The latest post from Javelin describes “the future” of payments as, (yes, you guessed it), contactless. The author, having just returned from a conference in Singapore, describes a number of demos of contactless in Japan made popular by DoComo and powered by Sony’s FeliCa’s chip. No doubt about it, the scenarios he describes are really cool and have driven great value to consumers and merchants. And, the author does give a nod to the significant regulatory, infrastructure and cultural differences that exist between America and Japan that make this stuff not easy to “translate to the US market.” (For more information on the backdrop around Japan’s mobile ecosystem, check out the 2005 MPD whitepaper authored by MPD Principal Andrei Hagui after spending 18 months on the ground in Japan and Hong Kong).

I would like to offer two slightly different takes on “the future.”

First, I agree that the ability to deliver value-added things to consumers will ultimately drive the adoption of new payment methods. But, contactless isn’t the only path to that new world. Internet-enabled mobile devices make any number of value-added applications possible, and is already changing the way that people use their phones to do just about everything. The ultimate measure of success for any payment method is incremental sales to merchants, from consumers who want to shop at that merchant because they accept the form of payment they wish to use while there. Whether the transaction is made via a card that is swiped or a phone that is tapped is almost irrelevant to the consumer so long as the transaction is conducted conveniently and securely. At the moment, contactless does not deliver enough value to merchants to make the investments needed to support contactless payments. So far, no one else has offered to step in and fund it and most consumers, even when they have contactless cards and are at contactless terminals, still swipe. The longer it takes for the US to achieve a contactless tipping point (Aite says that only 2.6% of all merchants will have contactless readers by 2012) the more at risk this technology becomes as THE enabler to a value-added payment experience, at least here in the US.

Second, the future of payments is about much more than contactless payments on mobile phones. At a Brookings Institute session on “The Future of Consumer Payments” held on 9/16, keynoter Ken Chennault spoke of the enormous runway that the consumer payments markets has given the (still) heavy reliance on cash and checks worldwide. His enthusiasm for the industry seems rooted in the ability for the world to migrate away from cash and checks by offering consumers convenient choices for how to pay and so therefore how to create products that “facilitate the conduct of commerce.” His view, is that product development and the penetration of new markets, like healthcare, will produce efficiencies and conveniences for consumers where they don’t exist today and in the process change the future of the industry as well as the stakeholders they were designed to benefit. Technology is important but is subordinate to the fact that people will have options for how to transact with each other, options that will most certainly vary geography by geography.

Will some of these products be supported by new technologies? Of course they will. But technology will be the enabler and not the driver. So will things like the continued evolution of cloud-based computing and the smart and efficient use of the trove of data that the payment industry generates about our buying behaviors. For more on how we see the future of payments, contact us to check out our newest white paper which was presented for the first time in Washington DC on 9/16.