The mobile phone as a real multitasker finally took hold in 2009, partially due to the ongoing success of the iPhone (remember, iPhone prices dropped around the 3GS launch on June 8th of this year), and the increased maturity of applications. Additionally, banks across the world, and especially in the US began taking mobile banking seriously, building apps leveraging the iPhone, Blackberry and Android OS capabilities. The assault on traditional plastic for payments has been waged, and we'll be watching as the battles are fought in the coming years.
In the Western World, the big story has been NFC's continued growth in POS coverage, its enhanced accessibility andusage amongst consumers and the development of decoupled NFC products (Bling Nation).
When the first NFC terminals came to pharmacies, convenience stores, gas stations, taxi cabs and fast food restaurants, it was the start of the Card Association's final attack on Cash. No longer did a person living in major metropolitan areas, such as New York, Chicago, Los Angeles, Hong Kong, or London need to stop at the ATM nor carry cash of any kind. The inclusion of the mobile phone in the NFC equation further lightens the traditional wallet.
With the economic crisis, merchants began to find relevance in the argument for ACH-based decoupled debit payments, which cut their merchant fees in half (or more). Startups like Bling Nation and Revolution Money were being heralded as the new saviors of the discount rate, allowing for much more flexibility than the traditional models of V/MC. Ultimately American Express purchased Revolution Money for roughly $300M, in hopes of bringing their technology platform to the more established Credit Card firm (and potentially build a secondary brand).
Square, which was recently announced with much fanfare attempts to convert the iPhone to a wireless and efficient POS, with a unique authentication solution based on audio and a network of user photos. Its a nice concept, and one we'll be watching closely, but may not actually have a place in the Western Market (as a colleague reminds me, if the current solution works, your solution must be infinitely better to get noticed). In this case, Square's dongle for CC reading is a bit bulky and pales in comparison to the relatively inexpensive and full featured wireless POS terminals available across the western world. As a result, the problem Square solves is on the long-tail side, covering individuals or extremely small or one-time businesses that do not have the ability or interest in having a POS. I'm not sure that market is large enough for a sustainable business.
In the UK, firms like MoBank have begun offering Mint.com-style apps for the iPhone, allowing customers to do online banking and also transact over their mobile phones. These mobile wallet apps with transaction capabilities will likely become the norm going forward, reinventing the online banking experience, and further pushing the traditional bank teller out of the equation.
In the developing world, particularly Africa, Eastern Europe, Asia, and parts of South America, the mobile phone has become the one piece of consumer electronics owned by the largest percentage of the population. Given the nature of banking and money in many of these countries, the mobile banking and payments space has been very hot, focused on building the non-existent payments infrastructure in those areas entirely around the mobile phone. Over the last year, I have had the chance to see numerous technologies in the US, Europe and Israel being developed to combat this exact problem, with a few key thoughts -
1) P2P transactions, such as those available through Obopay or M-Pesa, are a critical function in these markets, but one that is not yet easy, reliable and secure enough for mass usage. SMS does not fit the bill for any of this. Alternative and more efficient technologies, which require no user downloads and no 'terminal' on either side will be the key to success. Companies like Trivnet have unique approaches in this space, and we'll be watching them closely to see how they progress.
2) C2B transactions will be best served in these markets by a 'Square-like' device, only one that will work on a non-3G non-Smart Phone infrastructure. Companies like AcCells are working on finding the least intrusive and easiest to operate option.
With the new year coming later this evening, its useful to organize a hopeful message for the market going forward.
- Resolution of the stalemate on NFC payments in the Western World. Of course, this will require a resolution between mobile carriers and banks / associations, but with the market primed for a resolution, I am hopeful that it will be resolved this year.
- Growth of alternative payment technologies used at the Online/Offline POS. Paypal X and Revolution Money/AXP are both expected to allow greater control over the payment process to developers interested in new payment models. I would love to see the mobile phone become a larger part of this ecosystem, both for online and offline transactions.
- Operation of Multiple Mobile Payment Solutions in the Developing World. Someone is bound to break through all these pilots going on across Africa and other parts of the Developing World as a leader with an easy to use, secure and timely transaction model that can be scaled across these markets. The value of such a network would be huge, both economically and in enhancing the standard of living in these places. I hope that this coming year we will begin to see the beginning of widescale usage of the mobile payments economy.
Happy New Year to all!