Mashup Notes – Mobile Payments

Posted on April 24, 2012


This was originally posted to my internal IBM blog on 16:01 23/03/2012, Steve Devo, mashup, mobile, nfc, payments, Mobile Internet


The mashup are a series of evenings that look at various aspects of mobile technology and culture. run as a not for profit, they only charge enough to cover costs. (£42 squids for this one) The show was based at the Innovation base in the Spittlefields meat market. Yes that’s right in the roof above London’s main meat market. At least the market finished by breakfast, so not an issue.

David from Consult Hyperion gave his usual pitch on mobile money, namely there are 5 ways in which online/mobile money will work

these support “spontaneous commerce” where the impulse buy is king, with low values. Gave the example of a cafe in Botswana which is a internet cafe first and a coffee house second.

small bands using facebook/myspace etc to promote their gigs and using facebook credits as well as cash. Called this “Streaming commerce” which fits in with the continuous communication patterns of the “youf”
Told the story of banks wanting the kids to Friend or Like bank. This is unrealistic, not just coz of the currently poor rep of the banks but also because who wants to friend a bank. For me I’d be willing to “friend” my bank account, where it could message me with specific events (too little money, payment of type X went out etc etc. but not the bank itself. Of course getting security and privacy right is an issue.

And on this note Mobile Industry Review had a good entry yesterday regarding a bank’s commerce application which required you to use your name, password and key fob random number everytime you used it, even after a “sleep” of the app. This is a poor user experience. He contrasts this with another app that once you have identified yourself, you define a 5 number pin, and simply use this to get into the app. this is a far better user experience, because you’re not likely to be carrying that special fob everywhere you go, and to have to dig it out every time you want to see your bank details.

Kids have a fuzzy boundaries for real and virtual, to kids the lands and people in World of Warcraft are as real as any other place, and they barter and trade in valuables within games (eg power ups, swards etc) and this is real commerce for these kids. He calls this “community commerce” and likens it to the way social networking works.

Identity is the new money. Banks don’t really like handling payments as this costs them quite a lot for very little gain, so would be happy to drop it if they could. However banks are seen as a the source of identity, and this could be their main role in the future of commerce payments. “Security Theatre” describing how many firms make it look like there is security, when in fact there is little.

London fashion week gave the buyers devices with NFC chips, and after a show if they liked an article they could swipe it’s RFID to register interest. this worked well, could have moved to pre-orders. “Street commerce” where you are able to self scan goods into a bag and then just leave, and everything is sorted for you.

Another speaker talked about the three stages to get from money (plastic, paper and card) to electronic commerce
Says we are entering the second phase.
Phase 1: previous 5 years or so where mobile phones are trying to kill cash, SMS premium, Ringo (car parking payments, where at some stations just over 50% of the slots are paid for by the mobile app!). also services like vodafone’s Money Transfer (aka mPesa) which allow for the transfer of monies between parties with the use of SMS as the bearer of actions.

Phase 2: Last year or so, and likely to last for next 5 years
Now that over 50% of the UK pop has a smartphone, the use of QR codes and other more targeted, “live/real life” examples will take over. Mentioned “Deliverance” a fast food ordering service, where some 70% of the orders are taken from people while they are on the train home, with delivery to the house. In other words making transactions over the phone, but still using cash in the bank to transfer the value.

Phase 3: Belt and braces over the next 10 to 15 years
Mobile will replace chip and pin payments with tap payments, Mobile will hold virtual cards, as many as you like. Also loyalty cards and the like. This will lead to the point where real cash is never required, and so will be phased out.

Retailers will start to look for cheaper options for payment handling, and once the mobile solutions start to deal with coupons and vouchers (properly) then there will be a switch away from plastic to these methods. The Visa and Mastercards of this world will have to look again at their costs and their place in the value chain, or they will have a Kodak moment. Example that Halfords (a car part and accessory chain of stores in the UK) state that 87% of their online orders are for “click and collect” where the punter turns up to pickup the goods in the store. This is key for punters to trust. Interestingly there are reports coming out that folks trust their mobile phones more than they trust their PCs when it comes to puchasing. This is interesting to me, an is likely in part due to the fact that there are few virus/trojan type attacks on mobile phones, and long may that last.

Lots of talk of moving from cash based liquidity to other forms such as bitcoin, facebook credits and so on, will merchants be willing to trade in these other types of value ? Personally I am unconvinced unless these have the ability to be transferred back into cash in the bank.

Talk of the Starbucks order and pay application moved rapidly from stating how cool it was to the fact that this segments the payment data too much because starbucks only get to know about your purchases at their store, whereas your bank knows about all your purchases, and therefore can determine likely purchase intents. The discussion then went on to see how Google have far more details regarding purchase intents (hence the success of their adverts) and that if they ever sort out google wallet (see this post to understand why they will not be able to do this anytime soon) then they will have your life story down pat. Someone pointed out that tesco and sainsburys have good data too because they know what you but, in details, from week to week. Much discussion followed on the relative merits of the data and who can or should use it.

the payments triangle was mentioned, this is: Payments – Marketing – Data. This was rapidly amended to include Identity (in the middle if you will. Here I’ve mocked it up in ppt

Lastly on the security front it was noted that card fraud is declining and being replaced with account capture. This is effectively a form of identity theft as the perp gains enough details regarding you to get into your account, and steal directly from there. Therefor there will be much more pressure put on identity and the sources of trust. The banks and the operators have to fight it out to see who is the main source.