Over the last weeks, we saw multiple announcements around mobile wallets:
o Partnerships between Visa and Samsung announced at the 3GSM in Barcelona
o Introduction of MasterPass by MasterCard
o Launch of Isis
All these announcements are interesting and represent good steps towards the construction of a real mobile payment ecosystems. However, we do not believe that they are sufficient steps yet to guarantee the success of mobile payments.
The telecom industry has always been more technology driven (NFC) than consumer driven, and mobile payments is not an exception. The most shocking example of this is the lack of consideration/integration of the needs of the retailers: they are needed to get on board to allow mobile payments to take off. Among all the announcements, we hear about Samsung, Visa, MasterCard, the carriers … but where are Walmart, Best Buy, McDonald’s?
To get retailers on board, some conditions are required:
– In terms of payment, retailers are not likely to adopt cloud-based solutions. They will definitely prefer “card present” solutions, where the risk of fraud is lower, and the interchange fees lower. This will definitely favor NFC-like technologies.
– Retailers are not likely to adopt solutions which would be limited to certain types of devices, carriers or card networks. Scale matters. And this makes the adoption by Apple of NFC a critical decision.
– Another question to crack is the real benefit of a mobile payment: saving a fraction of a second by tapping a phone instead of swiping a card is not interesting enough for the retailers to convince them to invest money in new readers and employee training. Mobile Payment needs to come with something more viable.
The good news is that the “something more” exists, although it can take different forms depending on the type of merchant:
o Loyalty / couponing: use the mobile to engage with the consumer, identify him/her and follow-up with him/her.
o Local search: use the mobile to increase visits and shops, and lure people passing nearby into the store.
o Customer experience: use the mobile to ease / speed up the check in (pre-order) and check out (pick-up, payment) processes.
o Enhancing the experience: use the mobile to bridge online and retail/proximity commerce.
Retailers are more likely to adopt a full solution than to try to assemble the pieces by themselves.
If you don’t come to retailers, they will come to you.
– The irony is that retailers, at least the most innovative ones, might be too impatient to wait for the carriers, the banks and the card networks to come up with an interesting package.
– We expect to see more and more the retailers taking the lead on these mobile commerce initiatives.
– This would mean a “retailer centric approach” for mobile commerce, instead of a “carrier centric” or “bank centric” model.
– A few examples
o Starbucks: the Starbucks wallet allows to pay at Starbucks and also to discover other places and get deals.
o The MCX initiative between Walmart, Target and Best Buy
– It’s certain that the retailers are the best positioned to understand customer needs, and they can develop their applications “over-the-top”, working on any device with every carrier.
Does this mean that banks, carriers and card networks are completely out of the game, here? Not necessarily. Here is why:
o Many retailers do not want to enter the payment business as such. They value the mobile for its communication and interaction capability, and can rely on traditional players for the payment itself. For instance, the Starbucks wallet is based on the existing payment card networks.
o Implementing fully secured technologies, like NFC payment, cannot be achieved without partnerships with the device manufacturers and the wireless carriers.
However, some retailers, especially the largest ones like Walmart, might try to grab the full scope of services, including payments, to generate savings on the interchange fees that they pay to card networks. Their scale might allow them to build their own payment network, exactly as eBay did with Paypal.
