blog

Feeling the need for speed

Matt Carberry | Payments | 10/19/2015 1:25 PM

Just how fast is an electronic payment? How much faster could it possibly be? Is there a glaring need in the everyday lives of consumers and businesses to increase the speed at which payments are sent or delivered? Would a customer shop more or less frequently at their favorite store if the payment process was slightly faster or slower than it currently is? How interested is the store owner in knowing these answers?

You may not be thinking about these questions in too much detail today, but there are many companies out there that are very invested in how we all will be thinking about payments in the near future. Some are multi-billion dollar stalwarts that are concerned about their very existence should we choose to go a direction other than what they’ve predicted. Others are very young and nimble start-up organizations focused more on convincing us that their innovation is the way of the future. But almost all of these companies agree that we are only a few years away from the next major shift in human behavior related to how we transact payments. This is very significant as until now, there have been very few shifts in human behavior in this area. The next big thing is at our doorstep and trillions of dollars are at stake!

To most of us, electronic payments already seem to move pretty fast. But in an era where so many components of our normal lives have increased in speed by exponential measures, the electronic payments process, by comparison, has changed very little. Think about it: in the not-so-distant past, it would have seemed very foreign to have the ability to instantly stream enormous libraries of videos using just a tablet or a television and Wi-Fi signal. Likewise, who would have thought that we would be able to order a taxi with a mobile app and then exit the taxi at ride’s end without consciously making a payment, all while not having to speak a word to a dispatcher or driver? How long will it be before that taxi itself is operated completely by a computer? Probably not as far away as we may think.

By contrast, the payments networks, payments processors and payments banks that all work together to process a payment continue to operate in much the same manner as they have for years. Almost all electronic payments move at the same speed today as they did ten years ago. Sure, there have been improvements in certain cumbersome and time-consuming payments processes. But most of these improvements come from technological advances to what were formerly paper-based payments. For example, depositing a check takes less time today because of image technology and the wide adoption of smartphones that are able to deliver the technology. However, the behind-the-scenes presentment and processing of that image haven’t changed much in over 12 years!

This is not to say that ideas to speed up or improve payments haven’t been developed or deployed. Mobile payments (ApplePay, AndroidPay and SamsungPay), virtual currencies (Bitcoin and Facebook Credits), and Person-to-Person payments companies (PayPal, Venmo and SquareCash) have all found varying degrees of success attempting to exploit the inefficiencies of traditional payments, but none have succeeded at majority mass adoption sufficient to supplant the standing norm.

So what will definitively change the way the world transacts today? Will it be cutting-edge technology? Intuitive applications? Access to devices on both sides of the transaction? Processing speed? Or will it ultimately come down to the complexity of human behavior and the resistance or willingness to change?

The plot thickens… 

The opinions, findings, or perspectives expressed in this content are those of the author and do not reflect the official policy or position of The Bancorp, Inc., its affiliates, or its or their employees.