Mobile payments were tipped by experts several years ago as the panacea for payments at merchants, online, for governments and at tolls/transit. Today lot of people ask me this question – what is the problem that mobile payments are trying to solve? Considering, mobile payments have been touted as ‘must-have’ in the race to digital payments supremacy, companies from various industries and domains (Technology, Banking, Financial services, Retail, Telecom and others) launched their mobile payments solutions. As a result, market was flooded with hundreds of solutions. Each boasting its technological edge, promise of large adoption and being the game-changer. Forget the game many were not able to grow beyond their island.
How do we know this? Well to start with, the adoption among the consumers has not been encouraging. With mobile payments volumes not reaching the desired levels, board and investors at companies are asking tough questions to mobile payment leaders of these solution providers. This is driving some companies to closure already. LTP in this article would look at how major companies are dealing with it and what options are they exploring? What are the learnings for the market players as a whole. In subsequent articles, with inputs from industry experts we will try to further the cause.
Major closures in the Mobile Payments Industry
O2, the leading mobile carrier in UK, willshut down its mobile wallet program within 1.5 years of its launch on Mar 31st 2014. Lack of clarity on winning technology and a weak business model (Offering mobile as the only payment channel) are the major factors that drove O2 to closure.
Bouygues Telecom has abandoned its NFC payment program in 2014 envisaging investments requirements and proposed returns
Launching mobile payments solutions meant significant investments and resources. Closure of these solutions has been a strong setback for the companies that did it. So, where did the companies go wrong? We believe the key reason for failure has been inability of the players to map their solutions to end consumer needs. We have seen multiple ‘me-too’ and ‘me-first’ products without bothering about user pain points. It is imperative for player to do empirical investigation and field studies to understand the consumer requirements and create solutions around the pain points. At the same time, continous feedback mechanisms and changing/pivoting as per changing customer and market needs is important. Google Wallet for instance, is one of the major players which has shifted it positioning quite a bit, since its launch. Weak adoption of mobile payments drove Google and T-mobile to walk a new path of connecting plastic cards with mobile wallet solution and topping it up with other things like loyalty programs. As Jack Dorsey puts it, It’s not about killing cash. It’s about being able to account for your entire business.
Google, T-Mobile are now looking at multiple channels to drive transactions through their payment platforms
Google launched its plastic card supported by Mastercard and linked it to the Google wallet platform. This allows consumers to pay through their wallet account using a plastic card, at retailers where mobile payments are yet to be accepted. This is expected to drive the much needed transaction volumes for Google wallet.Once they start putting money in the account, they would perhaps also start using it via mobile at Google Wallet friendly locations. With HCE Google is also trying to make NFC transactions more ubiquitous (given the carrier resistance due to ISIS).
- Enabling Technologies is part of the ISIS program, which has not been particularly successful in terms of driving large number of transactions. Recently T-Mobile opened the second front living up to its image of an un-carrier.As an additional product, T-mobile launched its solution recently called Mobile Money. Mobile money has a smartphone app and T-Mobile® Visa® Prepaid Card that works at merchants, supports bills payments, money management and provides a surcharge-free nationwide ATM network that brings many of the features of a checking account. It also allows consumers to receive their tax refund directly into your T-Mobile Visa Prepaid Card
Coin on the other hand created a solution that enables users to store all their cards on a single card and manage it with the smartphone application through BLE. Omne mobile wallet is another such dynamic magnetic strip plastic card that came earlier. The changeable magnetic strip allows coin card/ Omne card to be accepted at all existing retailers and is very closer to current card process in terms of usage.
Some of the Key Learning’s
- Don't work in isolation. Doing your own thing in your cocoon and the Island approach is not working. Working towards bringing a large eco-system play like Zapp has done in the UK is a better approach. High penetration of services of the participating banks will ensure high adoption. The Zapp wallet has been brought by VocaLink that processes more than 90% of UK salary transfers, more than 70% of household bills and almost all state benefits. Last year its systems handled 9.6 billion payments worth a total of £4.5tr. Scale combined with a robust, omnipresent and user friendly solution is the name of the game.
- Mobile payments secret sauce may not be about replacing the plastic (or cash) but working with it. Plastic cards will remain a dominant channel for payments and so will cash. Atleast for the time being. You can't change entire set of habits that the human race has developed over the last 2000 years in 5-10 years. Dual play or even a multi/Omni channel play may be the way forward. There are use cases where cash would still be required, so instead of replacing cash your mobile payment solutions should also help the customer getting cash when required - That is what Diebold, FIS and Paydiant are trying to do
- Payments functionality is viewed only as utility function by consumers. Ability of payment solutions to link themselves with retailer loyalty and rewards program, bill payments, micro-lending (Affirm) and to provide on-the-fly analytics (Moven, Gobank) will be a strong proposition for driving adoption. Players must look at this kind of holistic end-to-end solutions for success.
- With strong focus of technology players now on payments, commerce and banking, these industries are being re-imagined. But for newer solutions to be successful, they need to drive strong commonalities with existing infrastructure. Mobility, Cloud, Analytics and software are already solving problems. Smart players have initiated their efforts to design solutions at the intersection of the retail, banking, and payments industries. For this reason, many in the industry believe solutions like Loop (uses Magnetic Secure Transmission) that makes your phone talk with the tens of millions of existing credit card readers has higher chances of success. If you have to solve just one problem for retail payments using mobile then it will be ubiquity of solutions. I might have said about this in the point 1 above but think about this - 90% or more mobile wallets do not work with all POS terminal.
I am a believer in Mobile Payments and this is just the beginning. I am hopeful that the solutions Apple and some other players (including some key startups) are working on, would be adopted at a bigger scale.