Birch lambasted traditional banks and payments providers for their failure to grasp the nature of the opportunities presented by mobile technologies, which has led them to miss the boat. “I’m almost embarrassed to stand before you and say that I thought that banks and mobile operators could work together,” he told the conference. “It was a stupid fantasy for which I apologise.”[From Identity is the next big thing for payments | Banking Technology magazine]
This isn’t a new rant, but a considered opinion. In fact, I wrote about this last year, round about the time I made some similar remarks at an event at the GSMA, reflecting the fact that I think that mobile operators should have been quicker in to the NFC space and with more open models, and that I think banks should have been quicker to develop and implement mobile approaches other than “windows on to the web” or “cut down ATM” solutions.
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 [Booz Allen Hamilton] 2001 vision for 2010 may never become reality[From Digital Money: Let’s put the future behind us]
The reference to Booz Allen Hamilton, a management consultancy, is because the post was discussing a magazine article by them from a decade ago: ”Why banks and telecoms must merge to surge” from the Booz Allen Hamilton strategy+business magazine that I’d filed away back in 2001. I took some comfort from it, because it meant that I wasn’t the only one who had expected banks and operators to get together, but I was commenting on the cultural factors that meant that it had proved very difficult for them to co-operate effectively.
This has meant that it has taken longer for the infrastructure to develop than he’d predicted, but more importantly, banks are still missing out: only recently, banks in the US had told him that there is no business case for subsidising the installation of contactless readers in retail premises, just as Google was announcing that it will.[From Identity is the next big thing for payments | Banking Technology magazine]
It is absolutely true that I (as well as number of other consultants) were at an event with US banks earlier in the year where this opinion was expressed. But there was nothing special about it: the banks had said exactly the same thing in public to retailers.
Representatives of three of the country’s largest banks, Bank of America, Citigroup and U.S. Bank, attended a meeting last month organized by the Merchant Advisory Group… to talk about the new opportunities that mobile technologies, such as NFC, will create for the payments industry. “You know what they (banks) told us? There’s just not a business case right now,” Dodd Roberts, head of the merchant group, said last week[From Digital Money: Inception]
But back to the 2001 article, which agreed with me about one particular strategic element. That is, that while banks had 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]
The Booz Allen Hamilton 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.
So why did my comments about banks and operators working together sound so harsh? It’s because we (Consult Hyperion) have been involved in a number of projects, going all the way back to the Orange/NatWest joint venture, and so have seen at first hand what works and what doesn’t in these relationships. And, yes, things are improving: but it may well be the case that having let a couple of years evolution slip away, the idea of the bank/operator partnership as the central organising principle for mobile payments is over. European operators have started to apply for their own Payment Institution licences, while I expect banks to focus more on developing value-adding services for the retailers and consumers and less on the “bare” retail payments (where the downward pressure on transactional fee income will continue).
Incidentally, I wonder if both the banks and the mobile operators held back because they’d been listening to their customers? If you had done a survey of consumers asking them if they wanted an iPod, the day before hte iPod had been invented, you would never have launched it.
in an interview with the Daily Telegraph in February 2005. The founder of Amstrad said: “Next Christmas the iPod will be dead, finished, gone, kaput.”[From Bill Gates and Sir Alan Sugar made some of worse technology predictions of all time – Telegraph]
Predictions are difficult, as the saying goes, especially ones about the future. Of course, you do have to understand what it is that you are predicting, and in many cases people don’t really understand the proper context. This is why I read surveys like these with a raised eyebrow.
Just One-in-Five Brits Currently Interested in Paying by Mobile Phone[From Just One-in-Five Brits Currently Interested in Paying by Mobile Phone]
Now this might be interesting news if I cared what the public think about anything (I don’t), but I wonder if it’s the sort of thing that causes mass market players to slow down? It caught my eye because it tallies with the revealed consumer preferences of Japanese consumers, where mobile proximity payments are mainstream. Indeed, only around one in five or six people in Japan use their proximity handsets for payments. But then only one in five or six people here pay for things using credit cards (debit cards dominate in Europe) and that’s still a business. The headline intends to be negative, but what it says to me is that the potential for mobile payments is such that ten million people could be using them in the UK in the not-too-distant future, if banks and operators (or someone else?) can come up with the right proposition.
These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers