Saturday, November 21, 2009

Why you should love (and fear) mobile payments [part 1]

A month and a half ago I discussed the mobile payments opportunity in India, a country where the mobile phone is often the consumer's sole financial entity (no banks, credit cards or anything else but cash). Boku's press release is a good opportunity to take a closer look at the US mobile payments market (see a previous post), and tell you why I think that it has great potential, but should also look out for a few obvious challenges.

You're all busy people, so I'll save you the time reading through my first paragraph and give you the bottom line: mobile payments are here, are growing, and have the potential to kill all other payment services. BUT it won't happen the way you'd imagine, and there are many pitfalls along the way, yet there are many chances for success.

Phew! Now that I got this off my chest, I can start explaining.

Now is a better time than ever for mobile payments

Mobile payments are a huge opportunity. No, they're not going to replace your wallet anytime soon, but they can just as well pose a threat to any payment service that's out there. Why? Well, up until now mobile payments were a niche - mostly because there was no fertile ground for users to move from credit card to mobile. Standard eCommerce payments are the norm, most users are used to either punching in a card number and buying or using their Paypal account, and there was no crowd that will adopt an alternate method; that's before the challenging technical aspects in device security (more on that later).

So, what changed? In comes social gaming and virtual goods. Why? Because this crowd is more tech savvy, more appreciative of a streamlined-in-game purchasing experienced, more engaged, more used to his mobile device and above all - big enough to reach a tipping point. What's the outlook for mobile payments, then? With a delightful user experience and a broad enough user base, they are in the right position to start letting users sign up and add a financial instruments (right now - a credit card) to their account (ring a bell? It's called Zong+); they also have the perfect incentive system by the form of in-game virtual goods. Will that make them the payment option of the future? Is that so easy? Not necessarily. But I'm a bit ahead of myself.

What are the challenges for mobile payments?
  • Operators: integration, regulation and fees
  • Devices: technology and security
  • Payments: interchange fees and fraud
Each of these is a challenge not to be underestimated. Over the following few posts, we'll take a closer look at them and see why there's a potential to overcome all of them and become a major player in mobile payments, both for startups and for Paypal.


Anonymous said...

I don't see any problems or difficulty in solving those issues.
Dean Procter

prashant said...

I believe the key to any successful ePayment sytesm, is its ability to minimize fraud. This only will drive customers to ePayments.

Anonymous said...

An article requires research, numbers and an interesting POV on a matter.
I, too, see no difficulties in solving the challenges you mention since they are inaccurate.

Ohad Samet said...

I'm more than open to get educated on how these challenges can be solved. Unfortunately, each time the best I can get is an explanation about a "killer app" that can do everything. I'm not convinced yet...

Eugene said...

Seconds First Data's white paper on mCommerce, "the success of mCommerce and Mobile value added services depends on convenience, interoperability and trust."

-Eugene Azucena
Marketing Manager
Neoedge Pte. Ltd

Monetise01 said...

The mobile operators already pay each other. Those systems are based on standards - and the MOs need to stay compliant and current with those standards. A viable solution needs to leverage and extend those standards and the MOs will come along automatically. This creates a global, common platform at the expense of the MOs (since they are already spending the money).