Very short blog
I tweeted this week that “Mobile Payments” are dead.. quite a contrarian view, particularly when compared to Juniper’s forecast of $180B by 2017. Or Visa Europe’s wild prediction that half of all payments will be through mobile by 2020.
Why am I the Contrarian?
- There are FEW payment “PROBLEMS”. Do any of us leave the store without our merchandise because the retailer didn’t take our form of payment?
- Payments is only the last phase of a long Commerce process that involves marketing, influencing, shopping, selection, purchase, support. Payments should be evolving toward a DUMB PIPE.. More value will not center around payment… but rather the retailer and consumer.. the costs of payments will begin to decrease SUBSTANTIALLY as supporting services improve DRAMATICALLY (Authentication, Fraud/Risk, Credit, Transparency Reputation, … ). Can you imagine if you had to pay a 3% transaction fee everytime you bought a stock? Such a market would be highly INEFFICIENT.. yet that is the case in retail today.
- Mobile is not a payment solution.. it is primarily an “Access” and “Authentication” Solution
- My behavior rule of thumb says that there must be a >20% value improvement for behavior change
- Cloud, Cloud, Cloud.. Our money, friends, digital creation, … are NOT locked up in the phone.. they exist in the cloud. It makes no sense to have a solution that ONLY works with the phone. (See Cloud Wallet). The mobile device can serve as a key authentication tool.. but so can your iris, voice, or facial geometry.. (See Apple NFC and Stage 4 Value Shift). This is the context of Ross Anderson’s quote at KC Fed “If you solve the authentication problem [in payments].. everything else is just accounting ..”
- Retailers are not supportive
- Supply Chain is complex
To be clear, there are many viable payment businesses today. However, MOST exist because of the INEFFICIENCIES within current networks (banking, 4 party models, regulation, …). My top examples surround P2P and international remittance (see my note on Xoom). Banks have the ability to completely defeat any of these 3rd party services, yet they choose not to. Why? They are locked into existing services, products, branch distribution channels, payment partners.. most are mired in a sticky muck.. (see blog on VMT, and my Big Blog on Battle of the Cloud Part 4 – Clusters Form).
Emerging markets are completely different. There are many problems to be solved..including: commerce, banking, remittance, community, access, transparency, social welfare, .. In this area new models are “leap frogging” traditional banking and payment models. I’m very excited at the prospect of lifting billions of people from poverty (see this blog).
In OECD 20, We are beginning to see a massive restructuring of commerce (how goods are created, marketed, and sold). Tectonic shifts which will shake the foundations much beyond Amazon, taxes, mobile-physical shopping and channels, marketing, loyalty, discounting.. It is a 3rd phase of Retail (Future Blog). What is Retailer loyalty? Brand loyalty? What is a commodity? How do you service a customer? What is the role of price in a buying decision? Where can I get a customer’s attention? Who else can influence this customer?
Start ups…. Go solve a Real problem
VC/PE… Due Diligence is required prior to investing here. If Visa and Google can’t move the needle… how can NewCo?
WSJ.com is my home page.. yesterday I see a Monitise banner ad on the right “Over $30B in payments, purchases and transfers annually” (see Monitise PR)… I almost spit out my coffee. I doubt if many know the context here.. Monitise’s history is in SMS banking.. a first kind of online banking, where their unique innovation was integrating an SMS server onto the ATM switch.. this allowed a very quick and dirty implementation that was extremely reliable. My guess that $29B+ of their volume is banking customers moving money from one account to another.. including bill pay.. Oh.. their pricing? its not transaction based for this.. its just a piece of software sitting in Lloyds, RBS, HSBC, … Is this the poster child of MOBILE MONEY SUCCESS!? I suppose I should put Apache down as well, as within Citi and Wachovia.. Apache/Tomcat executed over $500B in payments and transfers.. Just FUBAR.
So before you go out to buy a piece of MONI on the London Stock exchange.. realize that biz model resembles FIS.. or rather Jack Henry (be VERY skeptical of any mobile payments revenue). In fact, Visa gave up on MONI within emerging market payments (in favor of the much more robust “BANK IN A BOX” Fundamo solution).