By Optism Team, Oct 26, 2012
We are at the cusp of a worldwide explosion of innovation in mobile payments and commerce. What is unclear right now is how we will use our phones to purchase goods and services next year or five years from now. Our continued hope is the conversation revolves around consumer convenience, utility and value. Unfortunately, in the U.S. and elsewhere, most of the conversation has been about having the wrong technology, transaction fees, finger-pointing and trying to anoint the mobile payment victor before the mobile payment game has even really started.
How did we get here and how do we go from here?
U.S. Mobile Payment Davids and Goliaths
The mobile payment stakes for America are obviously high. The mobile payment market will grow into a multi-billion dollar business and more importantly, having user attention with their mobile payment app prominently located on the first screen of a consumer's mobile phone. The mobile payment market is currently dominated by Square, Google Wallet, PayPal, LevelUp, ISIS and Starbucks with other emerging players like Apple with their Passbook mobile organizer, and Groupon. Some of these companies are huge while LevelUp is a handful of people in a startup division of mobile gaming company SCVNGR.
U.S. Mobile Buddying Up and Consolidation
ISIS, a joint venture of AT&T, Verizon and T-Mobile plus financial service companies Amex, Chase and Capital One, launched this week in Austin and Salt Lake City. Google Wallet has 140,000 locations but is not available on phones from the ISIS carriers. Sprint, the other large US mobile carrier is in talks with Softbank and has aligned itself with PayPal which has 3,000 outlets nationwide. Square which has 75,000 locations nationwide has hooked up with Starbucks and their 6,000 coffee outlets. LevelUp, which hasn't aligned itself with anyone yet, is growing in popularity with 6,000 locations due to the fact that it is not charging retailers any transaction fees plus it accepts both NFC and QR Codes for transactions. In response to LevelUp, Square began offering a flat, monthly fee for credit card transactions, versus the steeper 2.75% it had previously charged.
Mobile Payment Wars
The barrage of opinions from all the mobile payment players both in the US and abroad are being shot at a fairly rapid pace.
- Sean Harper, director of product management for payments at Groupon said “Right now, what merchants like the best is the credit card payment. So that's what we're sticking with.”
- A digital wallet leader may emerge later, but “in the short term, there will be a whole bunch of apps,” said PayPal Australia head of mobile business Paul Buchanan. “There isn't one right now that does it all.” Buchanan said he does not view requiring users to flick between multiple digital wallets as an inconvenience.
- “The goal of the digital wallet is to mirror a real wallet,” said Visa Australian country manager Vipin Kalra. “It can hold credit, debit and store loyalty cards and any other payment methods. Kalra disagreed with Buchanan: “At the end of the day, consumers won't want to carry too many wallets.” The winner will be the wallet that is “accepted by all major merchants,” he said. “Open and ubiquitous acceptance are the two key words that will eventually win the battle.”
- Seth Priebatsch of LevelUp realized there was an opportunity in helping merchants devise and run promotional campaigns that show exactly how many people engage with a particular ad, how many are then driven to visit the store and make a purchase, and how many of those return for another visit. “Suddenly the 3% you can save on interchange [transaction fees] is nothing compared to the revenue you can produce by effectively allocating $650 million of ad spend,” he says. “We want to optimize that part of the pie. That’s where we make money, and that's where we want you to make money.”
- According to Dekkers Davidson, head of mobile commerce business at Barclaycard, which offers online credit cards and credit guidance, successful mobile wallet adoption in the U.S. looks like one out four people using such a service in the next five to eight years. Now is the time for experimentation, not red tape or winner-take-all competition. “I liken it to Lewis and Clarke, where we're a 100 miles out of Missouri and looking back over the ridge and saying, 'Ok, where are we going?'” he said. “We're just getting started here.”
- Mike Love, executive vice president and chief technology officer at Mozido, a cloud payment network, said an attitude of “wallet wars” currently prevails. “Whereas the market is already looking for a mobile wallet victor, the time is ripe now to simply educate consumers on the value of mobile payment systems, not bludgeon the competition.”
- Dodd Roberts, an executive at Merchant Customer Exchange, a confederation of retailers. “To quote [Henry] Ford, 'If I asked consumers what they wanted, they would say a faster horse,'” Roberts said. “The average consumer doesn't know that their experience engaging in the commerce world could be so much better than it is right now. We are enhancing the experience, not necessarily solving a problem.”
For a snapshot of what mobile exploration and discovery should look like, listen to The Future of Mobile, a great panel discussion from the World Summit of Innovation and Entrepreneurship hosted by Scott Kirsner of the Boston Globe with Michael Phillips, founder of Vlingo (acquired this year by Nuance); Seth Priebatsch, founder of SCVNGR and LevelUp; Walt Doyle, former CEO of Where and now general manager of PayPal Boston; and Doron Reuveni, founder of uTest. The conversation was very collaborative and the panelists polled members of the audience about what they would like to see as part of the evolution of mobile. The topics covered included upcoming improvements in mobile software, mobile transaction via facial recognition, mobile recognition, personalization, augmenting personal interactions, how does the phone connect to my life and how does the phone react to me?
What is our mobile future? Is it a system that relies on legacy payment technology and point of purchase equipment that represents an incremental improvement in convenience? Or is it a system focused on providing consumer value that makes its money on big data that might or might not respect consumer privacy? Will the evolution of mobile payments delight us or depress us? Will the voices of reason win or will the battle be over dollars? Time will tell.
We can only hope we can continue to try to change the mobile payment and mobile wallet conversation.