The Future of Mobile Banking: Starbucks or Google?

Published

November 6, 2013

Bob Sullivan is author of the New York Times best-sellers Gotcha Capitalism and Stop Getting Ripped Off. His stories have appeared in The New York Times, the Wall Street Journal, and hundreds of other publications. He has appeared as a consumer advocate and technology expert numerous times on NBC's TODAY show, NBC Nightly News, CNBC, NPR's Marketplace, Terry Gross' Fresh Air, and various other radio and TV outlets. He helped start MSNBC.com and wrote there for nearly 20 years, most of it penning the consumer advocacy column The Red Tape Chronicles. See more at www.bobsullivan.net. Follow Bob Sullivan on Facebook or Twitter.

Spanish bank Banco Sabadell announced last month that it was the first financial institution in the world to release a banking app for Google Glass. Months earlier, a Ukrainian bank demoed its Glass app. Analysts are predicting that here in the States, Wells Fargo, Bank of America, and Fidelity are all toying with the idea.

And I do mean toying.

Google Glass bank apps were all the talk at a recent Las Vegas conference devoted to payment technologies. Like so many other wearable computing devices and their whiz-bangy apps before them, Glass banking will provide a lot more whiz and a lot less bang for the buck. While providing excellent press release fodder by aligning with a cool Google product, there aren’t many real new use cases for banking with Google Glass. They will be toys. As described, the apps would let consumers take a picture of a check and deposit it (as with a smartphone), conduct banking transactions without stopping by a bank (as with a smartphone) and let people find nearby ATMs with GPS aid (as with a smartphone). Do you sense a theme?

Understandably, banks and retailers — all who worry about collecting money — are very concerned about the arrival of new payment systems. That’s for good reason: mobile payments (as in, cellphone payments) will be a $235 billion business worldwide in 2013, a whopping 44% increase from last year, according to research firm Gartner. Most folks expect it to be a trillion-dollar business relatively soon, sending shockwaves through the $7 trillion business that is credit card transactions.

Keeping It Simple

You can understand why no one wants to miss the boat on the next way to pay for things. But while distracted by glitz, many in the payments world (and many consumers) may be missing the quiet success of Starbucks and its relatively old-fashioned new payments system — the Starbucks loyalty card app.

Starbucks announced Oct. 30 that fully 11% of its transactions in the U.S. and Canada are being paid through the mobile version of its Starbucks card. About 4 million cups of coffee and crumb buns are purchased every week by a consumer who flashes their smartphone in front of a reader at the cash register. The Starbucks app is simple: it keeps track of balances, it offers some loyalty benefits. But really, to consumers, it’s just a digital picture of an old-fashioned plastic loyalty card. It is, however, elegantly simple and familiar. It takes up no space in their wallets. It fits into their lives. And, most important, they trust Starbucks.

Most important for Starbucks — every time a consumer flashes that Starbucks card, Howard Schultz gets angel wings…and Starbucks avoids paying a pricey interchange fee to a bank.

Perhaps some day, we will all walk around with some kind of heads-up display attached to our heads, a la Google Glass, or even attached to our eyeballs. Then, it will be important for banks to have heads-up display apps that help me find the nearest ATM. Until then, if I were a bank, I’d be more worried about Starbucks than Google Glass.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its affiliates.

Image: Antonio Zugaldia, via Wikimedia Commons