Foreign Service: International m-commerce hits and misses good lessons for U.S.

From the Spring 2008 edition of CTIA’s Wireless Wave article entitled “Foreign Service: International m-commerce hits and misses good lessons for U.S.”:

M-commerce already is de rigueur in many parts of the world. It’s the means by which many people pay for the subway, buy movie tickets and do their banking. Although the United States is making progress, to learn more about m-commerce and see where it has succeeded – and struggled – it’s more illustrative to look abroad, as many other parts of the world are more significantly involved in this technological area than the US.

The article goes on to describe the different forms of mobile payments technology and approaches. m-Via’s own Ken Kruszka was interviewed for this article and is quoted explaining the company’s focus on mobile remittances.

To read this article and view other media coverage, please visit the Media Coverage section of our website.

Pay By Touch, an idea whose time has passed

The payments industry is a fast-changing place, where the next great thing can quickly become obsolete. No one knows this better than Pay By Touch. In case you’ve missed the news (here and here), Pay By Touch’s founder, John Rogers, has filed for personal bankruptcy, while the company itself is fighting for its life against an involuntary bankruptcy petition.

Pay By Touch’s pay-with-your-finger approach was an interesting idea. But, let’s explore the reasons why it has failed. First and foremost, the company’s problem stems from the fact that its solution requires specialized hardware at every point-of-sale location. Compare this with Visa’s payWave and MasterCard’s PayPass initiatives. Even with the deep pockets that these organizations possess, convincing merchants to pay for new hardware to process payments under a new paradigm will take years before critical mass is reached.

Second, biometric payments have been bypassed with the emergence of mobile payments. Consumers don’t mind using a device to make purchases; they just won’t accept having “yet another” device that they have to carry around. But, with mobile payments, consumers simply use their mobile phones as the payment mechanism. And, according to recent surveys, people are more likely to forget their wallets than to leave the house without their cell phones. So, the mobile phone is already a must-have device.

Mobile technology also has some great advantages over POS biometrics:

• Mobile payments can be conducted remotely.
• Mobile payments technology can give you more than just payments. You can also do balance inquiries, check transaction histories, take advantage of mobile coupons and more.
• Mobile payments work anywhere you are, anytime you want.

Pay By Touch failed because its solution was made obsolete before it gained critical mass. Pay By Touch failed by trying to build a new consumer brand (a strategy that wasted $300 million from investors). Pay By Touch failed because the value proposition wasn’t great enough to convince consumers to change their behavior.

A Tale of Two Markets

m-Via’s Chris Sorensen tells “A Tale of Two Markets” in the November 2007 issue of Intele-Card News.

“Like many early stage technology markets, the mobile payments market is starting to split into separate sub-markets. The first sub-market includes both m-Banking (checking bank account balances, transferring money between accounts, locating bank branches, etc), and m-commerce (using a bank account, credit or debit card associated with a mobile phone to make purchases from the phone, pay bills, and buy prepaid airtime).

The second sub-market could be termed ‘m-unbanking’ which focuses on using mobile phones to provide financial services to the roughly 70% of the world’s population who do not yet have a bank account, credit or debit card. …”

The full article is available here.

Showing value to overcome consumer doubts

The naysayers are out in droves. This time it’s “Mobile banking must overcome consumer doubts.” Yes, it’s natural for people to have fear and doubt about new things. Such is human nature. People like constancy.

But, mobile payments and mobile banking are no different than any other new technology that has every been introduced. And in that regard, the solution to driving adoption is already known: demonstrate undeniable value.

The value proposition is the key to driving adoption of mobile financial services. And that is precisely where mobile banking fails. Mobile banking, at this moment in time, does not offer enough value for people to look beyond their fears and apprehensions. Mobile banking is just another way for people to access their bank accounts. But, people can already access their accounts almost anytime they want. Therefore, we’re seeing that, in terms of mobile banking, the main benefit seen by consumers is the up-to-the-second balance inquiry ability. Yes, that is a very helpful feature in today’s always-on-the-go world. But, it’s not enough.

The greater value proposition is in mobile transactions, such as mobile remittances. Mobile transactions provide undeniable value to a systematically underserved market segment: the unbanked. There are over 40 million unbanked people in the US alone. And, roughly 70% over the world’s population is unbanked.

Mobile transactions bring the financial services infrastructure to this untapped consumer. Mobile transactions raise this consumer to a first-class financial citizen. Mobile transactions provide necessary tools that are currently unavailable.

So, when pundits debate the readiness of consumers for mobile banking, they are missing the whole point: Mobile banking is a vitamin, but mobile transactions are a pain pill.

Western Union’s entry is good for mobile remittances industry

Western Union, GSM Partner for Global Mobile Money Transfer Service was the headline of a press release a couple days ago.

We expected to see this announcement some time ago (even before the GSMA announcement in February). It will be very interesting to see how Western Union launches a mobile offering without creating conflict for their franchisees.

This is good news for the mobile payments industry – the most difficult and expensive part of building a new market is converting non-customers into potential customers. Western Union will spend a significant amount of money educating their consumers about the safety and convenience of mobile remittances. Once they have done the heavy lifting, it wil be easier (and cheaper) for competitors to lure away the converted users with better services and pricing.