You know that big search giant? Google, that’s the one. Their Mobile phone operating system Android is doing pretty well.  I happen to think their next big thing is payments.  Want to know why?  Read on…

Since Google announced their Google Wallet, mobile payments went mainstream.  You as a customer probably think, why do I need my credit card on my phone, I’ve got a card in my pocket right?

I have a lot of sympathy with that view.  If you want to pay your credit and debit cards work pretty well.  You know where you stand with a bit of plastic. Check out the video above for a quick demonstration of what Google propose replaces your plastic

Why put payments on your phone?

Because it’s just downright handy that’s why.  It fits into your pocket better than a wallet stuffed with everything and you’re more likely to have your phone with you, even when you don’t have your wallet.  You already prefer your phone to your wallet, payments are just catching up with you.

That’s nice, but why do banks care?

Whenever banks care about something, it raises an eyebrow.  They’re not known as an altruistic bunch.  The banks care about keeping you as a customer.  You are valuable to them in that sense.  With Mobile Network Operators, Visa and now Technology companies launching a wallet, the threat of losing you looms over the horizon.

Banks may not make much money from being involved in wallets, in some cases they actually lose a little money because the fee’s they make are a bit less on contactless or mobile payment transactions

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The business case for banks

The problem is until it makes money, banks won’t run towards mobile payments.  As much pressure as they’re under to improve customer service now that tax payers are a major investor the pressure to survive and not go under is greater.  So banks have to figure out how to make money out of Mobile Payments.  The Math goes a little something like this.

Cost Reduction

• Customers who have more than one card – reduced – less plastic cost
• Cards never need replacing – less plastic cost (as adoption grows)
• Drive customers to self serve on mobile – less branch / contact centre cost

Opportunities

• Coupons / deals using mobile device – unknown benefit
• Context sensitive advertisements (buy it now) – unknown benefit
• Value added services such as Personal Finance Management

It’s clear adoption is going to be crucial to getting any benefit from Mobile Payments.  Without regulation or a mandate from Visa / Mastercard this could get messy.  The opportunities require banks to provide you with offers for things you are likely to buy and use their card to buy with.  Look for offers in your mobile wallet to become common place towards the end of the decade.

The long road to adoption

When it comes to adoption, the Merchants are crucial. From Tesco and Walmart right down to Papa Joe’s little ice cream place.  In the next 5 years, the big names where you do your weekly shop, will change the devices you use at their checkout.  When this happens, there is a good chance they will put a contactless device there.

The temptation to merge their mobile marketing and payments capability will lead to increased adoption.

What happens next

One thing is for sure; Google will seed the market at a loss, and make money from the advertising. That will be tough and near impossible for anyone to compete with, without closing them out through regulation or lawsuits.

Your data will be the price of all these free new services.  So don’t worry about new charges.

• What are your thoughts about how Mobile will play out?
• Will banks invest to work with Mobile Payments?
• Who will win the Mobile Payment race?