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Competitive collaboration behind new mobile banking model in Peru

28 Jan

Peru is preparing for the launch of a nearly nationwide mobile banking system that aims to expand financial access to millions of the country’s unbanked citizens. The mobile money platform will allow users to transfer funds to friends, pay their bills and top up their phones with even the most basic of first generation cellular devices.

But mobile money isn’t a particularly new phenomenon anymore, as mobile money has become a popular service in developing countries. But what makes this different is that the real innovation is in the process behind the platform and the collaboration among the actors that are putting it together.

Billetera movil

BIM — an abbreviation for “mobile wallet” in Spanish — is a project that has brought together three of Peru’s main telecommunication companies and 32 of the country’s largest banks. Whereas mobile money platforms in most other developing countries are typically offered by one bank partnering with one cell phone company, Peru’s will bring together the main entities from both industries.

“What makes Peru different is that pretty much all of the major financial institutions and telecom companies have come together to use one shared technology,” Jeffrey Bower, a digital finance specialist with the United Nations who is helping to launch BIM, told Devex.

Rather than competing against each other to acquire customers — essentially dividing up the pie and walling off customers into individual mobile payment systems — the banks are collaborating to bring as many people as possible into the same system.

“It is one platform that works across all phone companies and all the banks that is built and designed for financial inclusion,” Bower said.

That type of collaboration is beneficial, but does it undermine competition between traditional head-to-head competitors? The banks, according to Bower, see plenty of market opportunities to go around. In a country of 30 million people, roughly 70 percent of the population doesn’t have access to financial services. They include young and old people as well as rural and farming communities.

For the banks, the market opportunity is not only the mobile payment platform but the various market segments that make up the unbanked. And once a customer is in the system, the bank can compete on its other suite of financial services. Banks are essentially sharing a customer, rather than controlling the customer.

If you can’t beat them, join them

BIM itself originates from a disruption to Peru’s traditional competitive banking model. In 2011 telecom giant Telefonica partnered with MasterCard to launch a mobile payment system called Wanda. That same year, Claro, another telecom provider, partnered with Citi to offer a similar platform. Both programs forced banks to compete with telecom providers on what was their traditional territory.

The banks, realizing that it would be difficult for them to reach scale acting individually, formed an initiative through the Peruvian Banker Association to develop a common approach to digital money. They eventually settled on an “open loop” platform designed by Swedish tech firm Ericsson, that brought together many entities under the auspices of financial inclusion.

The platform, BIM, has been fully functioning for the past three months, even though its official launch is scheduled for Feb. 16. An organization controlled by the Peruvian Banking Association owns 51 percent of the platform, with the rest of the ownership divided among individual banks.  The three main telecomm providers that will carry BIM account for about 97 percent of mobile phone users in Peru.

The Peruvian model

The collaboration between different financial and telecom entities is what the U.N. and BIM’s partners refer to as “Modelo Peru” — the “Peruvian model” of sharing assets and development costs in order to build a common financial infrastructure.

“To grab bits and pieces of the market doesn’t make sense,” said Bower. “To collaborate and take advantage of existing infrastructure in order to enable future competition is something unique that hasn’t really been seen elsewhere.”

Tight collaboration among industry competitors can raise potential red flags of antitrust issues and unfair play. Companies are taking the standard precautionary measures to avoid that. But the system’s “open loop” feature means that any bank is free to run their own platform, should they decide, and connect it to the BIM network.

The use of existing infrastructure — both financial and technical — accounts for the differences between BIM and other mobile payment systems in developing countries. Kenya’s widely popular M-Pesa system is the product of one telecom company, Safaricom. As a result, Bower said, the telecom company effectively controls Kenya’s digital financial infrastructure of payment networks, branches and access points.

In Peru’s case, there is a vast existing network of about 30,000 bank branches that will now be repurposed and included in the mobile network. The presence of an already robust financial and telecom infrastructure is itself partly due to Peru’s status on the development ladder. The country’s economy has expanded rapidly in the past decade and it is officially classified as an upper middle income country by the World Bank.

There is still much to be done for BIM to reach scale. The challenge is to grow the network from 30,000 bank branches to whatever is necessary. BIM’s goal is to promote financial inclusion and it will be overseen by Peru’s former minister of social development who heads the principal organization that manages BIM. In a country of Peru’s geography, that will require extending branches either high up in Andes mountain valleys or deep in the Amazon.

And with the shift from cash to electronic payments comes the challenge of building acceptance among users and getting them to trust the system. Often when a large organization switches to electronic payments people immediately rush to withdraw funds when they are notified of a payment, which drains local branches of their cash, Bower said.

It is a growing pain that Peru’s government can expect when paying out various subsidies using the system, but it can be overcome with some education and coaching about personal finance management.

Mobile money, through the support of multistakeholder initiatives such as the U.N.’s Better than Cash Alliance, is becoming a preferred norm in developing countries for all of its benefits — security of transaction, safety over cash and proliferation of cellular technologies. Peru’s model of private sector collaboration to foster financial inclusion, if successful, may be a transformative testing ground for the future of digital banking.


Easier Ways to Make Payments With Smartphones

4 Aug

AT this point, smartphones are practically permanent attachments to our hands. But that quickly changes the moment you need to pay for something at a store and you take out a credit card.

The idea of using your phone as your wallet — for storing payment methods and even swiping, scanning or tapping it to pay at the checkout register — is a long-promised future that has been surprisingly slow in coming. Multiple technologies exist for mobile payments, but there is no clear winner and a lot of chaos.

“Mobile payments, it’s been the next big thing for three or four rounds of next big thing,” said James Wester, the director of global payments research at IDC Financial Insights. “I would say we’re probably still three to maybe five years away from seeing mobile payments really common, with most of us using it.”

But recently, several new products and services have been released that could make mobile payments more convenient and worth trying. Before you dive in, though, it’s best to have a map of this complicated landscape.


Credit Andy Chen/The New York Times

Amazon introduced an experimental app this month that lets people store gift cards and loyalty cards from a variety of retailers and check some balances on Android phones and Amazon devices. You can display the gift cards as a bar code or QR code (that odd checkered square on many products now) so that it can be scanned at a register.

So far, you can’t store credit or debit card information on the app. But Amazon already has a payment platform that lets you pay individuals or check out at some online stores, so the app could be a short hop away from being a full-fledged mobile payment service.

PayPal, the online payment giant, has also released new payment options, with an updated app for iOS, Android and Windows Phone that lets you store loyalty cards (like those used at grocery stores or pharmacies) in addition to your regular PayPal sources.

Some new partnerships PayPal has reached with some stores, restaurants and services, including Uber and Jamba Juice, also provide interesting payment twists.

People using the new app can order ahead from a participating restaurant and pay with their phones. Or if you are dining out, you can pay your bill on your phone instead of waiting for the check (and waiting for a server to retrieve your credit card, swipe it and bring it back). Many of those stores and restaurants also offer coupons or discounts as an added enticement.

At Home Depot, a partnership with PayPal lets you check out by choosing PayPal instead of credit or debit at the store’s payment terminals. Then, instead of entering a debit PIN, you enter your phone number and a PIN you previously set up on the PayPal app. No wallet or phone required.

And then there are the persistent rumors that Apple will introduce a mobile payments service tied to iTunes accounts, perhaps based on the existing Passbook app. Apple recently added a feature called iTunes Pass that lets users load money into their accounts (although this must be done in person at an Apple store) to make purchases. The company also allows users to load and organize gift cards through Passbook; like Amazon, it could potentially tie Passbook to credit cards stored in iTunes to allow purchases elsewhere, too.

But so far, the company that has had the most success at creating popular, usable mobile payments is Starbucks. The Starbucks mobile app lets you pay for items with your smartphone at the company’s coffeehouses and also accumulate rewards like free food or drinks.

Howard D. Schultz, Starbucks’ chief executive, told investors in July that mobile payments made up about 15 percent of its sales transactions in the United States and even hinted that the company would try to share its payment system with other retailers.

If all these efforts by so many companies still sound like a messy playing field, you are right, and those examples are just scratching the surface. Part of the reason so many different apps and mobile wallets exist is that the previous attempts at mobile payments — based on tap-to-pay or contactless payments — took so long to get moving.

But now, there’s interesting movement in those technologies, too. The trouble is, many standards have not yet been worked out.

Contactless payments work using a technology called N.F.C., which stands for near-field communication. It’s kind of like short-range radio. When you pay for something at one of these contactless terminals, you tap or wave your phone in front of it, enter a PIN, and you’re done.

Your phone must have an N.F.C. chip in it for this to work. Most new Android phones and some Nokia Lumia Windows Phones have N.F.C., but iPhones do not.

Contactless payments have had a checkered history. At the moment, the two major mobile payment systems that use N.F.C. are Google Wallet and the Isis mobile wallet app, which was a joint creation of AT&T, Verizon and T-Mobile. (Isis mobile wallet is in the process of changing its name to avoid confusion with the violent militant group wreaking havoc in Iraq and Syria.)

In the past, N.F.C. payments required actual hardware: a so-called secure element within a SIM card, the card that identifies you as a carrier subscriber when you insert it into your phone. When you install the Isis mobile app, you can order the enhanced card free or pick it up from your carrier. Newer phones will have this type of card by default, Isis said. But most existing phones do not.

Worrying about a new card is a hassle. Worse, the card also puts the carriers in charge of the mobile payments world, and the companies have tried to keep out competitors. The carriers often blocked Google Wallet from being downloaded onto devices on their networks, though that practice has mostly stopped. (I was able to download the app on a Samsung Galaxy S5 and LG G3.) An Isis spokesman wouldn’t say whether blocking of the app might continue.

But other companies aren’t going to sit on their hands and accept Isis. Already, new technology built into the latest version of Android, technology that already existed in BlackBerry phones, makes the extra security unnecessary. The technology, called host card emulation, or H.C.E., lets apps like Google Wallet retrieve stored credit card information from the cloud.

Visa and MasterCard have approved use of their cards with H.C.E. — basically, the Google Wallet app has permission to act just like a credit card. And potentially, many apps will soon be able to let you make contactless payments, not just Isis or Google Wallet.

One other note, of course, is that contactless payments cannot happen without payment terminals in stores that can read the signals. Not every merchant has those terminals or wants to upgrade.

But those upgrades look like they will be coming. Most American credit card companies are migrating from cards that use a magnetic stripe to those that use a microchip to store information. Those microchips work with contactless payment terminals, so the credit card migration could also help out N.F.C.-based mobile payment methods.

It is unclear exactly how the iPhone will fit into this, because it can’t make contactless payments using N.F.C. Now, if you want to use Isis mobile wallet with your iPhone, you’ll have to buy a special case that includes the N.F.C. antenna. There are few options, and they cost about $70. And it’s unclear whether they will work with an N.F.C. payment app like Google Wallet.

See? There is still a lot yet to be solved before mobile payments are as popular as credit cards.

But the new options popping up are exciting, and once you get the hang of them, they can actually make paying a little easier. I, for one, am hooked on my Starbucks app. But it’s easy to forget that many people still are not comfortable shopping online and are far from storing credit card numbers on a phone app and paying that way.


8 Online Payment Options That Aren’t PayPal

1 Aug

When most people think of online payments, one name comes to mind: PayPal.00 - PayPalBut for all PayPal’s strengths, it’s a bad idea to rely on it as the single system to accept payments on your site. Monopolies are never healthy, and you need to diversify your payment channels.

Why You Need PayPal Alternatives

There are plenty of reasons why you should support multiple payment options, but here are several of the most important ones:

  • Your partners or customers can’t always make or accept PayPal payments. This is the major reason to offer payment alternatives. There are always people who can’t (or won’t) pay or receive money via PayPal. In this case, if you are not open to alternatives, you simply lose these customers or partners. On the other hand, you need to make some estimates if the gain is worth the extra effort. It might turn out that offering more options doesn’t increase your income but does increase your costs and hassle.
  • Your PayPal account could be blocked. We have all heard horror stories about PayPal blocking accounts for various reasons, or for no reason at all (so the victims claim). Even if these stories are not 100% true, it would still be a nightmare if it happened to you. You shouldn’t put all your payment eggs in one basket–the risk is too high.
  • You need a safer way to receive payments, especially for larger sums. PayPal is very convenient for small amounts but if you regularly send or receive thousands of dollars, then you are better of with other forms of payments, such as checks or wire transfer.
  • You want to reduce costs. PayPal fees are certainly not the lowest in the industry, so you might end up paying hundreds or even thousands of dollars a month in commissions. There are lower cost alternatives but unfortunately they have other limitations. In fact, if reducing costs is your main reason to look for PayPal alternatives, your options are limited.

If any of these reasons apply to you, then you should definitely consider using other online payment systems to supplement or even replace PayPal.

Best PayPal Alternatives

There is no single PayPal alternative that is best in all cases–the right option depends on your needs.

Since PayPal is global, a real alternative needs to be global, too. The best services that can be used for international transfers are: Skrill, Google Wallet, Payoneer and Payza.

In addition to these, there are dozens of local and regional ones payment processors. These services could be good for you, though if you have international clients or partners they’re not much use.

1. Skrill

01 - Skrill

Skrill, formerly known as Moneybookers, is one of the few true alternatives to PayPal. Though it is global in nature, it’s targeted mainly at U.K. and the other European countries because the merchant fees for these regions are more favorable than for the rest of the world.

Skrill is one of the more popular PayPal alternatives, so if you want to send money to somebody, he or she might have already heard about Skrill, or even have an account. Skrill is also widely accepted by many top websites and service providers, including Skype, eBay and oDesk.

Skrill is easy to use and it allows to transfer your account balance onto a prepaid debit card almost right away.

The fees for personal transfers are very low, though they very from country to country. With a 1% sending fee (capped at a maximum of €10) and no receiving fees, it’s one of the best offers on the market.

With merchants, the fees are much higher, though still acceptable. You can check the fees here. Currently their rates range from 1.4% + £0.20 for U.K. merchants with more than €50,000 monthly sales volume, to 3.9% + €0.35 for non European merchants with monthly sales volume of up to €2,500.

2. Google Wallet

02 - Google Wallet

Google Wallet, formerly known as Google Checkout, is another good online payment system with global reach. It might not have all the features of PayPal but for personal and business payments it does a good job.

Google Wallet’s fees are reasonable–it’s free to send money directly from your bank account or from your Google Wallet balance. If you want to send money via credit card, then the fee is 2.9%. Unlike PayPal, it’s also free to you receive money or transfer it to your bank account.

There are some per transaction and other limits ($10,000 USD per single transaction and no more than $50,000 USD per 5 day period) but they are something to worry about only if you have a huge turnover (in which case you will most likely be using wire transfer anyway). One of the limits I personally find peculiar is the $500 limit per 30 days for uploading money to your Wallet Balance with a credit or debit card, but this is hardly a deal breaker.

3. Payoneer

03 - Payoneer

Payoneer is very similar to the other international services on this list. Probably what makes it truly different is that with it you can get a virtual U.S. bank account. This is of great importance to everybody who is not in the US but who needs to get money in a U.S. bank. (If this might pose legal issues in your country, check with a local lawyer.)

As for fees, Payoneer is not cheap. First, it has an annual fee of $29.95. Second, withdrawal from an ATM costs about $3. Third, there are transaction fees (they differ based on volume and location).

Despite its high fees, Payoneer has managed to become popular. Many sites now accept it, and some of the best affiliate marketing networks have embraced it as well.

4. Payza

04 - Payza

Payza (formerly known as AlertPay) is very similar to the preceeding payment options. It is available in more than 190 countries. It offers generally low fees (though this varies on your location and the type of the transaction) and some of the services are even free. It seems to be the least popular of the PayPal alternatives but still many sites accept it.

Bonus: Local Payment Systems

The availability of local payment services is astonishing, especially for the U.S. Some of the best options include: Stripe, Paymate, Amazon Payments, and Dwolla.

Of all the non-global payment alternatives Stripe is the most promising. Currently they cover the U.S., Canada, U.K., and Ireland but they are also available in beta in another 10 or so countries. At 2.9% + $0.30 per transaction, their fees are similar to PayPal’s. Stripe also has great customization capabilities that might be of interest to developers.

Paymate is a good option for sellers in New Zealand and Australia, though cards from 60-plus countries are also accepted. They have relatively high monthly fees and transaction fees. However, one of the advantages of Paymate is that you can use it to collect payments on

Amazon Payments is a good option if you are looking for a credit and debit card processing and an eCommerce platform. It’s an option for U.S. sellers only and it’s fairly pricey for low sales volumes. You can use Amazon Payments on, of course, and some other sites also accept it as a form of payment.

If you are looking for a PayPal alternative mainly for personal payments and you are in the U.S., then Dwolla is probably your best option. With a cost of just $0.25 per transaction and no fees for transactions under $10, it beats all the other systems in terms of fees.

In addition to these systems, there are dozens of payment processors that target particular countries, so do your homework if you only need to sell in-country.

There’s No Perfect PayPal Replacement

While there are plenty of online payment systems, none can really replace PayPal completely.

Your best bet is using alternatives to reduce your reliance on PayPal while still offering PayPal as an option.

If you try to eliminate it completely, chances are good that most of your clients or partners won’t follow you.



Eight technologies making waves in 2014

9 Jan

During 2014, eight major areas of technology will make waves, increasing their capacity to change how business operates, creates value and responds to customers. Governments too will need to learn to play by new rules. The list is by no means exhaustive, and we would gladly hear your suggestions. Their impacts will play out over many years, but we see 2014 as a time for critical growth.

What is changing?

  1. Variable cloud forecast- The cloud will continue to evolve and transform and enable mobile and tablet-based services. Companies will need to incorporate enhanced digital experiences and services into their customer offers and internal processes. Cities will be able to create responsive, intelligence-based strategies and reduce IT costs.
  2. The Internet of Things (IoT) gets personal- Connectivity and embedded intelligence are beginning to hit critical mass as ever more equipment, from watches to cars, is connected. As a result, our surroundings will begin to ‘look after us’, our homes and cars will do more and more for us, services such as healthcare will migrate to the home, the sharing economy will challenge more sectors.
  3. M-Payment, a logical next step- As consumers reach ever more for their smartphones to research options and make purchases, so their use of their smartphone to pay is increasing. Retailers, restaurants, and services need to be ready, or miss out on these hyper-connected consumers.
  4. Wearable technologies grabbing the headlines- Momentum is building and capabilities are rising as wearable technologies begin to get into their stride, and bring a host of new interfaces with gesture, voice, BCI (Brain Computer Interface) and haptics all playing a role. Health and medical applications are growing, along with others. Watch out for our forthcoming report on Wearable technologies.
  5. 3D printing delivers on new fronts- Several patents end this year and 3D printer prices are falling to under $500, which may liberate a wave of experimentation. Bio-printing may see a major breakthrough with the first liver being 3D printed. NASA is preparing to take 3D printing into space. But, criminals will also explore its potential for counterfeiting and weaponry.
  6. Big data going extreme- A direct knock on effect of the growth of the IoT will be ever more data streams coming on line; big data will become even bigger. Competition to provide devices, tools and techniques which can simplify and make sense of it will increase. New approaches to medical research may reveal significant new insights. Consumers may become more aware of the value of their data.
  7. Gaming playing hard and fast- Gaming is leading the charge on many new technologies- enhancing player interaction, creating more immersive experiences, developing new graphics and displays. It is also migrating to mobiles, colonising our living rooms and integrating entertainment. Gaming will continue to disrupt not just leisure, but learning, retailing, and marketing as its capabilities migrate.
  8. Machines get very, very clever- New chips will bring self-learning machines that can ‘tolerate’ errors, process automation that requires little or no programming, robots and other forms of AI (Artificial Intelligence) that are able to see, hear and navigate ever more like humans.


These eight technology areas – collectively and in some cases individually – have the capability to transform processes and industries, create new opportunities and new competition, to transform business models and drive innovation, generate new jobs and annihilate others, and to provide companies, governments and consumers with ever more power at their fingertips. Organisations will need to take a systems view of their potential and impacts in order to develop strategic responses to ride the technology waves not drown in them.

Over the coming year we will continue to scan for developments in these and the many other areas of change that will affect us all, and discuss the impacts and implications in more detail.

If you would like to explore the impacts of these and other areas of technology for your business, please contact us to discuss how we might help you develop technology roadmaps, impact and risk assessments, and assess strategic options.


Mobile Payments Provider Fortumo Launches Program To Help Chinese Developers Expand Into New Markets

24 Oct

Mobile payments provider Fortumohas launched a program that will serve as a “one-stop shop” for Chinese developers that want to distribute their apps in other countries. Called Fortumo Expand, the program offers Android, Windows Phone and Windows 8 developers access to the Estonia/U.S.-based company’s network of mobile carriers in 80 countries, as well as localization, testing, distribution and marketing services.

Fortumo Expand is a counterbalance to the company’s direct billing agreements with the three major telecoms in China, which helps foreign developers gain a larger foothold by allowing them to offer carrier billing for their apps. While working with Western clients likeRovioEAGameloftZeptolab and Badoo, Fortumo saw that it was just as difficult for their counterparts in China to scale internationally, especially if they do not have partners in other countries to help deal with differences in language, culture and business practices.

Fortumo Expand will be headed by Martti Mustila, who was formerly Head of Global Developer Programs at Nokia.

“We want to help Chinese developers get visibility. For Android developers, we help them publish in independent app stores and carrier stores. In the best cases, if an app is doing well, we can also build up a promotional campaign for them,” says Mustila. Fortumo Expand’s monetization plan follows the same model as the company’s other developer programs. The mobile operator takes a cut, while Fortumo charges a 2% to 5% commission.

Fortumo is already working with 30 Chinese app development companies, primarily in the gaming sector. Developers who sign on for Fortumo Expand can decide which countries they want to enter. Fortumo is especially active in Brazil, Russia, Latin America and Southeast Asia, where most consumers make mobile payments through carriers and not with credit cards.

In addition to gaining access to Fortumo’s international network of 300 mobile operators, developers will also have the option of distributing their apps in 23 third-party app stores and receiving monthly reports so they can see which emerging markets have the most revenue potential. Fortumo Expand offers developers free localization and testing services for their first app through Symbio and free advertising for Windows Phone and Windows 8 apps from AdDuplex.



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.



Facebook Turns On Carrier Billing Mobile Payments In France With Orange France And Bango

19 Nov

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Square Wallet Now Accepted In Over 7,000 Starbucks Stores In The U.S., Only 3 Months After Deal Signed

8 Nov

One Way the Mobile Payments Business is Like VoIP

1 Nov

There are growing signs of mobile-induced price pressure in the credit card payments business. Emu, for example, launched flat-fee dongle-less mobile payments service in the U.K. last month.

Emu’s cloud-based system works across mobile gadgets such as smartphones and tablets or on desktop PCs.

The company has announced it’s opening to accept card payments in 16 more countries in Europe.

There is no charge for merchants to use the service for the first approximately $1,619 of sales (1,250 Euros). After this, sellers pay a flat fee equivalent of $8.42 per month, regardless of how many transactions they make.

Price disruption is both a possibility and likelihood when new entrants try to reshape a large existing industry, and it appears credit and debit card payments are no exception.

LevelUp, a mobile payment app provided by Scvngr, says it will drop all “interchange fees,” the percentage of gross revenue paid by merchants to card processors as a transaction fee. You might immediately ask how LevelUp will make money, and the proposed answer is that LevelUp will provide marketing services to its partners, taking a percentage of the revenue from activity LevelUp generates.

It remains unclear whether the gambit will succeed. But if it does, and other competitors start to match the pricing, the importance of marketing, loyalty and advertising revenue as a driver of the former payments business will grow.

That sort of disruption is quite familiar to service providers in the communications business, where per-minute prices for use of voice services, or per-message pricing for short message service (SMS texting), has been dropping for decades.

Separately, Groupon has launched a new mobile payments service, after trialing the service with 150 businesses in San Francisco. The service allows merchants to accept credit and debit cards by swiping them through a card reader attached to an iPhone or iPod touch.

For some observers, the activity in the mobile payments business will bring to mind the changes in the voice business wrought by over-the-top (OTT) VoIP.

In a general sense, an attacker in an established market will always find the logic of the “same product, lower price” value proposition quite compelling. It answers the question of why a customer should buy the product (the transaction processing service).

It answers the question of “what is the customer value proposition?”

Groupon Payments is clearly seeking to grow by offering cost savings. That’s the same approach taken by most VoIP providers, including both facilities-based cable operators and OTT suppliers as well.

Of course, you know where that story leads. Over time, we should expect to see pricing pressures in the payments processing business become more pronounced.

In other words, the amount of revenue transaction processors can make should fall, over time, as has been seen in spaces like the voice calling business.

Groupon’s move is the latest bit of evidence that mobile payments are going to transform the retail payment process overall, in the same way that over the top VoIP has transformed voice communications globally.

To be specific, the profit margin is going to be wrung out of the business.




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