The NYTimes had an article yesterday about how investors are pouring (and have poured) tens of millions of dollars into payments on mobile phones since that is the next payments frontier. It talks about turning phones into “virtual credit cards” that enable “click and buy” commerce. Then it proceeds to describe the complexity of getting carriers, merchants and payment companies on board and several start ups that are focused on things like using your mobile phone number as a substitute for a credit card.
The article is right, getting two massively complex ecosystems – payments and mobile - to play nicely together is an undertaking that has resulted in the situation we have today – not much to report, at least here in the US. Sure, there has been talk for the last 5 years about the promise of NFC payments, but that has gone nowhere given the lack of a merchant business case for it. And, given the current economic state, it is likely to continue as wishful thinking for some time to come.
Then there are the P2P solutions, which for the life of me, I can’t figure out. I get the fact that it is technically feasible since it relies on a text-based process which is handset and carrier independent, but the use case, well, I don’t see it. Maybe the every now and again mom who wants to pay the babysitter, or dad wants to send money to junior at camp (whoops, most camps don’t allow cell phones, so scratch that), but that doesn’t strike me as the mobile payments nirvana. Ditto the notion that carriers will become lenders, allowing us to buy stuff and charge it to our phone bill. Any chance of that happening now in this current regulatory environment is slim to none – for a whole bunch of reasons. Of course, no discussion of mobile payments is complete without talking about the 2D bar code, another gee-whiz solution that lacks a merchant business model now.
So, where does that leave us besides lots of investment dollars without a ROI?
Well, there are, in fact, real viable solutions that drive commerce via the mobile right under our noses.
The iPhone and smart phones with better browsers enable commerce via the mobile by making it increasingly easy to shop online with the phone, in much the same way as we do now on the PC. And solutions like that which Intuit recently launched that turn the phone into a POS system – opening up commerce via the mobile for many smaller businesses.
A real interesting play to watch is the opportunity to enable commerce without either the carriers or the payment providers having to say yes. Enter text-based commerce. The majority of mobile phones can text, and adding short codes to ads and in store signage and even loyalty card integration is all possible now, with minimal technical integration, minimal upfront investment and minimal time hurdles. I know it isn’t as “sexy” as tapping with the mobile, but it works. And, interestingly, it is one of the only solutions that does not really require either the carrier or the payment company to “get on board.” Merchants can append short codes to their products, and market to consumers – consumers can choose how to pay, and like the iTunes model, whatever card is downloaded on that first purchase is likely to remain the default payment device for future purchases.
In the spirit of transparency, one of our ventures, ShopText, offers this solution today, and where it has been implemented, it has surprised even its own merchant customers. A national retailer was able to hawk $299 trenchcoats and $199 handbags and $40 sunglasses (and 8 other pages of items) by appending short codes to those items and hook their inventory systems to the solution in real time to determine availability. 90% of the customers who bought, bought again. These merchants also get to offer customers membership into their mobile club, append loyalty program offers to them that work at the physical point of sale, and capture important data about the other behaviors of those customers. Is text-based commerce THE solution for the mobile phone? Who knows. But it is an important bridge to the future of mobile and available to a large number of people who don’t have smart phones but use their phones (and text a lot). It may not be perceived as “cutting edge” but you don’t have to invest or lose a fortune to get results.
Perhaps the bigger question for all of the investors out there is how long it will take for mobile commerce to account for an acceptable percentage of retail sales. Today, roughly 10 years after the birth of eCommerce, online shopping is projected to account for roughly 7% of retail sales in 2009. It’s growing, but the majority of sales still happen in stores. Will commerce via mobile accelerate the growth of online sales numbers given the blurry lines between shopping online via a PC and the mobile browser? Or, do we think that the mobile will cannibalize the plastic card and become an acceptance device at physical stores? To date, investors have been betting on the latter, with marginal results.
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Filed Under: Mobile, Payments, New Business Models, Technology, consumers, Economics, Web 2.0, Internet