What happens when a device that fits in your pocket delivers more computing power than the room full of supercomputers that it once took to launch a space shuttle? What happens when innovative technologies from a wide range of industries begin to come together and create new opportunities? What happens when new products and services deliver capabilities that help innovators envision better ways of eliminating friction points that people have been living with for years?
What happens is that you get the perfect conditions for the kind of rapid technology-driven transformation that has been gathering momentum in the payment industry for the past couple of years. It’s a transformation that promises to revolutionize commerce by rendering the transaction all but invisible while making the payments process itself a foundation for new experiences that connects consumers and merchants in powerful new ways.
Signs of this revolution are all around us, as more and more people use their mobile devices to facilitate more and more of their purchases. How quickly is this happening? In 2011, PayPal processed $4 billion in mobile payments. In 2013, that number will be in the vicinity of $20 billion.
But this is just the beginning. With companies large and small in payments, technology, financial services, telecommunications, and retail scrambling to play a role in the emerging world of mobile-driven payment experiences, I believe we’ll see a wave of innovation in the coming 12 months that will make 2014 a watershed year for commerce. This innovation will make its way into consumer’s hand in the form of products and services that make shopping faster, easier, more personal, and more fun.
Of course I look forward to seeing what new consumer-oriented products emerge during the next 12 months. But as PayPal’s chief technology officer, what interests me even more is what’s happening on the back end that will make these new products possible. As we wrap up 2013 and head into the New Year, I thought I’d take a few minutes to share my thoughts about some key technology trends that I believe will have a huge impact on the transformation of the way companies work and how people pay in 2014 and beyond.
Bluetooth Powers Local Experiences
Up to now, one of the unsolved challenges of mobile commerce has been how to deliver truly local experiences in a reliable and rich way. Traditional geo-location technology was a good first step, but the problem of spotty access to cell signals inside a store limits its effectiveness. This is where Bluetooth comes in. A new generation of simple, easy-to-use, low-cost Bluetooth devices will enable merchants to connect to their customers as soon as they step into a store using a low-power, reliable Bluetooth signals. This will open up the door to a wide range of incredible personal shopping experiences.
At PayPal, we also believe that Bluetooth will play a key role in the rise of the digital wallet and the demise the traditional leather wallet. In September, we announced PayPal Beacon, a pioneering Bluetooth powered device for merchants that will enable their customers to pay using their mobile phone without taking it out of their pocket. This completely hands-free experience works even in places where there is no cell service, and you don’t have to open an app or have GPS turned on. We think this will be a game-changer.
Hardware is the New Software
PayPal Beacon brings me to my second prediction. And while I’m not the first one to say that hardware is the new software — this catchphrase has risen to the level of tech-meme over past year or so — I think it’s a trend that’s going to have a huge impact on the retail environment starting in 2014. Underlying this trend is what’s happened in recent years as the entire hardware supply chain has become so efficient and standardized that it’s now possible to create small, powerful, and highly customized hardware devices at very low costs. Businesses are discovering that these devices are a great way to engage their customers and we’re seeing the beginning of an outpouring of innovation driven by this hardware-centric approach to the marketplace.
PayPal embodies this trend. A few years ago, I don’t think anyone would have predicted that a payment services company like PayPal would have a hardware group. But we do, and right now, in addition to PayPal Beacon, we’ve developed two credit card readers for our PayPal Here mobile payment service for merchants, one for swiping cards and one for reading the chip and pin cards that are common in Europe. It’s safe to say that we’ll do much more in this area.
The Death of the Password
Quick quiz: What are the five most common passwords? Answer: 123456, password, 12345678, qwerty, and abc123.
One benefit, if you could call it that, of the recent spate of security breaches, is that it’s given security researchers a good look at the passwords that computer users choose. This has confirmed what we long assumed to be true: that we need a more reliable way to protect online safety and security than the current system of passwords and usernames.
The key here is an approach that is convenient and easy enough to use that it improves security without adding complexity and confusion. The good news is that the answer may be at hand. In 2014, we’ll see the emergence of authentication technologies that will begin to replace the password. This process has already started with fingerprint authentication capabilities included on a number of new mobile devices. I believe that biometric technology will become much more common way for users to authenticate themselves over the course of the coming year. In addition, I expect that we’ll see an outpouring of new ideas and new approaches to identity security that are aimed specifically at eliminating passwords as the primary way that people prove who they are in the online world.
Open Source for the Cloud
Finally, the rapid maturity of open source software that targets cloud infrastructures and the problem of developing applications in a multi-device world in 2014 will mark an important shift for developers.
On the cloud end of things, there is an enormous level of energy and investment around OpenStack, a cloud computing project that aims to create a ubiquitous open source cloud computing platform for public and private clouds. I expect that it will becoming the Linux of cloud computing. At PayPal, for example, we are already running 20 percent of our infrastructure on OpenStack. That’s a number that will only increase.
Meanwhile, one of the most difficult and costly issues that developers face today is how to make an application work on the daunting range of form factors that their customers use: mobile devices of many sizes and shapes running iOS or Android or even Windows. What’s desperately needed is a development environment that will enable an app to render experiences easily across all devices and operating systems.
An open source framework to help with this problem is emerging in the form of something called Node.js, which offers an approach for building scalable network applications in this new multi-screen world. At PayPal, we are aggressively embracing Node.js to help build products for today’s multi-channel consumer. I believe it will become an increasingly robust and enterprise-grade technology during the coming year. In the process, it will help unleash a lot of innovation.
If you have thoughts about these predictions, or about other technology trends that will have a big impact on payments and commerce in 2014, I’d love to hear them.
James Barrese is Chief Technology Officer at PayPal.
