The Bay Area Mobile Payments Series focused on the US market last week with the topic “Is there REALLY a market for mobile payments in the US?”. The event was hosted by the Harvard Business School Technology Alumni Association, Wharton Club of Northern California and Google and moderated by Menekse Gencer of mPay Connect. Read on for my comments on the panel discussion.
The panel consisted of:
- Dion Lisle – Citi Growth Ventures and Innovation – Citigroup
- Arjan Schutte – Associate Director, The Center for Financial Services Innovation providing Research and Venture capital to the under banked
- Dhidha J. Timona – President, Shaka Mobile, MNVO targeting immigrants remitting to Africa
- Scott Shaw – Board Member AliasWire, Previously Senior Executive VP Kessler Financial Services. (Their mPay solution enables credit card account holders to directly transfer funds to any domestic card or bank account via ACH or pin-less ATM credit with a 2% sender fee)
- Gabriel Torres – Vice President of Business Development, Affinity Global Services with a focus on cross-border remittances.
Secrets to Success
While the points were generally teased out over the entire conversation, the panelists discussed the secret to success of mobile payments as the following:
- A strong use case
- A good price
- An attractive target segment
- Points of presence or market coverage
By points of presence we are referring to the points to put money in and take money out of the mobile payment solution. The target segment needs to have access to both.
For example: Those solutions that have access to the target customers’ credit cards or bank accounts have many points for putting money on to the phone. The mobile payment solution also needs sufficient points to use the mobile phone as payment or to withdraw the funds. This includes significant coverage at relevant points of sale, appropriate billers or desired remittance locations as appropriate for the target customers.
The discussion began with a brief overview of the market and types of mobile payments. The US market has grown up differently than other countries with high costs making the US slow to pick up texting and other mobile services. A key distinction between the US market development and the rest of the world seems to be that other countries have developed successful Mobile Network Operators (MNO) owned and operated mobile payments offering.
Arjan reflected his concerns that sophisticated payments channels are ubiquitous in the US, so there seems to be no clear advantage to pay over the phone. The unbanked may present a target segment as there are more people with a cell phone than a bank account and mobile payments can bring them services they cannot attain without a bank.
Dion from Citibank pointed out that price has also been a key driver of adoption of mobile services. Consumers have free payment channels including exchanging cash and therefore are less willing to pay fees for mobile payments.
The panel discussed use cases as a key success factor and quickly focused on remittances as an attractive use case for mobile payments in the US. It seems the panel has not had positive experiences with the P2P market and were still looking for the “killer application” of that capability. Since some foreign countries have sophisticated mobile money transfer markets, Shaka Mobile is finding opportunity in targeting African immigrants familiar with mobile banking. Gabriel with Affinity Mobile is focusing on the Latin American customer. Points of presence can be a key success factor in the remittance market and Affinity Mobile has recently announced a strategic partnership with MoneyGram to attain access to their extensive physical presence in foreign markets.
To combat the challenge of making consumers comfortable using the phone for payments, Arjan identified the company iSend that has focused on bill payment as a new channel for remittances. iSend is in the international bill payment and cell phone refill market. Their strategy is to enable remittances through the Bill Payment process allowing the sender to control how money is used. As a consumer pays their bills, they can also remit money to pay bills for family. Bill payment is a known / current behavior and so adoption of remittances through this channel has been fairly high.
For those interested in financial services for the un- and under-banked, check out Denari Payments in Atlanta. Sizzle Money is a mobile stored value product that enables mobile money access, payments and sharing. It employs an SMS-based mobile technology and includes person-to-person, merchant payments, remittances and a prepaid card for physical retail and ATM environments. They are particularly interesting for their “MaryKay approach” to reaching the underbanked with ISizzle Representatives reselling their kits to their communities.
The panelists also answered questions concerning identity in the post 9/11 USA and the challenges to support some consumers desire for anonymity.
The Starbucks iPhone App
The audience was delighted at the end of the evening with a surprise appearance of mFoundry to discuss their new Starbucks application (see previous Payments Views post here) that creates a prepaid card management tool with a 2D barcode that can be read from the phone at point of sale. The hope had been that this required no infrastructure changes, but unfortunately, it seems Starbucks is adding to their traditional POS devices to read the new bar codes. A very interesting implication is that this application does not involve the mobile network operators at all.
Mobile Payments Needs a Match…
In the end the conclusion was that mobile payments is “straw and someone needs to be the match.” The Silicon Valley is rife with smart people looking to launch the next great thing.
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Suggested reading: The Tipping Point: How Little Things Can Make a Big Difference
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Hope to see you all at the Vlabs MIT/Stanford event Mobile Wallet: Can your phone replace your wallet? on October 20th – Glenbrook’s Russ Jones is planning to attend.