Payments Watch

At an investor and analyst conference earlier this week, First Data CEO Ric Duques provided seven trends that First Data sees in the payments industry

(the full powerpoint presentation is available here):

- economic globalization
- increased consumerism in developing countries
- payment options = competitive advantage
- emerging potential in mobile payments
- double-digit growth of prepaid cards
- online payments will grow at double-digit rates
- evolving consumer expectations

When I see industry “trends” I often like to consider what the bias or motivation may be in the provider’s observations. I am unsure anyone, or any company can be purely objective, and when it comes to determining industry/market trends, a player, especially one with a dominant position in that industry, is often handicapped by a bias based on the competitive strategy they are in fact employing (see for example Michael Porter’s Competitive Strategy: Techniques for Analyzing Industries and Competitors).

My understanding is that First Data has approximately 50% of the credit card aquirer market (partly via Chase Paymentech?) and is also a processor for other issuers and aquirers. It also owns the STAR PIN debit network (see Adam Levitin’s The Merchant-Bank Struggle for Control of Payment Systems for some facts and figures). Basically a very large portion of their business is in payment cards. Given this, I thought it was interesting to subtract the “trends” that are obviously payment card related:

- increased consumerism in developing countries (often equated with rise in card use)
- payment options = competitive advantage (classic value proposition for merchants to accept cards)
- double-digit growth of prepaid cards (hey, it even says “cards”!)
- online payments will grow at double-digit rates (cards dominate online payments right now)

So what we are left with are the following:

- economic globalization
- emerging potential in mobile payments
- evolving consumer expectations
The first point is economic and the last one is a general observation of consumer behaviour (almost seems like a universal axiom at any time actually…), but in any event we are left with the observed trend of the emerging potential in mobile payments. Very interesting.

By the way (disclaimer…), I am not suggesting for a moment that the other four trends are not any less “real” and in fact most of them look extremely verifiable. I just thought it was a neat exercise to see observations on things not tied very specifically to their current particular business model.