It turned out to be a fun day. In the morning I went along to the breakfast, sponsored by Weve, with David Sear (the new CEO of Weve), Olaf Swantee (the CEO of EE), Ronan Dunne (the CEO of Telefonica O2) and Guy Laurence (the CEO of Vodafone UK). Over the muesli and herbal tea I listened to a very enjoyable (and educational) conversation about how the CEOs saw the company evolving and what its propositions would be. They spent a lot of the time talking about advertising and location-based SMS targeting and such like. They did mention payments a couple of times, but as David pointed out the whole payments thing seems a bit complicated so they’re not focusing on it for the time being. The one comment that did make my ears prick up was when someone from the floor added the elephant to the room by asking how the UK MNO joint venture would deal with competition from the OTTs (ie, Facebook, Google etc). Guy made a very interesting and strategic point: he said that the key thing that Weve had that the OTTs didn’t was authenticated identities with billing relationships.
When it came to the debate I decided on a two-pronged attack, so I stood up and (using the montage of a New York coffee shop above as my backdrop) argued that NFC has no future because
- It doesn’t work. I rather ungenerously used the example of Transport for London’s landmark implementation of contactless technology. You can ride a London bus using an NFC phone. Or at least you would be able to if you could go to any of the mobile operators that are part of Weve and buy an NFC-capable handset with an active Visa, MasterCard or Amex payment application on it that will work on a London bus. Which, at the time of writing this piece, you can’t. Despite the fact that the first (very successful) pilot of phone use for Visa payment and Oyster transit was six years ago. So why no progress? Because it is so complicated and so expensive to implement that no-one is bothering.
- Even if it did work, it’s irrelevant. This is because the mobile revolution in retail isn’t about getting rid of cards, it’s about getting rid of POS. Look at the montage. That corner coffee shop in New York accepts more methods of payment than you can shake a stick at (and almost all of them have nothing to do with cards). They have an iPad and when they press the “pay” button I couldn’t even tell you how many choices come up. The picture shows me using PayPal, but I could have paid with LevelUp. Either way, I paid using my phone without a proximity interface. So, I argued, even if you lot (ie, the mobile operators) ever do get your act together and put out a working mobile wallet with an NFC interface, it will never be used.
I thought that my terrific one-two would lay Tony out flat, but he ducked and weaved with some fancy footwork around the fact that NFC is simply more convenient than pfaffing about with apps, and in the end that’s what counts. I thought he might go below the belt and say that I was focusing on payments and that advertising people can have fun with NFC without sorting out the secure element (SE) issues that none of us went into in front of the mad men (and women). I suspect he may well be wrong about this, since I’ve written before about the need for security even in simple tagging applications, but he had a good point. NFC has come to mean “EMV over an NFC interface via SWP access to an SE” in industry parlance whereas it is simultaneously much more, and much less, than that.
Tony and I didn’t get in to this in detail in the debate, but Weve’s shift away from payments makes a lot of sense. If the industry focuses on payments only, there are problems. Look at the numbers. In 2008, Frost & Sullivan said that NFC would be “widely popular” by 2015. Juniper in 2011 put the global NFC mobile payments market at $50 billion by 2014. A115 said mobile payments in Europe could reach €250 billion by 2014. In 2010, Frost & Sullivan quantified and said that they expected the total payment value for NFC globally to reach €111 billion in 2015, with €42 billion of that in the EU. They are now projecting that almost half of all mobile payments in Europe will be NFC by 2015 (while TSM revenues would reach €330m) and that by 2018, more than a third of the phones in Europe will ship with NFC. Last year, Gartner estimated the global mobile payment market at $670 billion in 2016, with the market 80-90% non-NFC (that’s still €100 billion+ NFC). Now
Forrester forecasts that US mobile payments will reach $90B in 2017, a 48% compound annual growth rate (CAGR) from the $12.8B spent in 2012.[From US Mobile Payments To Reach $90B By 2017 – Forbes]
They also forecast that nearly half of this will be mobile proximity ($41 billion). So is that a market to start chasing? Tough question. In the UK, there is only one NFC proximity payments handset on sale (the Orange/Barclaycard QuickTap) and virtually no transactions. In the US, where ISIS is getting off the ground, the market is nascent. The volume is taking a lot longer to arrive than was originally thought. Yet, as observer after observer is saying, there is little point in chasing it if the fees are the goals. The value of payment data is far greater than payment fees, which are in any case trending asymptotically to zero. This is, of course, where people like Weve can make a new business. Payments (NFC or otherwise) are a necessary but not a sufficient component of a successful wallet infrastructure. Can Weve deliver that component? I go back to David Evans’ characteristically accurate summary of the situation, which is surely correct.
The source of my skepticism is—I think that the likely role of the carriers in payments is basically being a pipe. It’s not clear that they really have any relevant skills needed for running mobile payments, and I think that it’s more likely that they’re going to turn out to be a very important source of pipes for other people developing mobile payments alternatives.[From The Future of Mobile Payments]
What the carriers should be doing is coming together to provide common wallet infrastructure, not the wallet itself. (And one of the most important elements of that infrastructure, per Guy’s comment at breakfast, is token-based identity management and two-factor authentication.) Hence my response to the last question in the debate session. I don’t see me walking into to Waitrose and paying with a “Weve wallet” in five year’s time, but I can see me paying with my “Waitrose app powered by Weve”, which is why I am enthusiastic about it.
These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers
Does Weve add any value to payments in general? To mobile payments compared to embedded SE? Are they truly instrumental and irreplaceable to ANY payment process? I guess the answer is obvious…
Eurogroup Chairman Jeroen Dijsselbloem caused uproar in financial markets by saying in an interview with Reuters and the Financial Times that the Cyprus solution gave a flavour of how Europe would handle future bank crises, by making banks solve their own problems rather than using European taxpayers’ money. Reuters 26/03/2013
Negative Interest Rates, QE is it working? Is money velocity increasing?
Imagine in the words of a Rolf Harris:
“Can you see what is yet?”
Then in the voice of David Attenborough:
“Here if we look closely anywhere in the Western World and look at the habitat of the small shop keeper. In the UK we can observe this nervous creature – the independent business paying all taxes at full whack with the full cream burden of employers PAYE contribution. The wilder-beast of the High Street savannah being savaged at every increase in Uniform Business Rates to International Cheetah – ACME Corporation, it pays almost no corporation tax with it’s HQ domiciled in the Cayman Islands mopping up every retail opportunity.
Ah but hold on, I can see some Cheetahs struggling, the savannah of the High Street’s habitat of grass land has become so mismanaged and overgrown that the rarest of species the “shopper” is struggling to actually get to the water lagoons. Their travel money to get there is being taken by 7% inflation, rising unemployment, poor pay from the said Cheetah employer and soaring energy costs back at their caves caused through a lack of investment in the National Grid since the mid 1950’s.
Oh dear, the future doesn’t look good for the shopper’s disposable income, even if they do get to the High Street Water Hole of the Cash Machine. They find themselves increasingly confused about the future, their off-spring are in increasingly deficit of an education not fit for purpose and many who thought they could raise extra revenue by renting out a nest box, find that their fledglings just refusing to saddle themselves with “debt” just to work for the ACME Corporation for 6 peanuts an hour. The older shoppers with off-spring still with them struggle even to help their young ones with third party car insurance to help them discover the High Street. So in these times of draught the youngsters are just glad of a monthly phone contract as hand-out.
So called experts in the field of economics predict just a handful of ACME Corporation operating out of town to maximize off-shore profits with kick backs in the form of reduced business rates for bringing employment to the area. But ACME Corporation pack is growing for strength to strength with the lock-in of the staff discount. Observers have commented that this relationship is very similar to early industrialisation for the business development of the pub to “lock” in profit to the balance sheet.
The economic equivalent of soil scientists are however getting very worried about the ability of the High Street to even sustain “Small Businesses” and with the success of PayPal handling the DWP Identity Contract, many observers in the payment management field – see PayPal as a natural contender for the Universal Stamp for Credit Worldwide USCREWD. It started off a pilot scheme to replace Food Stamps in the US, however this same behaviour was seen in the UK with a welfare payments card. However many can see the benefits of the USCREWD system where more the productive beasts can be crated up and exported to another farm depending on their economic output inabilities and they should be happy as they will get to keep their benefits – not matter where they are put out to graze.