In all of the breathless excitement over new payments capabilities unveiled at the Mobile World Congress in Barcelona, the Federal Reserve is injecting a little realism. Finextra reported on the Fed’s blog where it was stated:
Like the broken analog clock face that is correct twice a day, we believe that those forecasting 2016 as the ‘year of mobile payments’ (as they did in 2013, 2014, and 2015) will be a little bit right, but will still be waiting for this optimistic prediction to be fully true,” they write. “While the adoption pace of mobile payments is growing because of the increasing influence of millennials, the issues of limited merchant acceptance points, fragmentation, and consumer concerns over security and privacy will remain as substantial hurdles.”
Major educational efforts to convince consumers of the increased security provided by mobile payments through tokenization and biometrics, will be needed before consumer acceptance becomes widespread, but even so, the user ID and password “will remain the primary authentication method that consumers use to access their various applications”.
What was also discussed, and I believe quite revealing, is the Fed’s downplay of the benefits of faster payments starting with a question regarding business case benefits of next day ACH:
The Fed staffers are equally gloomy about the prospects for faster payments in 2016, forecasting that “ACH same-day service will not be a huge hit”. The Fed is predicting that the roll-out of Nacha’s mandated same-day ACH service in September will, at least initially, have modest adoption because corporate originators will have to update internal systems to support faster payments, the dollar cap of $25,000 per payment, and the imposition of the interbank fee. Likewise, consumer payment applications will see limited uptake due to competing payment alternatives.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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