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Facebook,, and Apple: The Frictionless Future

This article is part of a series on the present and future of digital payments. For the full report, click here.

In 10 years, will we be referring to Facebook,, and Apple as payments companies? It's possible.

To map out the payment landscape for the next 10 years, we can look to the individual players in the entire payment transaction to see how it will likely play out.

Consumers and Merchants
First, the consumer should expect to see an increasingly simplified and increasingly mobile payment experience. The plastic card is far from going extinct, but expect to see more and more opportunities to pay with frictionless services designed by enabler companies.

The same applies to merchants. Mom and Pop shops will increasingly turn to services developed by larger corporations to make the checkout experience as frictionless as possible. Larger merchants may seek to develop their own solutions, but conceptually the objectives are the same. Easier checkout is a universally good thing for merchants.

Banks and Payment Networks
For banks, the process is not likely to change much if at all. Bank's benefit from increased usage of the cards in terms of per swipe fees and the use of their deposit and loan products. A world with more digital payments is a better world for banks. Expect to see open cooperation among the banks themselves and the other participants in the payment process.

Source: Company website

The primary objective for payment networks is to increase digitized commerce. Visa's mission statement is in fact "to accelerate the electronification of commerce." To revisit the previous analogy, they want more cars to use their highways. More cars means more tolls. This means cooperating and encouraging enablers to expand the reach of existing networks—Google, Facebook, Apple, and are not threats to Visa or MasterCard. They are critical strategic partners.

To add value on the margins, expect the payment networks to increasingly leverage the data they collect from their massive database of transactions to assist merchants and banks increase their profits. This shift is meant to mitigate the risk of being a commoditized player in the process. Between restrictions imposed by government regulations and increasing clout of large retailers like Wal-Mart or (NASDAQ: AMZN  ) , the payment networks could find themselves squeezed out of some of their margin.

American Express (NYSE: AXP) CEO Ken Chenault described American Express' strategy, saying "We bring together users, card members, and merchants, and the data is incredibly valuable. We know where they spend online and offline. We want to deliver benefits and services when our card members want it, where, and how they want it."

Source: Marcus Quigmire

Again, whether its AMEX, MasterCard (NYSE: MA  )  or Visa, the objective is to increase the traffic on their networks. If they can assist merchants in growing sales, that's a win-win proposition.

No payment participant will impact the consumer's experience more than the enablers.

Many expect that one day Apple (NASDAQ: AAPL  ) will add near field communication (NFC) technology to the iPhone, opening up the possibility for widespread mobile payment adoption. This is the technology where you simply wave your smart phone over a reader at the grocery store, gas station, or elsewhere, instead of swiping your plastic card.

Others think that NFC is a bridge technology, and that another location aware technology will leap frog it, allowing you to keep your phone in your pocket and pay automatically. Imagine an Uber-like experience at the grocery store, where you simply bag your groceries and walk out the front door. By the time you finish unloading your groceries into the car, there is a receipt in your email inbox for the automatic check out.

Or imagine walking into a coffee shop, and having your coffee already prepared and paid for. You simply walk to the counter and pick it up. The ordering and payment processes happening completely hidden, driven by a location aware app in your smart phone.

These possibilities are not far off in our future, and they will be driven by the consumer facing companies I've coined as enablers here.

Amazon's "One-Click" has stood as the gold standard in frictionless transactions since it was first patented in 1999.

If these enablers have their way, in the not so distant future the friction of even that single click will be eliminated.

It's a bold new world for payments, and one that's shaping up to be a big win for everyone involved.

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To read Jay's full report on digital payments, click here.

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Jay Jenkins

Anticipating opportunity, filtering out the noise, and figuring out what it all has to do with the price of rice in China. Like me on Facebook here!

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