Blah, Blah Mobile…Blah, Blah Mobile
Published by Karen Webster on April 28th, 2008
Filed Under:
Mobile, Payments, Technology, consumers, two-sided market
How many of you are growing weary of the same old proclamations from analysts on mobile payments? Citing “the need to work together so that everyone can win” Javelin remains bullish on NFC technology and cites contactless as the enabler for e-wallets that contain everything from cards to photos to medical records.
A recent Gartner report suggests that use of mobile payments will increase by more than 300% over the next 18 – 24 months as NFC and WAP applications grow in popularity. That report suggests that the take up of mobile payments will increase more rapidly in areas where mobile is the only access to financial accounts and that NFC will be driven toward adoption in North America by convenience and the cool factor. Is there really anything new there?
Mobile payments is one of the industry’s hottest hot buttons and everyone and anyone with a mobile phone has rendered an opinion. But everyone, it seems, has their rose colored designer glasses on when they file their reports. We believe that mobile IS where the world of payments will end up, but there are few voices out there talking about how difficult it really is to make mobile payments happen. What sells research reports, I guess, is the promise of what might be.
But, as we have seen from the analyst’s contactless forecasts over the past few years, saying what might be is a heck of a lot easier than evaluating what it will take to get there and therefore, where we may likely end up.
Instead of another report talking about the miracle of mobile, I think it would be great to dive into why there are only 400,000 contactless terminals worldwide - a tiny sliver of all merchants - and why that differs from past experiences, both when merchants installed electronic terminals more than two decades ago and one decade ago when pinpads were installed at the point of sale. (Hint, merchants got big incentives which no one seems to want to give them for contactless.)
It would also be interesting to really understand why a new technology like Pay By Touch failed in spite of having their kiosk implementations subsidized. (Hint, customers did not see the value in signing up at a kiosk when presenting a card at checkout was easy and convenient.)
Wouldn’t you also like to better understand what the bone of contention is between all of the players in the mobile ecosystem so that you felt that you really understood why “we all can’t just get along?” (Hint, the elephant in the room is who “owns the customer,” which is the root of the business model discussions. If you don’t believe me, you should have been at CardForum’s Mobile Reality check breakout session).
I could go on, but you get the gist. Sure, data on growth is interesting and useful background, but what gets adopted in payments (and most everywhere else) is a function of something much more complex. Getting merchants and customers to adopt something new when, by and large, their experience today at the physical point of sale is pretty darn good, takes a whole lot more than just saying it is so or having technology that can enable neat new things. Our most optimistic colleagues say that mobile payments is 5 years away, our more conservative ones project 10 years. They might be proved wrong, but it will be because something big happens (like MasterCard buys Sprint) that they did not anticipate, not wishful thinking.
Nils Bohr, a Nobel laureate in Physics, was once quoted as saying, “Prediction is difficult, especially if it is about the future.” The industry analysts might want to take his words to heart.
Amen. The way pundits talk about mobile payments is so silly. I haven’t seen a single use case where mobile payments make good sense. In fact, I’m not even sure what “mobile payments” even means.
“what gets adopted in payments (and most everywhere else) is a function of something much more complex”
I’m not so sure. What gets adopted is what is compelling and adds value.
Good to read something else than the usual “rose glasses euphoria”…
I hope many decision makers at mobile operator and manufacturers, banks and all other newly appeared players will read this, come back to reality and understand that the way is still very long until NFC based payments will be widely used and accepted for the benefit of all.
For now most prefer to believe that “we just have to solve a couple of tiny technical things and we will get the goose that lays the golden eggs”. Nobody wants to invest -or so few!-, everybody wants to extract its pennies from each transaction for a supposedly “service”…
As Karen argued very opportunely, this reminds us the WAP story and we all know how widely WAP is used today…
While your points are valid for people going to a store to buy - some other considerations:
1. How much do you buy online? As recent data shows of those on the Internet, more now have mobile phones than credit cards. (And don’t look outside the US or it is more.)
2. Lets replace the “contact -less” (hat means a bunch of new devices and interfaces and training for the consumer) with your cell phone”, for the sake of discussion. Which would you use?
3. You lost your card “versus” you lost your phone. Which has the most potential cost to all involved for unauthorized use?
4. How many retail locations have problems with PCI because the actual transactions are transmitted over a link that is not encoded, i.e. WiFi? How did Target loose all that data? Would the cellular network be a little harder to crack into?
5. How much less would it cost the retailer to cut out Visa and MasterCard? (Again, don’t look now, into China, India, Africa, etc.)
I think the key statement is:
“It would also be interesting to really understand why a new technology like Pay By Touch failed in spite of having their kiosk implementations subsidized. (Hint, customers did not see the value in signing up at a kiosk when presenting a card at checkout was easy and convenient.)”
Merchant subsidy as a business model is understandable. . .However, if there is not convenience, consumers simply will not adopt. Ultimately, the merchant is truly motivated to adopt new payment workflows when either the consumer demands acceptance or the incentive is so great that there is value (as is becoming popular in new receipting and loyalty plans).
I don’t think I understand a single word of BobMac’s screed.
I totally agree on your argumentation when you talk about contactless and NFC payment, especialy in the US or in Europe. All predictions are fantasy into my eyes, key drivers will be the added value persuived by the end users, which has to be recognized by them.
In the other hand, mobile payment does concern also other services such as ticketing, M2M, P2P money transfers, virtual parking, … where contactless doesn’t bring anything, because simply not necessary. All these services are more and more widely used, for example in Europe where new actors like Crandy can show already 400 000 users in counter.
If you take the virtual parking (ex: Ghent in Belgium), where you can remotely pay, extend your parking, being informed before the end of time, or simply stop and being reimbursed, that are real services with added value created with the mobile usage.
Mobile payment is wide with a fast growth, and can’t be only assimilated to NFC.
I think you are making too many assumptions, and if we’re going to assume:
What if mobile payments worked with any model mobile?
What if the cost of transactions was significantly lower for merchants, they required no new infrastructure, and fraud was virtually eliminated?
What if it was safer and more private for consumers?
What if the risk of loss through loss of the phone was zero?
What if the same process was used to pay in-store, on-line and while watching TV or listening to the radio?
What if it worked equally well for micro and large transactions?
What if all this was true?
I’d be the first to agree that NFC and other half baked mobile transaction systems were of limited potential, but there are other approaches.
There’s a lot more to it than transactions at the counter or on the internet. A whole lot more. The internet is a fraction of the real world in terms of usage and commerce and it seems people have forgotten the power of TV and radio in generating transactions. Most observers appear to look through blinkers.
I think you’re all going to be pleasantly surprised.
With so much pontification already available - I’ll be brief. It’s all about technology, convenience, and a new generation of adopters.
This is not about the current debate on value and revenue between the carriers and the bankers. It’s also not about the debate between proximity on cards versus proximity in phones (hint: that decision has already been made - in case you didn’t get the email).
This is about evolution in payments and the continuing automation of those tasks. It’s not if - but when - and the when will be determined as always by those that see the value and build the solution. The skunkworks and small emerging companies are there. It’s just about when the big players will decide to play. (hint: Qualcomm seems to have made that decision already with Firethorn)
Let’s talk again in early 2009 and see where we are!
As a C level exec who just moved out of a mobile payment company I have to agree with the author. You do have early adopters like Japan and South Korea, but the market dynamics in these countries were very favorable for mobile contactless payments to happen. It will be a few years before that happens in most western countries.
I do think emerging economies like India and China (and maybe Africa) could be the potential surprise packages - if you think of mobile payments broadly (i.e., not just contactless but also the SMS/application usage models). But again the combination of banks and telcos as protagonists is the worst possible mix to make this happen. So I am not betting my money on this (literally..!!)
Absolutely agree. I did a blog post just recently on when an mPayment makes sense, and I think for many of the use cases being suggested (especially in analyst reports) it doesn’t.
If the mPayment actually reduces customer pain (acknowledging the pain of doing anything on a phone these days), then an mPayment can work. If there are existing systems which already work well, the mPayment will fail - just because you can do something doesn’t mean you will…
More here if you’re interested: http://blog.masabi.com/2008/04/judging-when-mpayment-makes-sense.html