Cameron and Tyler Winklevoss presenting on Bitcoin at the close of Day 2 of Money 2020.

Earlier this month, I was fortunate enough to attend Money 2020 in Las Vegas. Money 2020 is fast becoming the finance, banking and payment industry’s premier event. With over 7,500 attendees and over 400 exhibitors and sponsors, it’s a mecca for everyone who’s anyone in the fintech world. So much so that this year’s venue was bursting at the seams. Thankfully the organisers have secured a much bigger venue for 2015.

2012 vs 2014

It’s also a place of high drama and tectonic shifts in power. Two years ago I attended the same event. At the time, Walmart and a consortium of major US retailers announced their plans for MCX.

MCX was designed to put retailers back in control of point-of-sale payments by linking to stored value cards or directly to bank accounts and offering an alternative to credit cards. This would reduce what retailers felt were high interchange fees set by credit card companies for accepting payments. This of more importance in the US as they lack a ubiquitous national payment acceptance alternative that isn’t run through the credit card company controlled networks, other than cheques and cash.

Google Wallet was also attempting to court issuer banks with their mobile wallet with mixed success – and limited adoption – and there was real fear around what might happen should Apple enter the payments space. Square was at the height of their power, having transformed the point of sale experience, in the US at least. And contactless payments in the US looked like they were going to fail at the first hurdle. The US EMV liability shift – a move by credit card companies to force retailers to upgrade their point of sale systems to accept chip-and-pin or be liable for fraudulent credit card transactions – was still far off in the future.

Fast forward to now, and Apple has entered this landscape with a new benchmark for mobile payments, which any other technology company is going to struggle to replicate as they don’t have the ability to control every level of the hardware, software and payments rails to work.

Every other mobile payment option, including MCX’s CurrentC, has to exist as an application on primarily Apple or Google hardware and software (over which those companies exercise ultimate distribution control). This means they will have a limited level of integration into the operating systems and hardware functions of those products. Without that deep integration, they can doubtless make mobile payments work, but they may struggle to make them more compelling than a piece of paper or plastic.

All this means that Visa, American Express and Mastercard are coming across as very relaxed, as Apple has entrenched them as the basis of their payments solution. The issuing banks are now scrambling to be included as compatible card issuers, and several MCX retailers are allegedly turning off support for contactless payments on their point of sale hardware to give their alternative mobile payments product, CurrentC, a fighting chance.

Ultimately it’s going to be a battle of wills between consumers and retailers – will consumers force retailers to accept Apple Pay and Google Wallet and others? Or will retailers convince consumers to use their alternative mobile payment product? Or will both throw up their hands in disgust and continue to use cash and cards because it’s all too frustrating to know who accepts what and where?

New POS technologies

Given this level of uncertainty, it’s no surprise that highly flexible point-of-sale hardware products have appeared. Not one, but two next-generation POS solutions were launched – Poynt, a new product spearheaded by former Google Wallet mastermind Osama Bedier, and Clover Mobile, a powerful, vaguely Star Trek Enterprise shaped device produced by First Data.

Each of these supports a huge number of payment options and integrations (swipe, chip-and-pin, contactless, various wallets, etc.) and more interestingly feature app-stores, effectively turning these devices into distribution channels for various value-add products for retailers. Poynt’s keynote launch included an impressive integration with kiwi-built point-of-sale product Vend that included payment via Apple Pay.

The timing of all this is very conspicuous – with the EMV liability shift now less than twelve months away, and US retailers at least considering upgrading their POS hardware to the latest and greatest, the time is ripe for widespread contactless acceptance.

B2B payments

Meanwhile, various parties continue to circle business-to-business and bill payments with a constellation of competing options and networks. Several companies have given up on the largely federal-owned ACH network and are offering alternatives. Fiserv, for example, who develop software that a large number of financial institutions use to run their banks, introduced Fiserv Now, a payment network to facilitate these non-POS transactions.

These transactions are less sexy than point-of-sale, but the fact is that these payments are higher value and much more painful (and therefore much more in need of fixing) than shopping at your local boutique. The average American still writes 93 checks a year (by comparison, as a New Zealander, I’m quite sure I haven’t written a cheque in the last 10 years). Complicating things further, while Australasians put their bank account numbers on the bottom of their invoices, in the US an account number is an extremely sensitive piece of information and rarely shared with customers.

Still, there’s a growing recognition at Money 2020 that the winner-takes-all scenarios laid out a few years ago are less likely to come to pass, and that it’s more likely that systems that interoperate will each gain market share and there will be a variety of solutions for everyone.

Virtual currencies

Finally – virtual currencies were huge this year, with a large number of new businesses founded based on Bitcoin and others. These offered services like wallets, payment acceptance, and cross-border payments. Interestingly, some of these Bitcoin companies have potential to bring down cross-border payment costs significantly compared to alternatives like wires and SWIFT. However, most people are still a little unsure about dealing with such a volatile medium of exchange with fairly sketchy origins and a reclusive Japanese inventor. And though some Bitcoin fans were unhappy that New York state is making moves to license any business that trades in Bitcoin – it may be the first sign that virtual currencies like Bitcoin are approaching legitimacy.

Small business loans

There is also a growing recognition of the need for small businesses to have easy access to capital. In the US, there are 8,000 small business loan applications a day and less than 24% of those are approved. This has seen a rise in alternative and P2P lending to fill a gap that traditional lenders (i.e. banks) have struggled to fill.

Alternative lenders were out in force at Money 2020 touting their innovations in risk management and speed to lending. Of course innovations in risk – and more precisely, how risk was packaged and on-sold to investors – was a root cause of 2008’s Global Financial Crisis, so it remains to be seen whether these innovations will actually result in safer loans for the long term. But as a small business, with these new market entrants offering new lending products with competitive terms, banks who want to retain their small business loan book will need to change their approach to compete.

What this all means for retailers

As a small business, all this may seem rather remote and irrelevant. But if you operate as a merchant, the outcome of this arm-wrestle between retailers, card companies, and consumer acceptance of their payment products, will have an affect just how much of your revenue you keep and how much you pass on to these providers. The good news is that other costs are being driven down – particularly cross-border payments, which is great for importers needing to pay their suppliers.

It’s easy to forget the enormity of the money and intrigue that sits behind what you have in your wallet. Business empires rise and fall on the products consumers use to pay for goods and services, and in another two years, there’s no doubt in my mind that the landscape will have significantly changed again.

Personally, I hope outside of the US, Apple engages with domestic payment networks – potentially a much better deal for retailers – rather than taking the easy option of doing deals with card issuers for distribution. However, until they extend beyond the US, it’s hard to know what their priorities are. We live in interesting times.