Last week’s news that a host of high profile investors have contributed a record $25m (£16.4m) seed funding for mobile payments startup Clinkle has certainly caused a stir in the industry.
While everyone from banks, operators, retailers, payment providers, OEMs, and of course consumers seek to benefit from the innovation going on, could mobile payments end up being something of a mythical El Dorado city of gold?
Traditional players are joining forces in some areas and appear to be thinking creatively, but do they have the agility to succeed? And what chance do startups have in taking a share of an industry which is set to be worth $235.4bn (£153.8bn) by the end of 2013?
I spoke to two mobile payments specialists, Michael Nuciforo, futurist and former head of mobile at RBS and Australian bank ANZ, and Roy Vella, ex-PayPal and Visa Europe exec, about the current state of the market. Both now work as consultants advising major players in the mobile payments space so we asked them who they think ultimately wins in a crowded market like this. Does the market own the customer, or will consumer choice prevail?
Truth or crap?
While a lot of noise is being made from vendors selling ‘the next big thing’, both men urge caution. “We need to distinguish between the truth and the crap,” says Nuciforo. “When we look at what’s happening in the market, the first thing you have to understand is that a lot of the announcements that you see are purely that, they’re not necessarily fully functioning services.”
Although consolidation may help, Vella doesn’t see this happening any time soon: “I think money’s going to get more fragmented not less. The idea that there’s a winner in mobile money is just PR.” And as operators, banks and payment providers continue to carve up their customers, Vella adds: “This ‘we’re going to own the customer and that’s going to be forever’ is ridiculous. That’s never going to happen again. It’s now as easy to move as a touch of the finger.”
Initiatives from the biggest names in the payments industry have been slow to start or are yet to take hold but Nuciforo is betting on the banks, at least in developed markets: “Joint ventures like Weve really have to rely on coming together and trying to attack the market as a group because if they were to do that on their own, they would have no chance. But success really depends on regions and market sophistication. "In Europe, the UK, the US and parts of Australasia, I think the banks stand the strongest chance from the perspective that they have the opportunity to come together, which a lot of them still haven’t yet,” says Nuciforo. “Most importantly, payments are driven by the fact that your salary is paid into a bank account."
Vella takes a more critical view of these traditional players. “The banks and the operators are both trending towards commodity utilities. They’re just a central clearing house for data. The one who’s going to win is the one who provides the most convenience for the customer at that time for that particular transaction. "But it could be any brand. It could be Tesco. It could be Virgin. It could be Apple. People have brand affiliations that they like and if that brand offers them service and convenience and value, that’s what they’re going to use.”
Middlemen will lose out
He sees the traditional customer-merchant relationship coming back to the fore. “I think merchants and consumers are going to connect directly in as many cases as possible,” Vella says. “The losers are going to be the intermediaries like Visa and Mastercard who are trying to connect the dots between two individuals. That clearing system in the middle is not required anymore. If they’re not worrying, they ought to be."
In the US, the likes of Walmart, Target and Gap have come together as the Merchant Exchange to seize on the energy of mobile payments. Vella points to the potential of closed-loop merchant systems: “The most successful mobile money implementation in the developed world today is run by a coffee shop. Starbucks is holding $1.5bn in balance. Coffee that’s been purchased but not even drunk yet. “What we all forget because we weren’t born then is that payments used to be run by the merchant. In the 40’s, 50’s and 60’s, they outsourced payments to Visa and Mastercard and now they’re going to insource them back.”
He sees this as a key time for shoppers to reassert themselves. “Consumers are definitely flexing their power in terms of transparency and understanding the market. They are going into retail stores now and bringing their phone with them and they know exactly the price of the item in front of them, globally, in every currency and they know how well it performs. I know what I know, and what everyone else I know knows, and what everyone they know knows," he says.
The future is Square
So what of the weekly announcements from mobile money startups? Nuciforo is sceptical. “It is difficult to see a big player emerge though there is a lot of interesting tech coming out. Eventually I see a huge amalgamation of all these startups; some of them will die off, some of them will be bought.” Vella is more keen. “The future is Square [Wallet]. I don’t touch anything. I walk in and I walk out. I don’t want to touch my phone, I don’t want to touch my wallet. That’s the world we’re going to live in.”
Both point to biometric as the next battleground. In Nuciforo’s native Australia, where the futurist usually looks for consumer trends yet to hit the UK, his former employer ANZ bank is already investing a huge amount in fingerprint cash machine. He says the next step for this would be fingerprint payments.
NFC, a key element of the Weve Wallet to launch mid-2014 is a pet hate of Vella’s. “One, it’s not fast and two, nobody cares,” he said. “The difference between swiping, chipping and pinning and almost touching a reader – nobody cares. That’s not important. No value has been added. "Eventually maybe it’ll be biometric - the whole Minority Report thing - we are not far from that."
Written for Mobile Marketing Magazine and first published here: http://www.mobilemarketingmagazine.com/content/goodbye-visa-hello-fingerprint-payments#GAyGfT9ZvJLsIImV.99