Apr 19, 2009

A counter-intuitive way to make mobile payments irresistible

Put loyalty and prepaid cards on mobile phones first, which will create the desire to have credit and debit cards as well, integrated into a single transaction. Going the other way, credit cards first, will be extremely challenging. The difference is the value proposition to customers and retailers.

The main promise of putting credit and debit cards onto an NFC mobile phone seems to be, "you can leave home without your wallet". That promise is impossible to deliver until the vast majority of retailers accept NFC payments. Customers still have to carry around their wallet, and, from the merchant’s angle, if customers have other payment methods on them anyway, the value of accepting NFC payments is limited. The promise is empty.

Some other promise is needed. How about, “tap your phone, instead of pulling out your wallet”? That promise can be delivered now, but is it really valuable? The difference between tapping your phone and pulling out a card is questionable in the vast majority of retail environments, except transit. The contactless promise was, “no more lines”, but removing the need for a signature on all transactions under $15 suddenly made traditional magnetic stripe transactions just as fast as contactless. Many people are working at linking the tap and go transaction to interactive information on the handset, to enhance the customer’s experience. Something may in time produce an exciting promise there, but there is a very high likelihood that it turns out that the value is in the application on the handset, and that the promise will be deliverable with traditional payment methods as well.

On the other hand, with loyalty and prepaid cards, Taggo’s promise is, "no more fat wallets". This is a much easier promise to deliver. As soon as one retailer is equipped, that retailer's card can disappear from your wallet. Poof. Gone. Whereas credit and debit cards will stay in your wallet for many years to come.

I see loyalty and prepaid cards going onto phones first, then pulling credit and debit cards on in a second phase. The promise for doing this would be, "no need to pull out a payment card when you use your mobile phone for loyalty".

3 comments:

White Magpie said...

Long time no post. Hope you haven't pulled the plug.

Toffene Kama said...

The prepaid cards, i mean vouchers have changed the telco industry and allowed many operator to reach millions of subscriber. I see Universal Vouchers this as a natural replacement of Visa/MasterCards in most emerging markets.

Many initiative in the mobile money space but most lack of real innovation. Offerins are a replication of what exists in Western Europe or North America where the market is very different.

Second error i see is this assumptions that poor people want bank accounts. When you have less than 1$ per day, the main question is not not have bank account but to earn more.

Adding mobility is not enough as we have recently seen in the mobile internet space. Many billions $ have been wasted into operators mobile portals or multimedia content without a real innovation ...until RIM and Apple came into the market.

I sum, Mobile Coupons and Vouchers are the universal mobile payment method... and it is likely to happen in the emerging markets.

this said, building a true ecosystem where mobile operators have a serious role and can convince more subscribers is key.

Toffene Kama said...

The prepaid cards, i mean vouchers have changed the telco industry and allowed mobile operators to reach millions of subscriber. I look at this is a natural replacement of Visa/MasterCards in most emerging markets.

Strangely, most offerings in the mobile money space are replicating what exists in Western Europe or North America where the market is very different.

I am also very surprise by this assumption that poor people in Africa want bank accounts. When you have less than 1$ per day, the main question is not not have bank account but to earn more. Mobile phones are successful as they allow micro-business get in touch with their partners.

Adding mobility is not enough as we have recently seen in the mobile internet space. Billions of $ have been spent in operators mobile portals or multimedia content and this promise of internet connection everywhere, without much real added value for the end user ...until RIM and Apple came into the market.

I sum, Mobile Coupons and Vouchers are the universal mobile payment method... and it is likely to happen in the emerging markets.

this said, building a true ecosystem where mobile operators have a serious role and can convince more subscribers is key.