I really have not been overwhelmingly good at updating this blog for the past year and some change, its been hectic since we launched suretap in November with CIBC, and we have been spending most of our time enabling bank issuers to be ready for this year and certifying mobile devices with all their kinks and quirks.
Other than all the hard work we have been doing, way to many things have been happening in the world of mobile payments, Google has done an about face on their NFC wallet (again), new players have emerged, Bitcoin came, saw and conquered (at least some headlines) and analysts have downgraded the mobile payments expectations in North America.
Many of the articles I read, and I read quite a few, almost always makes the adoption of mobile payments a black/white proposition "mobile payments is not taking off as quick as we thought, therefore it must be a fluke", I dont think its as straight forward as that. Mobile payments is not just about launching a services and then market it, mobile payments is for most people a matter of putting in the right platforms and operational processes, and then building payments services on top - turns out, putting in platforms for the incumbent players, platforms they have never looked at before, is hard - very hard.
Take a bank for example, how hard can it be to do mobile payments? Well depending on what types of payments they will have different challenges. Proximity payments require brand new card distribution and data preparation infrastructure, which in return requires new business, care and technology processes. Money transfers (local or international), depending on partner vs. buy/build, requires a bank to create whole departments who focuses on compliance, risk, reconciliation and settlement - news flash, many banks dont do that transaction type today, to the extend it is required - banks essentially use core processors like (TSYS, FIS etc.) to handle all their debits and credits and at the end of each day, they look at files and make sure that the balances match up (I know I am simplifying and generalizing - but hopefully you get the point). So mobile payments are hard in 1st world markets, whereas in developing markets its a heck of a lot easier, because its greenfield and everything goes when you are trying to build a market. Great examples are m-pesa who is known to have outages and reliability issues, but thats "ok" because they are enabling a brand new economy and educating the consumer about digital payments in the process, eventually they will be having the same restrictions and expectations as a bank in Europe or the US, but for now they work and while its a nuisance for customers to not have access to their service during the weekend its better to have some unplanned downtime versus the alternative of not having m-pesa (I know they are making significant upgrades and changes to fix the historical issues they had, so not bashing them at all).
So assuming that the incumbents have the stamina and can put in the right platforms, read the article about the $300MM Google wallet money pit - which is a lot of money but invested for all the right reasons - you can argue about the execution, but the motivation behind Osama's direction was sincere and all to help position Google as a payments company. Many of us who have been doing this for very long, often find ourselves in a similar situation, we are not just offering up a "new, cool service" we are fundamentally trying to change the way the organization operates and behaves.
Now the issue of adoption.
How do you teach consumers why and how they should use and feel comfortable with a new payment form factor - quite frankly I am not impressed with any of the numbers I am hearing from the new entrants into the payment space, I can appreciate that they are trying to raise funds and create hype/awareness, but they are not moving the needle. When Paypal says they have 20.000 retail locations accepting Paypal, I am thinking "good effort, but its not really moving the needle", when Square is saying that they process $12Bn annually, of which they generate ~1% revenue, I am thinking "good effort, but you are easily displaceable".
In Africa and South Asia its been easier to justify a change in behaviour to the consumer because there was a demand which inherently needed supply, and Safaricom jumped in, and they had "A USE CASE" not many use cases - Send money home. whats the killer use case in North America or Europe? Store your cards? create new terminologies for old services? potentially make it quicker to check out? give you a coupon?
I am not sure that we have a single killer use case in these 1st world economies, there are plenty of economic unquantifiable reasons why, but no consumer use case that I in the past have felt compelled to use.
I think that what ex. Paypal and Square has shown is that there are room for new entrants to enhance on existing services - the Square model is not fundamentally innovative, they operate as an overlay network to a processor who is already in the business of processing merchant payments - essentially they do exactly what Obopay did, except they have C2B rather than C2C identifiers and a dongle! what Square did brilliantly was to put a UI on top of the traditional merchant account application form and make it a 1-click-ish experience for the consumer rather than a "fax the form in" experience - in my opinion that was the real innovation that Square brought.
I am actually much more impressed with the start ups who look at creating new payment rails like Dwolla is trying to do - if you are to innovate, do it fundamentally, and you will be able to sustainably solve pain points, not just temporarily as Square is doing it - although they are leaning into the same general direction.
to go back to my starting comment, I think that mobile payments have a ways to go, but I think that over the next couple of years the current trajectory will change and conversion will be complete, users will get services and offers that they care about and banks, operators and alternative networks will find a niche for them that fits their foundational structure... Just wait and see.
I will follow this "welcome home" post with more chatter
Other than all the hard work we have been doing, way to many things have been happening in the world of mobile payments, Google has done an about face on their NFC wallet (again), new players have emerged, Bitcoin came, saw and conquered (at least some headlines) and analysts have downgraded the mobile payments expectations in North America.
Many of the articles I read, and I read quite a few, almost always makes the adoption of mobile payments a black/white proposition "mobile payments is not taking off as quick as we thought, therefore it must be a fluke", I dont think its as straight forward as that. Mobile payments is not just about launching a services and then market it, mobile payments is for most people a matter of putting in the right platforms and operational processes, and then building payments services on top - turns out, putting in platforms for the incumbent players, platforms they have never looked at before, is hard - very hard.
Take a bank for example, how hard can it be to do mobile payments? Well depending on what types of payments they will have different challenges. Proximity payments require brand new card distribution and data preparation infrastructure, which in return requires new business, care and technology processes. Money transfers (local or international), depending on partner vs. buy/build, requires a bank to create whole departments who focuses on compliance, risk, reconciliation and settlement - news flash, many banks dont do that transaction type today, to the extend it is required - banks essentially use core processors like (TSYS, FIS etc.) to handle all their debits and credits and at the end of each day, they look at files and make sure that the balances match up (I know I am simplifying and generalizing - but hopefully you get the point). So mobile payments are hard in 1st world markets, whereas in developing markets its a heck of a lot easier, because its greenfield and everything goes when you are trying to build a market. Great examples are m-pesa who is known to have outages and reliability issues, but thats "ok" because they are enabling a brand new economy and educating the consumer about digital payments in the process, eventually they will be having the same restrictions and expectations as a bank in Europe or the US, but for now they work and while its a nuisance for customers to not have access to their service during the weekend its better to have some unplanned downtime versus the alternative of not having m-pesa (I know they are making significant upgrades and changes to fix the historical issues they had, so not bashing them at all).
So assuming that the incumbents have the stamina and can put in the right platforms, read the article about the $300MM Google wallet money pit - which is a lot of money but invested for all the right reasons - you can argue about the execution, but the motivation behind Osama's direction was sincere and all to help position Google as a payments company. Many of us who have been doing this for very long, often find ourselves in a similar situation, we are not just offering up a "new, cool service" we are fundamentally trying to change the way the organization operates and behaves.
Now the issue of adoption.
How do you teach consumers why and how they should use and feel comfortable with a new payment form factor - quite frankly I am not impressed with any of the numbers I am hearing from the new entrants into the payment space, I can appreciate that they are trying to raise funds and create hype/awareness, but they are not moving the needle. When Paypal says they have 20.000 retail locations accepting Paypal, I am thinking "good effort, but its not really moving the needle", when Square is saying that they process $12Bn annually, of which they generate ~1% revenue, I am thinking "good effort, but you are easily displaceable".
In Africa and South Asia its been easier to justify a change in behaviour to the consumer because there was a demand which inherently needed supply, and Safaricom jumped in, and they had "A USE CASE" not many use cases - Send money home. whats the killer use case in North America or Europe? Store your cards? create new terminologies for old services? potentially make it quicker to check out? give you a coupon?
I am not sure that we have a single killer use case in these 1st world economies, there are plenty of economic unquantifiable reasons why, but no consumer use case that I in the past have felt compelled to use.
I think that what ex. Paypal and Square has shown is that there are room for new entrants to enhance on existing services - the Square model is not fundamentally innovative, they operate as an overlay network to a processor who is already in the business of processing merchant payments - essentially they do exactly what Obopay did, except they have C2B rather than C2C identifiers and a dongle! what Square did brilliantly was to put a UI on top of the traditional merchant account application form and make it a 1-click-ish experience for the consumer rather than a "fax the form in" experience - in my opinion that was the real innovation that Square brought.
I am actually much more impressed with the start ups who look at creating new payment rails like Dwolla is trying to do - if you are to innovate, do it fundamentally, and you will be able to sustainably solve pain points, not just temporarily as Square is doing it - although they are leaning into the same general direction.
to go back to my starting comment, I think that mobile payments have a ways to go, but I think that over the next couple of years the current trajectory will change and conversion will be complete, users will get services and offers that they care about and banks, operators and alternative networks will find a niche for them that fits their foundational structure... Just wait and see.
I will follow this "welcome home" post with more chatter
