As I’ve written many times before: It is “the sheer number” of diverse, yet interdependent, mobile payment stakeholders in the United States that prevent any tangible advancement in making mobile payments a reality.
Anyone who manages by consensus knows that the process is sluggish, messy and complex. And the more there is to lose, the harder and slower the process becomes. Progress in the mobile payment arena is moving at a snail’s pace because every vital industry player not only has a concerned interest to protect (or not lose) and wants customer ownership, e.g., revenue and data. That is why mobile payment adoption and acceptance is comparatively easy in those parts of the world where there is no existing infrastructure or revenue to defend – no one has to cooperate or compromise.
To underscore my viewpoint, I wanted to share two recent mobile payment articles from the American Banker. One is from today’s edition that speaks to the stakeholder complexities and an opinion piece from last week’s Bank Think that addresses consumer roadblocks. Each article encapsulates and clearly articulates the issues and challenges that require cooperation from the many stakeholders resolve if mobile-based payments are to become mainstream in the United States. I do wish to note, however, that a very critical participant viewpoint is not addressed in either article. Why should a merchant care at all about mobile payments right now? Why make the investments necessary to accept mobile phone payments at the point-of-sale now?
Until merchants believe that they are going to lose customers and revenue if they don’t accept mobile payments and connect the mobile payment to discounts and/or rewards, we are not going to see much beyond merchant experimentation for the time being. While we see some evidence of cooperative alliances like ISIS in the market place, those alliances have yet to really be tested, so the results remain to be seen. Command and control is a lot simpler than attempting to build consensus via cooperation. No mobile payment player is in a position to dictate a particular mobile payment business model as far as I can tell, so it will I predict that the landscape will continue to be messy and slow as all the stakeholders continue to duke it out over customer revenue and data.
Here are the articles (ready to read for your convenience):
Mobile Wallets Are Still Hung Up on Business Concerns
Though the hype around mobile wallets is at an all-time high, a lot of work remains to be done before phones can be considered a mature venue for financial transactions.
Banks must still attract actual users, as well as settle the turf wars among the various companies and industries that stand to profit from mobile-payment systems.
Telecoms, Google, banks and card networks — many of which are at odds with one another over who owns the various rails and subsequent income — are all chasing the mobile-wallet market with tenuous collaboration at best.
“There are issues here, not only in terms of cooperation, but also in figuring out how the control points in the mobile wallet ecosystem would actually work together,” says Rick Ogelsby, a senior analyst at Aite Group.
Gerhard Romen, chair of the Mobey Forum’s mobile wallet task force, spoke with BTN this week about his group’s efforts to forge an understanding of the ecosystem. Romen also discussed which stakeholders are best positioned to control the different components of the mobile wallet.
“There is good momentum in the industry, but at the end of the day, the control points rely on the business partners,” Romen says. “That determines who pays or who charges whom and for how much.”
The Mobey Forum, which includes banks, payment schemes and service companies, has finished work on a white paper that analyzes how the development of the mobile wallet will be affected by the different stakeholders. The forum’s participants include Bank of America, DNB Bank, Rabobank, Royal Bank of Scotland, SWIFT and other international companies.
The forum’s research identifies several control points where the different stakeholders play a distinct role in development of the supporting infrastructure. The mobile wallet ecosystem remains in its infancy with little collaboration, the forum says, and clarity over roles and strengths can inform a broader discussion about development.
“Ownership” of a control point does not create value for a stakeholder, Romen says. Ownership is simply part of what that stakeholder can contribute to a larger ecosystem that’s of mutual benefit to the entire market. If the mobile wallet’s network is limited because it can’t work everywhere, consumers won’t use it.
“One important thing here is that consumers will decide which wallet to adopt,” Romen says. “The wallet has to work seamlessly and add value for consumers that’s beyond what they would get with a credit card.”
The forum identifies the stakeholders as banks, payment scheme owners, device manufacturers, mobile network operators, operating system providers, merchants, regulators, users and other service providers. The actual control points include data ownership, data flow, connections to and from the wallet, distribution channels, customer acquisition, bearer connection technology and other channels through which value can be derived from the mobile wallet.
The agreements over customer and transaction data will likely be the most difficult to work out. Banks would appear to be well positioned here, since they typically have the relationship with the consumer — but the transaction still relies on the handset, the telecom provider and the merchant.
“The data flow and ownership are the most crucial points nowadays. It’s the management of data including transaction management and the interconnection between mobile payments networks,” Romen says. “There’s a lot of data that gets accumulated. The key part of the mobile wallet service [is] who can aggregate most of the data.”
The forum did not endorse specific “owners” or suggest a cooperation model. And even once the structure of the market is agreed upon by stakeholders, working out the details of collaboration will still be elusive due to the diversity of firms and tech involved.
“A lot of the issue is the different business models. Not everyone uses SIM cards, for example,” Ogelsby says. “So storing SIM card data makes sense for some but not for others. There are also issues around the data, [such as] how to access the data once it’s on the phone and who actually owns the phone. Should that data only be open to the wallet, or should it be open to any application that resides on the phone?”
When American Express Co. came out with Serve, I signed up for the card right away. It’s been sitting in my wallet ever since.
As a reporter covering payments and a tech nerd, I was curious about the product, Amex’s version of the digital wallet. But as a consumer, I’ve had no incentive to use it – or any of the other newfangled mobile payments options we write about every day. When it comes time to pay at the register, I’m still reaching for my leather wallet, which I bought for $5 on a New York City street corner, not my iPhone.
It all comes down to economics. I can earn reward points by paying with my regular American Express credit card. Right now, none of the mobile wallets give consumers such incentives.
Of course, rewards such as electronic coupons stand to be the virtual wallets’ most compelling feature – eventually. But these perks are not available to early adopters, or would-be ones like me.
Each of these offerings has its strengths and weaknesses. At the moment, PayPal’s mobile payments system is probably the strongest because it doesn’t rely on any specific consumer hardware.
To pay at the point of sale, users register a phone, but they don’t need to have the phone with them. Funds are accessed when users type in their phone number and PIN. If users also have PayPal’s smartphone app, they can check balances or make person-to-person payments.
Google Wallet has a number of merchant deals in place today. But Google seems to be getting ahead of itself. With Verizon Wireless reportedly resisting the Google Wallet app on its phones, consumers’ only option remains the fuddy-duddy (by consumer tech standards) Nexus S smartphone from Sprint. So when I see the Google Wallet logo on terminals at my Duane Reade, I’m not motivated to switch to a new phone to try it out.
On the surface, Serve looks like PayPal’s mobile wallet. Amex acts as the merchant of record and moves cash to a stored-value account before it is spent. Merchants draw from that account when a transaction is made. In this way, Serve functions much like a prepaid card — but only at merchants that accept Amex.
Cash and traditional cards are entrenched. Without rewards, the digital wallets are unlikely to make a dent. If even someone like me, who lives and breathes payments technology for a living, can’t be compelled to use the mobile option, the average consumer may hang up on it too quickly.
Sean Sposito is a reporter covering technology for American Banker. The views expressed are his own.