May 6, 2017
Most mobile payment initiatives that have prevailed over the last two decades are of singular applications or essentially vertical services, initially providing a simplex channel and over time, a more bidirectional interactive channel between the provider’s domain and the consumer’s device.
The US carriers were the first large infrastructure providers to take a closer look at the issue of scale. They forsake their typical hubris and started to closely study various attempts underway around the world, carefully examining and compiling the underlying structural issues that would help drive adoption and scale over time. They gradually came to the realization that the single-most important factor that was missing everywhere was a comprehensive ecosystem.
In a bank-led model, the emphasis naturally is on payments, with the larger focus being on the act of making a payment and not on the application that is the driver for the payment. In a merchant or provider-led model, the focus is flipped around – possibly a little too much – where not enough attention is paid to consumer choice when it comes to making a payment. The carrier-led model is in typical fashion a "build-it-and-they-will-come" approach.
No single model by itself is capable of molding user behavior around new channels and simultaneously reinforcing user behavior related to the existing transaction ecosystem. No single model by itself has the ability to deliver tangible and sustainable value to the consumer.
Softcard (now part of Google) – which prior to its official launch was a covert group run by committees from participating US carriers – identified the need for a broad ecosystem to truly scale mobile commerce and payments. The technology, business and regulatory architecture they evolved after careful research and consultation across the industry were truly unique in that they would create a common infrastructure for the entire ecosystem to leverage, and at the same time, also provide enough flexibility for differentiation and competition amongst all participants, including themselves.
Ironically, the uncommon humility demonstrated by the carriers was replaced with hubris the day the formal joint venture company was launched. Rather than leveraging the carrier’s brands, which commanded immense trust and reliability, the joint venture embarked on an extremely expensive and eventually futile exercise of creating a new brand. Rather than building an ecosystem first, which is what their founding carrier fathers had bequeathed to them on the formation, they chose to build a brand first.
This entire exercise that spanned across several years – and possibly hundreds of millions of dollars – represented a lost window of opportunity of mammoth proportions. This exercise was about delivering a truly secure, sustainable and comprehensive transaction infrastructure for consumers. This exercise was about bringing the entire transaction ecosystem together, without differentiating between m-commerce and m-payments, and eventually focusing on m-transactions in its entirety.
This exercise was also about creating a global reference. There was a short period of time when the joint venture had everyone’s attention. The US carrier model was being carefully studied and clones were being designed across several markets around the world.
The same lost window of opportunity has also directly resulted in fostering the current era of fragmentation. Rather than having an ecosystem-wide common infrastructure upon which provider-led differentiation and personalization enable best in class solutions, competitive pricing and constant innovation, we are now faced with the prospect of multiple OEM-driven ecosystems. Each individual ecosystem’s enabler will effectively become a monopoly for its captive user base. Case in point, Apple Pay will only work with applications that are in the App Store, and while these applications will work with the Apple Watch, it will need Apple’s iPhone.
Looking back, if the US carriers founding humility had prevailed, it is safe to say the world of secure transactions would be a very different place today. For once, if they had built it, everyone would’ve come.