[Dave Birch] I was flattered to be asked by the TMForum to chair their keynote debate on “Driving Profitable Partnerships Between Communications and Financial Services” at Management World Americas 2011 in Orlando, Florida. I had the good fortune to have been given a terrific panel. James Anderson (Group Head, Mobile and Emerging Payments at MasterCard), Stewart Holmes (Head of Strategy, Mobile at Barclaycard USA) and Doug Kilgour (Mobile Commerce Executive at ISIS) were superb. They were kind enough to go “bare”. That is, they didn’t know what questions I was going to ask them and none of their answers were rehearsed. Get a cup of tea, put your feet up and watch the panel here.

There were quite a few issues discussed in the debate, particularly around the reconfiguring of the value network centred on retail point-of-sale (POS). Doug called the payments part “table stakes” and he is surely right about this. A mobile wallet that didn’t do payments would be useless – no-one would ever both downloading it or using it – but the payments are the enabler not the revenue source themselves.

There are business models there, and some people will find them, but the panel were, I think, pretty clear that these models will be centred on wallets rather than payments: it’s the combination of the payment and everything else around it (loyalty, coupons, that sort of thing) that makes the business case in the US.

Banks and their partners could be wasting money developing mobile wallets and other ways for Americans to pay at the checkout counter with their smartphones, according to a survey published this month by Lightspeed Research.

[From Mobile Payments Very Unimportant to Consumers – American Banker Article]

Oh dear. That sounds like very bad news for Google, Visa, ISIS and everyone else launching mobile wallets. But we’ve seen it before.

The ability to make mobile payments is “very unimportant” to about half of credit card customers with smartphones, Lightspeed found. Only about 15% of the customers surveyed said it was somewhat or very important to them to be able to pay with their smartphones.

[From Mobile Payments Very Unimportant to Consumers – American Banker Article]

You have to wonder about this sort of thing. Are these real insights? Almost no-one in the US has ever used their mobile phone to pay for something in a shop. Perhaps it’s pointless asking consumers about this is sort of thing, since none of them have “tap and go” phones and virtually none of them have used a mobile at point-of-sale. Yet they all have their mobiles in their hands while shopping.

NFC (near field communication) will become a standard feature on smartphones over the next few years as consumers respond to the convenience of the “mobile wallet” for making payments

[From Consumer Demand Driving NFC-Enabled Mobile Wallet Solutions – pymnts.com]

I think the convenience is the key factor here. NFC makes the whole POS transaction (loyalty, coupons and payments in one tap) easier, so that’s why it will gain ground. That is not to say, incidentally, that convenience is only about the technology. It’s also about the transaction model.

Dan Schulman, American Express Co.‘s group president for enterprise growth, told attendees in a keynote speech that payments in the next few years must move from a bank-centric model to a customer-centric, mobile paradigm.

[From Roles Will Be Redefined for Bank and Retailers in the Coming Payments Landscape – American Banker Magazine Article]

Dan is surely correct. But who will provide this customer-centric mobile paradigm for payments?

Chu, formerly of PayPal, noted that banks are not the most innovative of organizations. He warned that the evolving m-commerce landscape “must not relegate us to becoming a dumb pipe.”

[From Citi Exec: Banks Must Not Get Left Behind in Coming Era of M-Commerce | NFC Times New – Near Field Communication and all contactless technology.]

Absolutely, because that, after all, is the role of the telco in the new m-payment environment!

He said mobile operators have a role to play, too, though he added that the business model “complexities” haven’t yet been sorted out.

[From Citi Exec: Banks Must Not Get Left Behind in Coming Era of M-Commerce | NFC Times New – Near Field Communication and all contactless technology.]

Indeed they do. I spent nearly seven hours discussing these complexities in meetings on a single day recently. And, as was also discussed by the MWA panel, even once the principles of partnership have been agreed, it takes time for banks and mobile operators to learn to work together, given their different cultures. But if they can agree, and work together, then this “customer-centric” model should deliver some real value. Not, as previously noted, because of payments.

So if they’re not saving money why would consumers be compelled to jump onboard with mobile payments? One could argue that convenience is a factor, but at the end of the day, pulling out a wallet and swiping a card may not be seen as an overly laborious task by most consumers.

[From Are Consumers Ready For Mobile Payments? Maybe Not.]

Indeed. So if mobile wallets compete with that experience, they’ll lose. They have to provide more than an expensive simulation of a magnetic stripe. They have to provide a package of benefits for consumers and retailers. I’m pretty sure, based on our experiences in a variety of pilots and early launches, that customers will want that package. Retailers certainly want do.

For the first time ever, British retailers’ priority for IT investment is e-commerce and mobile commerce, according to the latest annual IT in Retail research of the UK’s leading 100 retailers by Martec International, sponsored by BT Expedite.

[From UK Retailers Increase Investment in Mobile Commerce]

Within this trend toward integrating the real and the virtual, the local and the remote, we can see PayPal moving to in-store payments, we can see retailers putting together packages involving payments, we can see the wallet providers working hard to put together the right combination.

Retailers like near field communication payments. For one thing, security is better than for regular transactions using cards because account information is encrypted directly in the chip rather than as part of the communication between the store and the credit card issuer. Plus, businesses can tie its use to loyalty programs to gain more and easier access to customers’ buying habits. Retailers will be able to target frequent customers when they walk into a store, thanks to tracking technologies in the chips and smart phones.

[From The cashless lifestyle catches on – chicagotribune.com]

This is why the surveys that claim “customers not interested in mobile payments” are not a reliable guide to the evolution of the market.

Eric Schmidt, Google’s executive chairman, believes that a third of check-out terminals in retail stores and restaurants will be upgraded to allow wireless “tap and pay” from mobile phones within the next year.

[From Google’s Schmidt predicts widespread “tap and pay” within a year | FT Tech Hub | FTtechhub – Industry analysis – FT.com]

If you think that Eric is whistling in the wind, have a look at markets where the combination of the mobile, the wallet and the proximity interface is already mass market. Japan, for example, where (as I have mentioned before) the McDonald’s mobile strategy provides a valuable case study.

According to McDonald’s investor relations (in Japanese) there are over 16 million registered users on their mobile site – that’s more than 12 percent of the Japanese population – the company’s mobile site generates more than 100 million mobile page views per month, and in less than 2 years, the number of Kasazu Coupons now exceeds 4.5 million.

[From The insider’s guide to mobile Web marketing in Japan | mobiThinking]

So if you want to see what kind of products Google might bring to market around the technology, there’s no need to speculate. Have a look at what they’ve been doing in Japan, where there are already 70m mobile contactless handsets in use.

We’ve developed NFC base stations that people can use to quickly and easily share their opinions about various locations in Tokyo. When users tap the base station with their NFC-enabled phone they can immediately leave a rating or review for the place where the station is located. They can also star the place for later or share it with friends. Plus, we’ll recommend other places they might love.

[From Connecting Business Owners and Customers in Tokyo – Google Places Blog]

There’s another point that I’ve been discussing with various stakeholder recently. We tend to think about things like coupons and loyalty for our mobile wallets because they already exist and we know what they are. But surely it will be only a matter of time before some entrepreneurs come up with new services that can’t exist on paper or cardboard but deliver great functionality into a connected, mobile-centric retail experience. The mobile wallet with both remote and proximity interfaces isn’t about revolutionising payments, it’s about revolutionising retailing.

These are personal opinions and should not be misunderstood as representing the opinions of 
Consult Hyperion or any of its clients or suppliers


  1. It is about revolutionising retailing, to an extent. But the revolution will come from community currencies that are issued for volunteering or other contributory action that benefits community life. Being able to reduce the face value of your products, without having to resort to a sale, will only be possible for businesses able and willing to use community currencies like these. The ability to disguise a drop in price by accepting part payment in a community currency will enable the retailer to amplify the work it does for local communities, without damaging its brand value. On the contrary, a community currency would enhance the brand value of those big businesses that accept it.

    But will EPOS systems adapt? Will retailers adapt?

    Your post focuses only on money. The emergence of virtual community currencies may well challenge the status quo of the biggest businesses in the world. Don’t be surprised if a social business that rewards giving – not taking – nudges some of the big guys out of the way. In a networked world where knowledge is power and people are pissed off, anything can happen.

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