« Russell Moves Blog | Main | No Future for The Feature »
June 29, 2005
Mobile Payments: Why exactly?
Mobile payments have been hyped as the Next Big Thing for quite a while now. Contenders have come and gone (Paybox, anyone?), but still there is no champion in sight.
I've been reminded of this by Russell's post about a promising upcoming payment provider here in Germany, the unaptly called crandy with a current subscriber base of 250,000. Also, Smart Mobs points towards an article called "Cell Phones vs. Credit Cards: The Battle Begins".
Make no mistake: the stakes are huge! Whoever manages to introduce some serious competition to the banks is well set to be Da Rula, at least for some time.
Keeping in mind I am seeing this from a German market perspective (world's third largest economy), here are a few thoughts regarding mobile payments.
- Why is everyone assuming that, given most people own a mobile, they want to use it for payments?
- The mobile phone is competing against the wallet. Together with your key chain, these are the three items you are constantly carrying on you (why not a key-based payment system, then?)
- Your wallet includes two or three payment systems, at least here in Germany: Debit card, credit card and GeldKarte (more about this later)
- You will invariably have a bank account. Using a payment system which is directly connected to your account (as opposed to indirectly as in mobile payments) removes a degree of complexity
- All merchants accept a debit, credit or GeldKarte. No or few merchants accept mobile payments
- Card payments are simple: there's no (or little) technology involved. Your card.
- Your card is interoperable with all terminals (or at least, should be).
- A payment by mobile, in most cases, by nature can't be more convenient than a card payment. With the exception of vending machines and, in some countries, parking meters.
- All mobile payment systems use vending machines as proof of concept.
- A few rules for mobile payments: If they are SMS-based, your payment or confirmation SMS will usually fail due to poor reception. And that's after you held up the queue behind you for minutes whilst typing "p fGJhsA CRA555 100". And if your mobile batteries haven't died on you before.
- If you need some form of application running locally on your mobile, who's to say your next mobile will be compatible?
- The Mobile value chain is immensely complex. A successful payment system, beyond technological and price-related acceptance by merchants, requires telcos, handset and software manufacturers to agree on the same standard. Greed, in this case having the largest cut in all revenues related to the payment system, stand in the way.
- And that's for a national system. Whilst this might work out in the States, I'd love to see European unity at least in this field, since it doesn't seem to work in politics.
- Exactly how much do people trust a telco-based payment newcomer? As compared with a bank?
Now is a good time to take a short break. I've done a huge amount of bollocking or reality checking, if you like. What is missing is a true alternative.
Mobile payments are usually clearly positioned: convenient micro-payment, online and offline.
Now, let's have a look at our GeldKarte. The site sez:
GeldKarte is the German chip-based electronic purse system which is jointly maintained by the German banking industry. Over 60 million customers carry the chip today on their Maestro or banking card.
GeldKarte is mostly used for small purchases which have, up to now, required small change. Among others it is accepted in public transport, at parking garages, public telephones, and vending machines.
There we go, vending machines again.
I'll be the first to admit that GeldKarte hasn't really taken off yet. This is mostly due to the infinitely complex system running in the background, with a multitude of economic dependencies between banks and their technical providers. I won't bore you with the details, but suffice to say that it hasn't really been pushed yet. But we do know that it works; already now, millions of transactions are done this way.
This is set to change. Consider this:
- Most Point-of-Sale (PoS) terminals will accept the GeldKarte now already (EMV)*
- It is cheap for the merchant (0,3% or 1 Euro-cent merchant fee) and payment is guaranteed
- Most bank customers have a GeldKarte chip already. They just don't know it yet. This is changing though. No need for new registration(s), no fees, nothing
- It works like cash: Charge your card (max €200.-) at the cash dispenser. For payment, select your article (if you insist on the vending machine example), insert card, finished. The amount is deducted from your "e-wallet" on the card.
- It is easy to use: if you know how to use a debit (or credit) card, you know how to use GeldKarte.
- Mobile payments, if you look at crandy, is targeted at a youth audience. Too narrow for my taste. GeldKarte is for everyone.
- It can be used online with a card reader hooked up to your PC
And this:
- Before long, you'll be able to charge it online (using your banking software and card reader)
- You'll be able to do P2P: transfer funds from your card to someone else's
- 20% of Germany's cigarette sales are done through the ubiquitous vending machines (again). The tobacco industry will, for legal reasons, exclusively accept GeldKarte by 2007
Yay!:
- Your GeldKarte (if issued by a bank) has a little digital marker that says whether you are over or under age 18. Cigarette vending machines will check the marker. If you're old enough, you'll be able to pay. If not, then not. No fags.
- 30% of Germany's adult population smokes. That is the guaranteed mid-term potential of active GeldKarte users
- And yes: you'll be able to anonymously buy digital content for grown-ups. Think gaming, think adult, think subscription models. Actually, there's plenty more but these are the obvious ones
And all that is excluding the other, significant potential: the GeldKarte is but one functionality within the German banking standard chip. There's more: Electronic Signature (btw: signature logo art direction: me), other safety and encryption features as well as storage space.
As mentioned above, this is Germany-only. Given only 1% of all debit payments are done on an international level, there is no pressure to introduce a larger-scale solution. It is different in other countries.
Oh, and I do work for a bank...
*EMV is a technical standard for credit card payments ("liability shift") which requires a chip reader
Posted by Irakli at June 29, 2005 07:56 PM
Trackback Pings
TrackBack URL for this entry:
http://www.rakeman.net/mt-tb.cgi/571