[Dave Birch] I happened to be looking through some old notes about mobile payments recently looking for some information about one or two ancient, sales, mobile payment systems. I came across an article called “Why banks and telecoms must merge to surge” from the Booz Allen Hamilton strategy+business magazine that I’d filed away back in 2001. It was a very good article, which is presumably why I’d snipped it and scribbled all over it, looking at the imperatives around telecommunications operators and financial services companies and concluding that some form of merger would be a good way forwward. The article pointed out that while banks have a strong hold over payment systems, mobile network operators would be challengers.

Today, banks are at another competitive crossroads. This time the new contenders in financial services are telephone companies, specifically wireless telecoms.

[From Why Banks and Telecoms Must Merge to Surge]

So while the pressures to form alliances, mergers and joint ventures of all kinds was strong, the article noted that the cultural and psychological barriers around cooperation between these two industries would need to be overcome. Which I don’t think they have been. I suppose that it’s in the nature of these things that I’ve underlined and highlighted the points that I agreed with at the time and one of them that stands out is the suggestion that of all of the stakeholders it would be card companies rather than banks who would have the most to fear from a combined mobile financial services sector. The assumption of course was that banks would continue to provide the line of credit but to new, third-party transaction services rather than to conventional card schemes. This could still happen. The article finishes up by saying that it would be logical for “mega players” such as Vodafone and Citi to combine. This hasn’t happened and I can’t help but observe that Vodafone’s most successful mobile payment service, in fact, probably the world’s most successful mobile payment service, M-PESA, doesn’t involve banks at all except as a secure repositories of funds. All of my experience over the last few years has served to reinforce my opinion from those ancient times that it’s much harder for banks and operators to work together than either of them might think. So perhaps this part of the 2001 vision for 2010 may never become reality.

I also thought it was interesting that the article correctly forecast that regulators would push for more competition in the payments arena, which has certainly happened in Europe through the adoption of the Payment Services Directive (PSD), and that this would open the door for mobile operators. In the first wave of e-money regulation, though, the mobile operators fought hard to be excluded from the provisions of the ELMI directive. With the wisdom of hindsight, I think this may well have been a mistake. Post-PSD, when the new ELMI directive comes out, I think that there is a real opportunity for the operators to combine PSD and ELMI licences to offer their own payment schemes without the involvement of banks at all.

Coming up to date, I saw a survey on mobile payments in the 9th July issue of Mobile. It says that three quarters of UK mobile phone users do not want to use their mobile phone to make payments over £10 and half of them are not interested in making mobile phone payments all. But I wonder how many of them have any idea whether, or how, anyone might make a payment with a mobile phone? I’m suspicious about these kinds of surveys, since they are asking customers to project forward on the basis of the technology they already have, so customer responses may not be the best guide. Certainly, plenty of other people think that mobile payments are looking pretty good right now.

According to Generator Research, an independent market research firm, the worldwide mobile payments market is expected to grow from $68 billion in 2009 to more than $600 billion by 2014, a compound annual growth rate of more than 50 percent over the next five years.

[From AT&T Enters Mobile Payment Acceptance Market]

If I were asked to point to one key reason why mobile payments will grow to the levels noted here in the face of customer (apparent) indifference noted above, I would that it is this.

The key development in payments technology is the ability of mobiles to receive payments, according to Dave Birch, director of Consult Hyperion.

[From BBC News – Mobiles signal future of money?]

Mobile aren’t going to just replace cheques and cards, they are going to replace cash. And that makes all the difference.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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