Mobile Money – Navigating in the Fog

Being an ex-Gartner guy I love to analyze the spin machine. What has been the return on the “mobile investment” made by established payment players (approx $500M in US/EU over last 2 years), or the $200M /yr that VCs (MobileMonday services estimate) have pumped in?

5 April 2010

Great recap of CTIA session: http://bit.ly/bmOFQS

Being an ex-Gartner guy I love to analyze the spin machine. What has been the return on the “mobile investment” made by established payment players (approx $500M in US/EU over last 2 years), or the $200M /yr that VCs (MobileMonday services estimate) have pumped in?

As an investor or P&L owner… a look at the hard numbers of teams focused in this space over last 2-3 years would not drive you to bet aggressively on mobile payments. For example, QCOM’s 2009 10-k shows a 4 year old Firethorn unit running at $34M expense generating $3M in revenue (page F-29). This is a “successful” team that had contracts w/ Wachovia, Citi, Chase, USBank, …

Obopay and Firethorn

Citi is out of Obopay

Mobile investment exceptions revolve around delivering short term value or supporting an existing value chain. Within the US, payment data would show that PayPal and the banks are the clear leaders here. Customer listening data shows that the average US consumer today does not view mobile as a separate channel, or a  separate product, but rather as a convenience which supports existing products and relationships. As my mobile head in HK said to me “what is so urgent that I must use my mobile and can’t wait to gain access to my computer”? There are times when all of us do have that urgency, but it is difficult to build a business case on irregular, sporadic use of mobile payment services. There are certainly “niche” needs, but few result in a profitable ‘stand alone’ business case (the banks are very adept at serving the market). It is far easier for banks (or existing players like paypal) to “extend” into the niche then for a new product to enter (the nature of network effects).

Bank of America, Wells, and Chase have solid plans for supporting “mobile payment”. Rather then creating a separate organization, they have treated it as an extension of the existing customer experience (online or on the phone). As the payment head of one of the majors told me 2 months ago “what payment problem can I not address today with one of my current products”? This same “extension” approach is taken by AT&T and PayPal as well, extending existing products and services into a mobile experience.

Within the US, as Obopay/MA, Firethorn, MPAYY and other mobile specialists struggle to keep 2,000 active users (I’m not missing any zeros) existing players are meeting their customers needs and making plans to expand services for a seamless “inter bank” experience.

Similarly, outside the US,  MNOs are extending their existing value chain by adding payment services. All of this seems to prove the axiom that “payments” is a challenging “stand alone” business (perhaps a separate blog on this?).

Beyond value chain extension, there are significant investment opportunities in infrastructure. Mastercard and Visa are very pragmatic here, investing in upgrading “rails”, rules, and “riders” which will drive increasing volume. An example of which we will see from Visa next month in a mobile marketing engine integrated with card use. “Payment innovation” history shows that adoption follows infrastructure 20 years after investment. Early adopters will be the consumers with the compelling need (or the trend setters).  For most US/EU businesses, being a “late follower” has limited downside as infrastructure is built and consumer behavior adapts, there is little risk in waiting.

Within emerging markets, common payment infrastructure is required in linking all nodes of the network: Bank, MNO, Agent, Consumer, Merchant… This is a much more exciting space as consumers evolve from a model where they must travel 2 hours to reach an agent to pay a bill in cash. It would seem that investment will be driven by MNOs as they have developed an economic model which has adapted to serve these markets. MNO efforts will be driven internally and by vendors that already serve them today (example Roamware/Macalla).

Comments appreciated.

Related Post http://finventures.wordpress.com/2009/11/10/investors-guide-to-mobilemoney/

SWAGG

What is this? In a nutshell it seems to be a software app that provides for consolidation and creation of pre-paid gift cards. Allowing gift card bar code to be displayed on a cell phone screen so it can be scanned by merchants.

19March 2010

Previous Posts

  • http://tomnoyes.wordpress.com/2010/03/15/att-visa-prepaid/
  • http://tomnoyes.wordpress.com/2010/03/02/obopay-and-firethorne/

What is this? In a nutshell it seems to be a software app that provides for consolidation and creation of pre-paid gift cards. Allowing gift card bar code to be displayed on a cell phone screen so it can be scanned by merchants.

From the SWAGG website we see:

GIVE
Plastic is lame. You’re not.
SWAGG lets you create a personal digital gift and send it to your friend’s mobile device.

GET
Get hooked up. Way up.
SWAGG stays on tops of your favorite brands so you’ll always be the first to know what’s fresh.

GO
Your wallet is full. Of crap.
SWAGG files all your membership and loyalty points neatly under one button.

QCOM CEO, Paul Jacobs comments at CES “”It lets us conduct all sort of transactions on the go…So we can purchase and personalize gift cards, share them with our friends, exchange them with stores we like better. We can use them to buy stuff wherever we are. We can receive personalized offers, We can get loyalty points, manage our rewards programs.”

[youtube=http://www.youtube.com/watch?v=Zgfn-_lXo0U]

SWAG stands for “stuff we all get.” … sounds much more interesting than Firethorn’s initial mobile balance checking application. I’m a little disappointed this isn’t more NFC focused given QCOM’s tremendous IP portfolio. In this “bar code” model, I can’t help but wonder about conflict w/ Apple’s broad payment patent here

http://www.forbes.com/2007/12/26/apple-patents-iphone-tech-wire-bc_1227appatent.html

Firethorn gets new CEO

Great news for QCOM this week. Firethorn gets a new executive with payments experience… AND has tremendous start up experience. QCOM is one of the best run, most innovative companies on the planet.. they are everywhere in mobile.

9 March 2010

Press Release

Previous Post “Obopay and Firethorn”

Great news for QCOM this week. Firethorn gets a new executive with payments experience… AND has tremendous start up experience. QCOM is one of the best run, most innovative companies on the planet.. they are everywhere in mobile.

Rocco has a clean slate given that Firethorn’s current customer list is rather sparse (?US Bank?). My recommendations for Rocco:

  • Dual track org: Short term quick hit and a strategic initiative
  • Short term: find some low hanging fruit and attack and forget about the banks in short term (they take too long)
  • Long term: better to “enable” 1M+ of businesses than to “own” a single product…. that is the model of QCOM. Example: Authentication. http://finventures.wordpress.com/2010/03/11/5b-mno-opportunity-kyc/
  • Leverage existing assets and relationships, listen for key opportunities
  • HR: Look at the team you have in place and shake it up… substantially. Start cross pollenating with the rocket scientists at the parent company.
  • Financial: I’m sure Rocco worked this out w/ Dr. Paul already.. but there are few path’s to revenue in 2010 unless there are some reallocation of assets.  Example, QCOM is investing in integrating NFC into chipsets. Should this be owned by firethorn? or should just the software that runs on the chipset?
  • Go global. The only alarm bell on Rocco is that he is lacks much international experience. Most of the innovation in mobile (payment) is taking place outside of the US. He needs a solid global team that can ensure that Atlanta prioritizes the global need.

– All the best Rocco