Brett King

Mobile Payments action heats up…

In Customer Experience, Future of Banking, Mobile Banking, Mobile Payments on May 25, 2011 at 20:10

Square POS and Cardcase, ClearXchange (BofA, Chase and Wells), Visa NFC trials, Google NFC trials – wow! Mobile Payments just arrived big time this week in the US particularly. So what does it all mean?

Inevitability is biting
Clearly there’s a bunch of very smart people that have all come to the same conclusion over the last months. Mobile Payments is not about what’s going to happen in 5 years, or 3 years – it is about what’s happening now. Regardless of where you stand on the whole death of checks, death of branches argument, I think that horse has bolted. You can’t seriously be in banking or payments today without a mobile play. End of story.

So who are the players to watch as this roles and who is going to dominate? Here’s a comment I received from PayPal’s communication team this week in respect to the action hotting up.

“eBay Inc. companies are leading the mobile commerce experience with our wide-ranging mobile assets, from eBay’s Milo and Red Laser to PayPal’s recent acquisition of the app, Where. PayPal is the leader in mobile payments. We have been offering our 98 million active users ways to send and receive money anyway they want, anytime they want, wherever they are in the world. PayPal is the only global service perfectly positioned to deliver on the convenient and secure “digital wallet.” – Anuj Nayar, PayPal Spokesperson

Everyone wants to own either the platform, the wallet or the ‘network’. That just isn’t going to happen. What Apple, Google, PayPal and the banks should have done is create a digital wallet standards organization years ago to bring the Telcos, handset manufacturers and banks together. But that’s never going to happen.

The Banks?
Banks think they are much better at this stuff because of security and access to network. The only problem is they are archaically slow.

ClearXchange announced today seems to be an effort to compete with PayPal, with some P2P effect aimed at around mobile. It is a shame that it is only now close to a decade after PayPal has already commanded a huge lead in this respect that a small smattering of US banks has finally got how critical P2P is.

Think about that. It took BofA, JP Morgan Chase and Wells Fargo 10 years to catch PayPal in respect to a basic platform of person-to-person payments. Why? Because they don’t get customer experience (CX). If you’ve ever tried to do a wire or ACH transfer in the US, you’ll know that PayPal with the option of sending to a mobile or email address is massively superior from a CX perspective.

The banks look at risk mitigation as their primary driver and don’t want to move until a secure, safe standard of doing ‘digital’ emerges. The problem is, that by the time it clearly emerges, they are almost a decade behind in capability. Driving customer experience improvements should be in the DNA of banks and it is a long way from being so. Until they crack that, they will increasingly be doomed to being the products, pipes and wires to enable the back-end of the banking system, rather than owning the customer.

Telcos are almost as chaotic as banks when it comes to creating common standards around something like a digital wallet. I get the challenges of platform differentiation, geographical diversity, etc, but organizations like the GSMA or IEEE could have played a strong role in creating a standard. We seem to have been able to crack it in the IP world around standards like HTML5 at least at a high-level, but not when it comes to mobile. Just see CDMA vs 3G vs 4G vs LTE vs WiMax, etc…

Lack of standards is not helping us here. If we want interoperability on payments, it sort of requires we have interoperability from operator to operator, payments network to payments network, etc. We’re a long way off from that.

Handset Manufacturers
Here is where it gets tricky. Ironically it turns out that probably Google, Apple, Microsoft/Nokia and to a smaller extent RIMM will be in the best position to actually build a mobile payments framework. Purely because they own the primary hardware that gives you access to the ‘rails’ payments will have to run on.

So banks, mastercard, visa, etc might own the rails that the payments are processed on, but it does them no good to be restricted to stations provided by Google and Apple (think App Stores) or to have customers only ride on trains run by others (i.e. handsets). Ok here ends the rail analogy.

Start-ups like Square
Square and others think out of the box. They are not hampered by years of inertia behind existing business models, or challenges about who owns what part of the network or who gets what share of interchange. They are able to by-pass all of that and just simply think about a better way of executing. Square has the potential to become significantly disruptive to the traditional players, and when NFC comes along Square can just plug it in to their ecosystem.

We can’t expect banks to think like this, nor them to greet the efforts of start-ups like Square as revolutionary and actually helping to evolve the payments industry. But that is what Square is doing. They are showing us that the current system of checks, unwieldy complex KYC requirements for money transfers, the hoops we have to jump through for card issuance – all the complexities of the banking system when it comes to current payments ‘systems’ – have no place in our future world.

As customers we don’t value complexity – we value simplicity. We need standards, cooperation, and better user experience.

  1. Brett – your CX comparison with wire or ACH transfers isn’t relevant to the mobile P2P context. Some banks (albiet a minority) do get CX, and ClearXchange is a clear CX winner over PayPal, ZashPay, et. al. ClearXchange will permit brain dead easy P2P from mobile devices from within native mobile banking apps and without additional funding accounts or third party app sign-ins (a CX sin in my opinion). I suspect ClearXchange’s instant scale and cost advantage will quickly erode PayPal’s head start.

  2. Bob,

    The problem is that it is still limited to very few participating banks. So they haven’t really solved the CX problem for their customers on that basis.


  3. Brett: Good stuff. Mostly agree w/ your premise regarding inevitability of mobile.

    Do want to pick some nits regarding the CX comment (as Bob Meara did). You wrote:

    ” It took BofA, JP Morgan Chase and Wells Fargo 10 years to catch PayPal in respect to a basic platform of person-to-person payments. Why? Because they don’t get customer experience (CX). If you’ve ever tried to do a wire or ACH transfer in the US, you’ll know that PayPal with the option of sending to a mobile or email address is massively superior from a CX perspective.”

    Bob Meara is spot on about ClearXchange CX being a winner over alternatives. It isn’t just “third party app sign ins” that detract from the CX, but just having to establish a separate account in the first place is a big deterrent.

    My other comment is this: The big banks didn’t lag on P2P because “they don’t get CX.” They lagged on it because they didn’t see how they were going to make any money on it.

  4. Ron,

    I agree. Ultimately, the banks have to get this sorted. Basically allowing me to send money bank to bank, person to person, is a usability and interoperability issue.

    I still have real concerns over who is in the ‘club’ though. The big 3 hardly means ubiquity.

    I think we need banks to drive a real-time account creation via mobile for unbanked/underbanked as well. So that you can send money to anyone, they have a one-time account (with an appropriate fee for cashing out) that you can access via ATM with your phone.


  5. Brett: I can’t speak to the demand for mobile outside the U.S. But in the U.S., what the un-/under-banked need is a PRODUCT that fits their need, not simply a mobile capability.

    I’m a strong believer that the mobile device will become the primary interaction device, but — again, in the U.S. at least — we’re a few years away from that. Mobile payments isn’t going to be the driver of that. Mobile SHOPPING (price comparisons, reviews etc.) will be a stronger driver. Mobile account opening/creation would be nice, but isn’t going to be the killer app.

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