFC NFC NFC Phone # + PIN QR Codes QR Codes 15 Diving Deeper Into Mobile Pay Usage Source: Pymnts.com/Infoscout 16 The Transformation in China Has Been Swift! Source: “Lessons from a mobile payments revolution,” American Banker, May 2018 17 What Will It Take To Catch On in The U.S.? 18 So Is Mobile at the POS the Future? RTP ? 19 Questions & Discussion Ask a Question: - Click the “Ask Question” button in the webinar tool - Email rapid@stls.frb.org For more information: Douglas King douglas.a.king@atl.frb.org 20
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