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Payment Horizons

June 10, 2016

It’s About The Consumer


The human brain is a marvelous organ. Its capacity to absorb, process and retain information is not fully understood but the amount of data it handles is staggering. Researchers at the Okinawa Institute of Technology Graduate University in Japan and Forschungszentrum Jülich in Germany needed more than 82,944 servers just to simulate one second of brain activity

To be able to convert the data we hold in our minds into information we can use to make decisions, we use something called heuristics. These are mental shortcuts that ease the cognitive processing load when large amounts of data are involved. The way we use these methods has been categorized into “types;” e.g., availability heuristics, familiarity heuristics, representativeness heuristics and dozens more.

Looking at the digital payments landscape over the last year certainly is a study in heuristics. Here are some that were spotted.

Anchoring Heuristic: This is the common human tendency to rely too heavily on the first piece of information offered – was probably the cause for the aggressive estimates offered early in the year by many think tanks around the adoption of mobile payments. Much of the initial information about the future was provided by entities with much to gain by the adoption – e.g., Google, Isis, et al. Their bullish views helped many believe that a new world order for payments was at hand.

Scarcity Heuristic: This one surely helped motivate venture capitalists who have subsequently invested billions over the last two years in companies competing mainly to capture the mobile payment point-of-sale space. The scarcity heuristic is a mental shortcut that places a value on an item based on how easily it might be lost, especially to competitors. This heuristic can lead to a cognitive bias that creates an illogical deviation in judgment. Time will tell.

Affect Heuristic: This is a shortcut we use where our feelings affect our decision about the risk to benefit ratio involved in a certain set of choices. Obviously the rapid adoption of technology by consumers have many “feeling” the future is rosy for any service delivered digitally including payments. However, these positive feelings overlook the fact that there is an existing “technology” – already widely adopted that works pretty well for making payments; i.e., cards and cash.

These heuristics and any assumptions drawn from them that blind our read on the future of payments does not mean there is not a considerable amount of grey matter being spent trying to solve the entire digital payments puzzle. There are a lot of smart people working hard to crack the code in this area and in the last six months some “camps” have been shifting away from their own biases to face the fact that adoption of technology that facilitates digital payments at the point of sale and online using one or more mobile devices has been pretty poor.

Some have realized that one of the main reasons for this poor adoption is that consumers still do not see an innovation compelling enough to make them put down their cards and cash. The reason they don’t see a compelling innovation is that so many companies trying to capture a foothold in the space have not offered solutions primarily designed to meet the needs of the consumer.

It is not about the needs of the retailer, the needs of the search engine company, the needs of the mobile phone providers or other organizational entities. It is about the customers’ need for security, convenience and control. When these needs are the foundation for the solutions being offered, the adoption curve will become more dramatic and sustainable.