For some contrarian views on Apple Pay, read this blog.
Innovation Insights featured one of my blogs on promoting chance in innovation through deliberate, repeatable processes. You can read the blog at Innovation Insights.
Image source: lendingclub.com
American banker published a nice multi-part article on why payday lending remains expensive for the consumer. Read article
The aspect that interests me which the article does not cover is that mobile payments can revolutionize this market servicing consumers who are badly in need of financial help. Traditional players keep interest charges high banking on the consumer's immediate need for cash and inability to compare alternative offers. Many new entrants try to bring down interest rates.
However, as the article explains, price is only one dimension in this market. Mobile payments can not only help bring down pricing by making more bids available to the consumer, they can also improve friendliness and convenience - other factors that drive consumers of payday lending to the traditional players. Fear of rejection is the only aspect that mobile payments cannot do much about; the onus is on the consumer to build their reputation by repaying the loans on time and building a good reputation and track record to bring down the cost of financing.
Since the CARD act came into existence last year, payment businesses have been worried about loss of revenue. Coupled with other regulations such as Durbin amendment and Reg E, financial impact on payment businesses can be more drastic. According to estimates from Boston Consulting Group, the revenue loss can be as high as 29% or 25 Billion $ in US (Winning after the Storm, Global Payments 2011, Boston Consulting Group, Feb 2011).
No amount of regulation can stop product innovation in the marketplace. For example, Reg E impacts debit cards as it requires consumers to opt-in for overdraft protection while using debit cards for everyday debit card transactions. Although the regulation does not limit amount of fees that could be charged, there is talk of best practices in implementing daily limits on number of overdraft transactions or dollar limits. Naturally, several industry players are concerned about loss of overdraft fees for debit cards. However, debit cards are not the only form of payment instruments; there are credit cards and other forms of payment instruments (e.g. checks), not to mention the new instruments yet to be invented that are not subject to such regulations at least as of now. The industry will innovate in packaging debit card-like features into other products and unfortunately, regulation will keep playing catch-up.
I am a Management Consultant in Banking and Financial Services. Check out my "home" and "about" pages for more details.