Following the Money in Mobile – Mobile Payments and the Future

16 Aug

It's All About the Benjamins, Isn't It?

To my eye, mobile has been a great information deliverer and connection tool.  The nut that is trying to be cracked by many is making it more of a ubiquitous part of our life.  Mobile payments is one of the last pieces of that pie.  If you are looking at the next generation of services and products for mobile, you need to address a payment mechanism.  This can make the customer engagement stickier for you.  More importantly, it may help you keep that customer.

Let’s look at what mobile payments means, or at least one way to define it better.  Defined broadly mobile payments includes any money transfer made by or through a mobile device.  Expanding this to include tablets, there is quite a lot of activity out there.  The thing is that we are bolting existing systems on top of mobile.  Even some of the more interesting schemes out there, like using minutes as a currency, are just overlaying.  Maybe overlaying will be enough, but maybe we are waiting for something new, as well.

No Existing Working System Gets Replaced Easily

Let’s look quickly at another arena of payments – checks.  One of the coolest things we have seen in recent memory is the adoption of mobile check deposit.  First, we had it on our desktops at home and now we have it on our mobiles.  At any rate, this innovation may not have happened were it not for the terrorist attacks of 9/11.  The disruption to the central check clearing system (air travel being shut down) was the lever to get us to move to a more consumer-friendly system.

Let’s go even further back.  Before the formation of the Central Reserve, checks were cleared between banks by mutual agreement.  In 1907 America it was a very hard thing to write a check on a New York Bank’s account and use it with a Los Angeles bank.  Money moved very slowly.  In late 1907 there was a huge panic as the private clearinghouses started to not accept checks from certain banks and trusts.  In response to this, the Federal Reserve system was setup to provide a truly centralized system of check clearing so that commerce could occur without such friction and disruption.  Everyone saw it coming before the panic, but it needed a huge disruption to move us.

So what is the lever that is going to get us to a new system, or is all of this just re-arranging the chairs at the existing table?  Let’s table that question and look at some of the current mechanisms of mobile payments.

Near-Field Communications (NFC)

NFC was supposed to be the holy grail for payments.  NFC is much larger than just payments, though.     If you want more information on other uses of NFC, go to the wikipedia page.  We are just talking about payments here.  NFC payment adoption rate has slowed, and while I think it still stands a chance of being accepted more, it looks like it is stalling according to some reports.  If you have ever seen easy SpeedPass, or PayPass at a gas station pump, you have seen NFC payments.  It is a short range two-way radio conversation that enables a payment using existing credit card or debit card systems.

QR Codes 

Quick Response (QR) codes are also being looked at to enable mobile payments.  At its simplest, a QR code is a two dimensional bar code.  It can contain any bit of information you want to encode on it.  I have one on the back of my business cards with my contact information.  With payments, it contains the instructions to remit payment, and maintains security of your account details as it is all contained within the payment app on your phone.

Paying with Minutes

In places where there is a large unbanked or underbanked community, people have come to rely on airtime minutes as a currency.  In some countries, the carriers are even more trusted than the banks.  This may be bizarre to some, but it is useful to look at.  The Economist article also points out why this trend is catching there, stating that, “regulators there have made it difficult for banks to offer the newer form of mobile money.”

Mobile Payment Receipt

On the merchant side, Square leads the space for point of sale and mobile payments.  With the introduction of their Square reader they made it easy for low volume merchants to accept credit cards.  This is really cool from a consumer perspective, because I can get a receipt electronically as well.

Where is the Lever, What Will Change?

There is a lever coming.  A lever that will disrupt our current systems and possibly point us in a different direction.  I thought for a while that Bitcoin might have been that change.  It operated outside the current system.  Fears of illicit activity facilitated by this anonymous monetary system have lead to subpoenas and shutdowns.  The incumbents are fighting this change.  They are winning, it seems.

What about Mobile Wallets and Passbook, You Say?

We are all waiting for the mobile wallet as the mobile payment solution.  The problem is that I don’t think this is the final solution.  Mobile Wallets, even Apple’s Passbook, are relying on existing mechanisms, existing monetary systems and existing payment systems.  So, they are just overlays.  The fundamental underlying structure isn’t changing.

The other thing to look at from the mobile side, is implementing someone else’s payment mechanisms, such as Braintree.  This is a great way to bootstrap payment into your service.

I think Facebook Credits and Amazon Coins are interesting mechanisms to look at, as well.  They overlay national currencies, possibly.  Maybe this is where we need to be heading.  An extra-national currency system that is enabled through technological means such as mobile.

All this Rambling, and Nothing

Sorry.  This had ended up being a survey of the space for you.  I am going to leave it up to you to figure out how to go forward.  If you are in the mobile space, payments will be important to you.  You need to make the customer experience sticky, keep them coming back to your app, your service.  Payments can do that.  Easy payments even more.

If you are providing counsel in this space, you need to be aware of what can be done, what the trends are and what the future may hold.  Be prepared, the world may be changing.  Or not.




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