Payments innovations are all the rage today. Look no further than the intense scrutiny of Apple's new payment system Apple Pay since its launch last Monday, and you can see how much hoopla there is.
But a raft of startups including Square, WePay, Stripe and dozens of others are also pushing the envelope on payments, while competing with more entrenched players like PayPal and Google, who are also eager to own the space.
Osama Bedier may not be a household name, but he's been instrumental in creating some of the biggest payment innovations in recent years. A PayPal executive who oversaw platform development in that company's early days, Bedier jumped ship in 2011 to create the Google Wallet, a mobile payment solution that uses similar technology to that used in Apple Pay. Like Apple Pay, the Google Wallet can be used via phones containing so-called nearfield communication chip technology, or NFC, which allows for encrypted payments, using short bursts of radio waves.
Over the years, Bedier has amassed half-a-dozen patents for digital payment technology including for real-time transaction authorization and virtual account management.
He stopped by Inc.'s offices recently to discuss his latest innovation--which we'll be telling you more about later this week--and what's driving so much of the frenzy in payment technology and digital wallets today.
Following is an edited transcript of our conversation.
Q: Why is there so much attention and innovation going on now with online and digital payments?
A: Commerce is broken and the infrastructure that brings us commerce is broken. It was built in an era where we had cash registers, and it just kept getting updated without anyone stopping and saying, 'What should this look like in the future.' This is best described when you look at the technology that every consumer has in their pocket right now [a smartphone], literally a super computer in terms of the standards of 10 years ago.
Q: You oversaw the creation of Google Wallet back in 2011. It did not work out as everyone hoped. What was your biggest takeaway from the project?
A: There are 16 million terminals in the U.S., and you [can] not change them to accept Google Wallet overnight. We wanted to kick this off, but it is a lot more helpful when you have the mandate like the one for chip and PIN credit cards, slated for October 2015, already changing the merchant terminals. You have to ride a wave that is already causing change. Apple Pay learned that, and I think the timing of Apple Pay was related to the changes they saw coming.
Q: How have things been different for Apple Pay?
A: When we launched Google Wallet, we had 20 merchants come along for that ride with us. Apple has gotten a broad segment of the payment ecosystem together. They have the top five banks, which issue the majority of cards in this country, as well as the top three credit card networks, Visa, Mastercard and American Express, [and many of the top merchants].
Q: What's the biggest stumbling block for digital wallets today?
A: Consumers need to change their habits, and this is a very difficult thing to do. We did studies at PayPal and Google and found that getting consumers to change their habits takes at least three transactions in a specfic week, and for multiple weeks, so the habit becomes ingrained. So with all of these ideas of paying through a mobile device, it is not happening enough to retrain consumers on a new habit. And we know that consumers don’t like to go shopping if they have to prepare what payment method they plan to use. They get there and then pay, which is something that credit cards do very well. Consumers know when they get to a store it is going to work. With most of these new ideas, most of these digital wallets, it is not clear yet how they are going to work. Google and Apple, however, have a head start with this, because consumers are already buying music and songs and games and movies and apps this way. NFC [-enabled wallets] seem like an answer to connect this [buying behavior] in physical stores.
Q: So are we still 10 to 20 years away from widespread consumer use of a digital wallet?
A: It seemed that way when I joined Google. We thought it was going to be a five- to 10-year process. For the first time I think we have a line of sight. We can see all the moves happening. Before it was a lot of hopes, and we had to kick off NFC. Now I think we are just three to five years away.