Mobile commerce is one of the hottest areas of development in the wireless industry today. Almost daily, we see news of an acquisition or partnership, a hot new company, or new product initiative in this area. Startups such as Square, shopkick and Navette are trying to either disrupt or engage a complex ecosystem involving the major wireless industry players (operators, chipset manufacturers, handset OEMs), Internet giants and e-commerce players (Google, Apple, Amazon, Facebook, eBay/PayPal), and entrenched banking and payments networks (banks, credit cards, terminals).
But for those participating in, following, or consulting to the space, a question: what does the consumer really want here?
My first, likely contrarian point, is that I don't think the consumer is really clamoring for big change here. Most consumers have a pretty entrenched banking and payments infrastructure already, consisting of bank ATM/debit card(s), a couple of credit cards, and perhaps a charge card associated with a favored merchant or two (Best Buy, Sears, etc.). Electronically, they might have a PayPal account, and "one click" relationship with Apple and/or Amazon. And, 50 percent+ of households do some sort of online banking, which has proven to be a huge retention tool for the banks.
Many consumers go out of their way to tie as much of this as possible to one or two favored debit or credit cards, for the primary purpose of accumulating points in their preferred loyalty program (airline, hotel, cash back, etc.). So, I would suggest that any m-commerce initiative that takes consumers far afield of their existing payments "infrastructure" is going to meet some pretty heavy resistance, unless there is significant incentive to do so. (Caveat here: When it comes to m-commerce, every country has its unique variables, hence my comments are focused primarily on North America).
Second, if the phone is going to become a mechanism for payments, I think consumers want three things: the ability to perform new types of transactions; making certain existing transactions quicker and easier; and a system that works with their existing payments infrastructure (or offers really attractive other incentives). An example that hits all these notes (not on the phone yet) is Boston's Charlie Card, which is used to pay for the city's public transportation. I load it up, and pay for my fare with a gentle tap on a terminal when entering a station or boarding a train. It even works through my wallet. To refill, I simply tap it on a payment machine at a station--a two-step process that takes less than 5 seconds, and is charged to my credit card. Another good example: the New York City taxi system, which has the twin benefit of now accepting credit cards, with a quick, reliable and intuitive system.
Contrast this with a Starbucks' new phone-based app, which I would call a breakeven proposition. On the plus side, their NFC app works well, I can see balances and payment history on my phone, and I don't have to carry around my Starbucks card anymore. On the downside, the process takes longer than the previous practice of giving them my card to swipe, and offers no significant benefit other than a modest "cool" factor. In isolation, the Starbucks app is fine, but would you want to invoke an "app" for every major merchant you deal with on a regular basis?
What I'd love, as a consumer, is to have my phone become my new "Charlie Card," except that it would be used for a much broader range of transactions--the types that have historically been resistant to cashless payments--and where the hassle factor would be significantly reduced. For example, it would be used for parking meters, parking lots, vending machines and ball game food. And in order for this to work, there has to be one system that works similarly across a large variety of day-to-day transactions: not a different system or unique set of interfaces for parking meters, another for vending machines, and so on. And certainly not a separate "app" for each major vendor or merchant. Also, it should all work off an existing, preferred credit or debit card (one of the reasons iTunes has been successful).
Third, let's talk about te user interface. To begin with, we're not going to re-invent the world by merely moving from "swipe" to "tap." Perhaps we should even be looking beyond "tap" for certain types of transactions, to something even more frictionless. How about the EasyPass or open road tolling experiences, applied to mobile?
Finally, there is a confluence of user demand, unmet need, and industry opportunity with regard to small transactions and small-to-medium-sized businesses. Mobile payments are perfect for the types of small transactions that credit card companies have discouraged, and merchants have historically eschewed due to high credit card processing fees. Either the credit card companies will develop a structure that is more amenable to small businesses, or someone will come along or disrupt. On the merchant side, Square's approach is exciting, because these are small businesses that have historically not had an easy way to physically accept credit cards or other forms of electronic payment. And, Square's proposed business model is developed with smaller businesses in mind.
The technology for making some of the above scenarios a reality is for the most part already here. Examples exist all over the world, in their own little silos. But "creating a market" for mobile payments will require several ecosystems to both align and change. Big, entrenched companies across several industries will have to figure out how to open the payments world to smaller businesses and small transactions, in a way that the relevant parties can somehow make money. Way easier said than done.
Mark Lowenstein, a leading industry analyst, consultant, and commentator, is Managing Director of Mobile Ecosystem. Click here to subscribe to his free Lens on Wireless monthly newsletter, or follow him on Twitter at @marklowenstein.