The Breakthrough of Mobile Payment within the Bank 2.0 – Era

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More than 10 years ago, when I was at CeBIT in Hanover, we had this great idea of “Mobile Payment”. The case: Pay via your mobile carrier’s bill. The problem: The carriers wanted to earn their fortune with mobile transactions. The consequence: “Mobile Payment” was too expensive and – in addition: Carriers wanted to limit the transactions to micropayment. The banks were still busy with implementing “mature” Online Banking solutions.

Now, in the era of smartphone apps and Near Field Communication (NFC), there are new rules of the game. NFC is expected to become the most widely used system for making payments with smartphones. Apps will allow customers to manage their financial ship everywhere and around the clock. This is the chance for new business models in this field. Nobody will be dependent on mobile carriers or banks. New players will supply this “market niche” with new financial services. Candidates like Google, VISA, Paypal, Apple, FaceCash and to date unknown new service providers (and maybe “facebook”?) will now take the lead.

But, what is the new business case? Just pay your shopping in the supermarket with your Apple, Microsoft, Blackberry or Android phone? Perhaps that’s the case and just leave your physical wallet at home, take your smartphone. But – “by the way” – you will get credits and deductibles from your retailer. You will be noticed to special offers and new products. And you will scan the products barcode of your milk carton with your phone app as soon as milk is running short – this will be the reminder for your next shopping in the supermarket. There are really lots of business cases for Mobile Payment and new service providers in the Bank 2.0 – era.

There are new conditions: Payments will be moved to the new built frontend layer (and app layer respectively) which is controlled by the “app marketplace provider” Google, Apple, Microsoft and RIM, but not by banks or carrier. Primarily “underbanked” customers*, but also profitable customers will be abondoning the old ways of payments to go for the utility of a combined mobile phone and payment device.

“The bank becomes the back-end manager of risk and the product manufacturer, with the lowest margin of the whole value chain.” (Brett King, http://www.banking4tomorrow.com/2011/09/when-a-telco-becomes-a-better-bank/)

In addition to the technological and customer behavior caused impact of mobile payment, Brett King, the author of Bank 2.0, mentions another two arguments for the breakthrough of mobile payment (Brett King, http://www.banking4tomorrow.com/2011/09/will-the-us-be-the-last-to-go-cashless/):

  • “Tighter money laundering requirements”
  • “Cost of physical handling versus electronic transactions”

Like Enterprise 2.0 (and Web 2.0 respectively), what is about content and context (see [Domb11]), Bank 2.0 and Mobile Payments respectively are about transactions and context (see also http://www.banking4tomorrow.com/2011/06/google-wallet-is-not-about-payments/).

A good overview of Mobile Payment players is given by G+ (see G+, https://www.gplus.com/_Media/GLG_Goodbye_Wallets2-L_1841.png, this is a link to G+ and not a picture from the author of this article). One contender still missing in this big picture is Apple – but maybe we must wait only a few days (or months?)… Another list of the companies in this field could be seen on FaceCash (see http://www.facecash.com/versus).

References:

*) Less profitable customers at the lower end of the scale for retail banking. This term is described by Brett King in the article “When a Telco becomes a better bank” (see above).
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