Who Loses in the Mobile Payments Game?

As with any industry in the midst of disruption, the payments industry has been receiving a lot of attention by the tech media. Discussions of mobile payments firms and technologies generally end up speculating on who will “win.”

Will it be Amazon? What about the major card issuers? Or PayPal, the previous disruptive force “fighting to stay relevant,” in the words of one commentator? Will it be an upstart startup financial technology firm like Square, Stripe, Braintree/Paypal? And with this week’s announcements, what about Apple? Or MCX, an alliance of large retailers.

I do not know. But I can tell you for sure who is most likely to lose: community banks.

It’s a shame, because community banks are well-positioned to capitalize on the convergence of local ecommerce and the new epayment technologies.

After Our Customers

There are plenty of large banks, large card issuers, and more nimble financial technology companies that are after bank customers, given the increase in mobile-money related transactions. Data from the global business advisory firm AlixPartners, for instance, show that some 40% of smartphone and tablet owners have used their device for money-related transactions in the last month.


Community banks have a lot against them, to be sure. Their marketing budgets are tiny by comparison to the larger banks and merchants. They are perennially on the short end of technology budgets, with maybe one full-time technology executive overseeing part-timers and outside vendors. They face regulation from all sides, including pronouncements on what kind of technology they can use and how they should evaluate it. Many failed during the financial crisis and many others are only now seeing major improvements.

Banks in general and community banks in particular also have themselves to blame, and the situation continues to deteriorate. “For the first time in our survey, the most preferred provider of the digital wallet has shifted from consumers’ primary bank to PayPal,” write Bob Hedges and Teresa Epperson in “.”

Many have put themselves in the position of getting cut out of a bigger share of the mobile payments revenue stream. It’s natural but not helpful for an industry under regulatory assault to hunker down and focus inwardly, and banks tend to view the payments ecosystem from an internal perspective, rather than a customer perspective.

A Bank-Centric View

When you read about mobile anything in banking, you don’t read so much about mobile commerce. Instead you read about the banking industry’s own mobile segments: mobile banking and mobile payments. Most technology and banking analysts believe that mobile will become the dominant channel for banking in the next few years. Yet many community banks have not even set up mobile banking systems, let alone ventured into mobile payments and mobile money management.

All community banks, however, should be devising mobile strategies. It’s important to consider the role that mobile applications and partnerships will have in the eventual merging of mobile commerce, money movement, and financial.

Mobile apps in which checking balances and making payments are the highest functions will not engage consumers over the long term. Ideally, banks themselves should be working on apps for customers that include person-to-person (P2P) payments, merchant rewards, corporate banking services, and mobile payments.

This may require going outside existing system partnerships and experimenting with a mix of small technology innovators, app developers, and commerce providers. The main point is that there is plenty of room for agility and development for community banks, and their unique position can be leveraged to a competitive advantage.

Community Banks Know Local

Community banks remain in a better position than they might realize, and banks that are willing to innovate will find that they can out-maneuver their larger rivals. As Hedges and Epperson put it, “While the consumer perception trends should be alarming, banks still hold a trust advantage when it comes to safeguarding personal data and using data in the best interests of their customers.”

If the future of ecommerce really is social, local, and mobile, who better to bring these channels together than an innovative local bank? They have relationships with consumers and merchants, and social means face-to-face in this space. Given that local knowledge, banks are in a good position to find the mix of card, commerce, and communications services they can provide in combination with local businesses. Rather than looking at mobile banking and payments, the stock in trade of banks, they would do well to broaden their focus, to mobile commerce and financial management.

Yet the questions remain:

  • Is it too late?
  • Can banks make money at mobile and related services?
  • How best can community banks approach building a mobile strategy?

I would love to hear your thoughts.