Mobile money and wallets (paying for things with your phone) have been all over the news recently. Many companies see a valuable income stream flowing from such payments and they’re all setting up systems in the hope that theirs will become dominant in the market.
Many of the companies behind mobile money come from different sectors, and the sectors they come from indicate their motivation. So let’s take a look at who’s after your money.
Perhaps the most obvious sector, is the one who’s dependent on making money from your cash: payment companies like Visa and Mastercard. Both have invested in mobile payments systems. They believe that payments will, over time, move from credit and debit cards to smartphones. They already have the systems in place to process payments – Visa processes $4tn worth of payments annually – and they make a small sum for every transaction. For payments companies, mobile payments are the future of their industry, so they’re making sure they’re part of it.
Mobile network operators, including recently rebranded EE, Vodafone and O2, are facing a fork in the road. One path leads to them becoming providers of wireless data. This path essentially makes them utilities like energy suppliers or water companies. This low-growth, generic product path is one they’re absolutely petrified of. The other route they can take is the horribly jargon-ised “move further up the value chain”. The idea is to provide services to customers that add value beyond data and phone calls. The operators hope that one of these additional services will be payments. The beauty of mobile payments is that they offer strong growth potential and that payment processing fees to do not fall directly on the consumer. So exciting are the potential revenue streams, that EE, Vodafone and O2 have worked together to build a common standard for mobile payments.
Loyalty schemes have been one of the great innovations in retail history. Such schemes have enabled retailers to move from marketing their wares to segments of society, to marketing to individuals. Mobile wallets would enable them to capture more data by ensuring they record online purchasing data as well the offline purchases at the tills. It means they’ll never miss a transaction.
Internet and Technology Firms
Google already have a wallet, Apple have taken tentative steps with the creation their Passbook and start ups like Square and iZettle are bridging the gap by providing card reader attachments for attachments for smartphones. The Googles in this space are driving innovation partly because they’re in an industry that is changing rapidly and those who don’t innovate fail, and partly because, like retailers, they seek to add to their vast stores of consumer data. The Squares and their ilk are in the market because they seek to disrupt the payments industry – either by usurping Visa and Mastercard or by adding a whole new group of consumers and small businesses to the electronic payments industry.
So who’s going to win?
In the short term, no one is. Cash and cards remain at the centre of the payments ecosystem. That’s not going to change in the short term. However, systems like Square, which incorporate card readers but also go beyond those to visual recognition and automated payments, will be common in the not-too-distant future. A lot of money is at stake and a lot of companies are fighting for a piece of it.
When winners do appear, there won’t be many of them. Much like the smartphone ecosystem battle, retailers and consumers will gravitate to one or two systems. So the race is on to find out who’s able to get your money from your phone.