Rajesh Jayaraman

Drivers for Payment Innovations - Mobility

The new century dawned with feverish excitement that mobile commerce will enable people to buy goods and services while driving or while waiting for a train. The promise of ubiquitous computing has remained largely unrealized so far.

Back in 2001, Boston Consulting Group published an article that asked the question Mobile Payments: The Next Revolution or a Failed Coup?. They concluded that intimate co-operation between the various players in the mobile payments ecosystem is necessary for the mobile payments promise to be realized. These prescriptions continue to remain valid even today:

  • A compelling consumer payment experience that is smooth and adds perceptible value to the user
  • Mobilization of merchants with a clear near-term value proposition
  • Leveraging existing payment and settlement systems and telecom infrastructure.
The important issue at hand is whether the new crop of mobile payments players (Paypal, Obopay, TextPayMe) have these alliances worked out. It is clear that none of these companies are looking to invent their own payment networks or telecom infrastructure. But, the value to merchants and the user is not immediately apparent.

However, the increasing power and penetration of mobile devices bodes well for the latest round of mobile payments efforts. Teenagers, business users and gamers are already very comfortable using mobile devices for text messaging, email and gaming. Adoption may prove easier among these users. It is important for mobile payments startups to initially target user segments that feel at home using their mobile devices for new and innovative applications.

On the merchant front, mobile payment solutions need to either invest heavily in marketing the benefits of accepting mobile payments to merchants or figure out a way to route transactions to the merchant such that the merchant does not need any new investment. Paypal mobile is trying to side-step the merchant acquisition process completely, by trying to replicate the model that made it so successful on the Web. Start with a peer-to-peer service and expand to merchants after users are hooked to the service. Merchants are already battling the card networks over interchange and it will be interesting to watch how the battle for the hearts and minds of merchants will be won by the mobile payment startups.

Mobility will be a big factor in the payments landscape over the next few years. The direction of evolution of mobile payments and the nature of applications that will succeed are not clear. One thing however is certain; Mobile payments will not go the way of Artificial Intelligence, the technology that always held great potential but never delivered on its promise.


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