Update: Evolution of the Banking-Payments Space
Splitting up the bill—we've all done it. Whether at a restaurant, paying for rent or utilities, or any of the other possibilities that may arise out of daily transactions, dicing up the check is always a hassle. There is always someone who doesn't have cash, and as electronic and mobile banking proliferate, fewer people carry bank checks or cash.
I have blogged earlier about Peer-to-Peer sites and this is another evolution in the payments space. New methods to split the bill and pay-back friends, roommates and co-workers are starting to gain traction. Take, for example, BillMonk.com. Launched in 2006, BillMonk is a free service that lets friends track and settle expenses. It conveniently lets you record expenditures and details through SMS, making it easier to track expenses on long nights out or weekend trips.
Sounds cool, right? BillMonk is just the tip of the iceberg. What BillMonk lacks is a built in network of users. As large social networks like Facebook, Myspace and Twitter look to create new revenue streams, expect them to consider venturing into the mobile (or "stationary" for that matter) payments market. Nate Westheimer over at Silicon Alley has a nice breakdown here of how Twitter can leverage its popularity and create a successful Person-to-Person (P2P) payments network.
Social networks aren't the only players in the P2P payments space. Financial institutions have been in the business of payments for centuries, and have something which most social networks do not—consumer trust. This trust, combined with the growing popularity of online and mobile banking, gives banks instant credibility in the mobile payments sphere.
Banks and Telcos in the European Union are already teaming up to let customers pay grocery, restaurant, and other bills using their mobile phones - click here to read more. This is being spurred, in no small measure by "One EU" regulations like SEPA (more about that in a later post). As consumers grow more comfortable with bank backed mobile payments, and technology improves, banks will be positioned to grab market share in the P2P payments space. This penetration could occur through singular ventures, or partnerships with other P2P payments players.
To me, it is fascinating that banks and social networks are even considered possible competitors in an industry. It is apparent that as the world flattens, the leveling of the playing field doesn't happen only between countries. It also occurs across industries. And personally, speaking, the next time I am sharing a cab during rush hour in New York and do not have the cash to split the fare with my co-passenger(s), I know where to log on and settle the deal!
The next issue of FINsights, Infosys' Thought-Leadership journal on the financial services industry focuses on Payments and will look at the dynamics of this exciting industry segment. For the last few issues, check out here!
