News & Views - Savantor

Making mobile payments work

Friday, 15 July 2011

Whatever our various views about mobile payments, one thing is very clear: there is a significant flurry of activity and investment in innovation going on out there!

So much so that only this week at the MobileBeat conference in San Francisco, Google’s Vice President, Stephanie Tilenius, likened the current spate of activity and innovation in mobile payments to the similar burst of activity we experienced with e-commerce towards the end of the 1990’s. This previous occasion resulted in the likes of Amazon, eBay and others becoming a part of our everyday lives. Also this week, KPMG announced the results of a survey they conducted which said that 73% of banking and financial services executives say mobile payments will become mainstream over the next 4 years. If I am not mistaken that figure must have risen sharply since a couple of years ago when, if I remember correctly, the main questions on executives’ minds were “will I have a job?” and if so, “will my bank be nationalised”?

Having got a strong, well funded ‘head-of-steam’ and successful proof-of-concept going for all these new ideas, the second point must be about making them work, not only in a business sense, but also a practical sense for all parties on a global, if not a regional/sector scale. In the words of Jim Greenwell, CEO of the direct carrier billing company, BilltoMobile, it took his company 11 years of hard work to establish a working model in Asia (now processing $2 billion per year transaction value). Even then the major US carriers still needed convincing, rightfully so, that they had what he described as a ‘financial grade system’ before they were prepared to sign up to their services.

Carrier billing is just one form of mobile payments, others include: m-wallet (e.g. M-Pesa in Africa), online specialists (such as PayPal), NFC and M-banking services that can also facilitate payment. The initial motivation for these various kinds of mobile payments typically comes from the markets they serve first and which have greatest value for the user. Examples include low-value digital goods (e.g. games), the unbanked (e.g. in Africa) or PayPal (e-commerce). Could or should these new models be extended to the physical world where cash and cards dominate? Should we focus on the likes of NFC that has the potential and convenience to improve on today’s living experience by integrating the new capabilities and benefits of today’s smart phones? How consistent does the consumer experience need to be across different payment methods to make it acceptable?  What price is each party prepared to pay?  Merchants will have a view also about their back-office handling, funds guarantee, cash-flow, chargebacks, etc. as well as comparative price across the various payment methods.

These are just some of the questions and challenges we will face as we go forward in the mobile payments world.  The principles usually remain the same but the practical methods of dealing with them will inevitably have to match the context and technology.  What is certain is that as long as the benefits are sufficiently attractive, these challenges will undoubtedly be overcome just as we witnessed with e-commerce.  Despite the many commercial, social, technical and legal complexities involved, one thing we can agree upon is that it has become a massive commercial success in just a short, few years.

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