In particular, I’d been looking at the New York taxi case study. Remember how the story of cashlessness went there? The taxi drivers fought tooth and nail to avoid installing POS terminals and eventually they were forced to by the city.
The drivers were initially recalcitrant, and even went on strike. But the City persisted. Now every taxi has a meter and drivers have relented on letting customers pay this way. In my experience relatively few drivers in New York insist that the machine is broken or look like they will break my legs if I whip out plastic. They don’t even seem that grumpy.[From The Effect of Card Acceptance on Sales: The Case of Taxicabs in New York – pymnts.com]
A couple of years ago, when the programme to migrate taxis to e-payments was getting underway, there was already a measurable impact.
The majority of fares are still in cash, with about 13 percent of taxicab revenue now from credit card transactions. Nearly 80 percent of the yellow cabs, or 10,238 of 13,148 cabs, have had credit card machines installed. The rest will get the systems by the fall, Mr. Daus said.[From Card Readers in Cabs, and the Battle Behind the Scenes – New York Times]
You would expect the share of revenue down to cards to be much higher than the share of transactions, of course, because people would tend to use cards for the higher value fares in the first instance before developing the expectation that all taxis take cards and not bothering to get cash from an ATM before flagging one down. Now that the migration has been complete for a while, we can reflect on the long term impact of the change.
…accepting plastic seems to have increased taxi receipts by about 13 percent in a down economy. According to one taxi trade group representative, “Credit cards helped the New York industry stay stable in a time when the rest of the for-hire industry was in significant decline.” People are taking short trips and paying with plastic; before they might have walked or taken the subway.[From The Effect of Card Acceptance on Sales: The Case of Taxicabs in New York – pymnts.com]
Unfortunately, my UK contactless card didn’t work in the New York taxi I was in last week, so I wasn’t able to assess how convenient contactless taxi payments are. Anyway, always eager to obtain trends from the coal face, so to speak, I asked my Singaporean taxi driver what his experiences were. He told me that he pays a flat fee of 20 cents for an EZ-Link payment and that he finds it very convenient because it is so fast. When I asked him who used EZ-Link, he told me that it had only been in his taxi for a month, but that generally speaking it was students and young people. Older people used cash (as, indeed, I proved later on). The contactless reader in the taxi also accepted Visa/MC, but the driver said that there is a 10% surcharge for using credit cards and not many people used them. I wanted to try either my EZ-Link card or one of my UK contactless cards in the reader to see if it worked but I realised I’d left my wallet and my phone back at the hotel, thus immediately subverting a standard mobile conference cliche in an instant.
Incidentally, the driver (who may have been a plant by the Monetary Authority of Singapore) also said — unprompted — that he supported the idea of moving to cashless economy and thought that coins were a waste of time. He then went on to prove this when it came to bill which came to $5.40, so I gave him $10 and coins and he gave me $5 and coins back, waving away my attempt to leave him with the transaction shrapnel.
I was in Singapore for the Mobile Financial Services 2010 conference. I went because I thought that obtaining an up-to-date perspective on what’s going on in mobile payments in Asia would be useful for some of our customers around the world, but I found it useful for international perspectives as well. A few of the presentations that I found interesting and a few of the key points raised:
Rob Jonker, Deutsche Bank AG, spoke about their partnership with Luup and their strategy of targeting financial institutions and corporate customers with mobile financial services to increase their Global Transaction Bank’s competitive advantage (he said that just as the bank had grown by offering a SEPA platform, so they expected to grow by offering a mobile platform).
Joanne Avenda from G-Exchange (the wholly-owned subsidiary of Global Telecom that runs the G-Cash business) said that the top three challenges that they had to overcome were building an ecosystem, developing consumer awareness (for example, since the Philippines has a high crime rate and mobile phones get stolen, getting them comfortable with security) and compliance. She also said that in the case of money, consumers aren’t always motivated by lower prices, because trust and confidence are still important factors. She also announced that their PayPal interface is live as of 24th May, so you can now use PayPal to send money to any G-Cash user.
Taheo Tohara, the President and CEO of Jibun Bank (Japan’s newest retail bank) delivered a fascinating case study of an all-mobile bank. They have a million customers already and no branches, but they started in an environment where customers who used their mobile phones for everything from watching TV to getting on the subway didn’t like using their handsets for banking (for a variety of reasons: small screen, concerns about security, limited functionality). I liked the way that mobile phone numbers from the KKDI database are connected to the account numbers from BTMU so that Jibun customers can send money to each other using their mobile phone address books (this accounts for overwhelming majority of transfers).
Kelly Kay, from our friends at Flawless Money, who was chairing the first day of the conference, gave a very nice presentation surveying the regulatory situation around the world and some of the drivers for mobile payments and put it very well saying that “mobile phones are a window into payment products”.
Teppo Paavola from Nokia Mobile Financial Services gave an overview of the Nokia/Obopay implementation and said that the toughest problem in mobile payments is the merchant ecosystem. He touched on the Nokia Money launch in India — noting that there are more new mobile subscribers in India every month than there are credit card holders in the entire country (12m) — explaining that customers signing up have to fill out two forms, one for the bank and one for Nokia! He accurately pointed out that the barriers to growth in mobile payments are all “physical world” barriers such as KYC.
Rajesh Yohannan from Citi began by bemoaning a lack of product innovation in retail financial services, but very positively said that mobile will stimulate innovation again. One of his most interesting points, I thought, was that the Citi mobile banking payback comes from customer satisfaction and reduced churn, not from reduced costs. I think many of our customers have discovered that the mobile banking channel does not move enough traffic away from call centre, but that’s because it’s still in early days and the applications aren’t functional enough. The last time I phoned my bank’s call centre it was to order a new cheque book (I know, I know, but it was sadly unavoidable)
Enrique Beza from Etisalat gave super case study of their m-wallet developed for UAE, where it is illegal to pay foreign workers in cash, so there is a great opportunity for mobile alternatives to expensive bank accounts (or, I would add, low-functionality pre-paid cards). There’s certainly fertile ground: in a population of 4m there are 8m mobile subscribers, $10 billion “visible” remittances and $10 billion “invisible” remittances (I think he means hawala here). He was kind enough to share elements of the business model with us, and identified the most sensitive parameter in remittance product profit and loss calculation as the f/x rate from their banking partner.
We heard from a manufacturer next, Martin Stommer from Motorola spoke about alternatives to NFC and introduced Motorola iSIM, which is a thin-film NXP Smart MX supporting MiFare, with a self-adhesive strip to go on top of your existing SIM card in your existing handset to add additional functionality. There is an STK menu to access m-payment applications for remote and proximity — cool! — but there is a problem which is that their is no proximity antenna. Martin mentioned a couple of potential solutions, one of which is to add the antenna to phone back plate. It sounded good, but not sure if it is enough of an alternative to stop the operators and banks from waiting for built-in NFC or other solutions.
Mahzan Mahfadz shared more practical experience. He said that Celcom has 10,000 different device types on its network, which makes it difficult to find universal solutions! But interestingly he said that mobile payments part of “national agenda to improve competitiveness of economy” according to head of central bank of Malaysia.
There was a different angle from Naresh Vyas of Standard Chartered. I liked their angle on the use of mobile to support corporate customers “anytime, anywhere” transaction authorisation rather than low-value retail payments. He mentioned in passing that Standard Chartered is biggest corporate purchaser of iPhones, and is switching bankers from Blackberry! I asked him if SIM-based solution (to get rid of the 2FA tokens that are need for both internet and mobile banking in the Standard Chartered system) would be better, and he said “maybe”. I wonder if the banks just don’t want to talk to operators any more? A couple of the presentations left me thinking that banks want a tamper-resistant storage area outside the SIM in the iPhone/Blackberry. Will the next iPhone have microSD?
Probably the most useful presentation for me came from Union Mobile Pay, China’s biggest mobile payments provider. It was good to hear their opinions first hand and to have the opportunity to ask a few questions.
Mobile payments adoption has intensified in China with an inherent transaction value expected to reach EUR 1.16 billion in 2010,accounting for a 308 percent increase,[From The Paypers. Insights in payments.]
I won’t repeat all of the points that I fed out on my twitter feed, except to note that their target for having five million active “local” mobile payment users (ie, mobile at POS, as distinct from mobile remote) puts European efforts — such as 3,000 users in Nice — into some perspective. If I interpreted the presentation correctly, and I’m entirely prepared to accept that I may have not understood some of the inferences thoroughly, it seemed to me that the preferred solution in China is have the secure element (SE) under bank control, as a sticker or SD card, separate from the telco domain of concern. Given the sheer size of this market, I wonder if this might nudge the trajectory of the Japanese and European telco-centric strategies?
I also thoroughly enjoyed the roundtable discussion on regulation chaired by Forum friend Liisa Kannianen of the Mobey Forum.
Just a quick observation overall: I can’t tell you how many of the presentations said that co-operation between banks and telecommunications operators was the key to success, yet I couldn’t help but notice that almost all of the successful case studies that were referred to (M-PESA, DoCoMo, G-Cash, Bling) did not involve any such co-operation. Perhaps if we had spent less time over the last five years in working groups trying to establish this co-operation and instead had got on and built the services that customers demonstrably want then we would all be better off.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]