What’s holding back Mobile Payments?

It’s a complex picture, but so far the Solutions have come from two angles.  The first is from the banking sector, which is historically complex, and evolutionary.  As such we have product offerings packaging a prepaid card, with mobile services, tied to one operator and one bank…  The definition of a silo.

The second is from the technology sector.  In the past 5 years companies have been able to revolutionise advertising, media and traditional retail using a combination of technology & business model change.  Yet despite several complete implementations and product offerings, that would be enough to revolutionise or even create some market sectors, Mobile Payments have not taken off.

The businesses using the latest technology, software and business models have missed a critical element of the banking sector.  The banks themselves are the largest gatekeepers to change, and are often so slow to adapt they move forward with Scheme and Legislative mandates rather than through any entrepreneurial spirit.

The critical mistake made so far by existing solutions, appears to be the focus to sell mobile payments to the consumer, without considering the merchant or bank.  Many of the solutions are also technologically complete but unable to interface with existing banking business processes & Infrastructure.  The Open solutions allow anyone to become a merchant and completely bypass the existing network.  Whilst Square has focussed on the Merchant, they offer nothing to the consumer that is new & none of the banking security that comes through a regular Merchant account.

Neither Payment Silo’s nor Open Payment Platforms will gain ground without a killer feature or major unique selling point to the Merchant.  The keys to an adoption of a new model have historically been Simplicity, Compatibility & Universality.   TSYS is uniquely placed to provide this.

Lessons from Technology Companies

The story of how Apple ‘evolutionised’ their way into a market leading position with the iPod and iTunes is a great case study for how to approach the Mobile space.  The iPod when it launched was “just another MP3 player” however its unique selling point was the wheel interface.  Being intuitive there was a low barrier to adoption from a usability standpoint.  At the time the only solution had been illegal Mp3 downloads, or by ripping your own Mp3s from legally owned media.

Apple coupled their iPod launch with the launch of iTunes.  By coupling a business process, and media supply channel with the technology change, Apple positioned themselves uniquely for the coming move away from physical media by the consumer.  Despite the resistance of the recording industry Apple subsequently came to dominate the Music Sales space.

Scheme Dominance

Critical to understanding the slow uptake of Mobile Payments is the Schemes themselves.  Visa and Mastercard have piloted payWave and PayPass respectively.  Despite this the schemes have not issued any mandates like they have with DDA / PKI security.  They are in no hurry to jeopardise their position as Gatekeepers to the Point of Sale.

SEPA (Single European Payments Area) and GSMA (Trade Group of Wireless Operators responsible for the SIM card standard) have recently launched a consultation on mobile contactless payments.  The likleyhood is that before we get any real movement on Mobile Payments, we’ll need a Compliance mandate to make it happen.  History teaches us that banks move slowly to protect their dominance.  I expect this trend to continue.  How about you?