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Mobile Commerce – e=mc2

e=mc2 ?

Does this mean that e-Commerce is equal to m-Commerce squared?  For that to be true, mobile operators and banks had better starting getting their stuff together and provide something that just works, or else someone else will rewrite their equations.

It seems that operators have not learned any lessons from past mistakes:

When data networks arrived we finally had networks that were capable of providing a wide range of new services like picture messaging, video conferencing , music and TV.  But instead of agreeing common standards for all of these like they did for roaming (which created GSM as the global standard) and SMS which could be sent and received on any phone over any network, they all decided to compete for customers by launching proprietary services.  Who were the winners:

  • Music = Apple
  • Video Conferencing = Skype and Apple
  • Picture messaging = free IM, Whatsapp and Apple
  • TV = still no perfect global solution, but old fashioned streaming seams to be the de facto standard, which is not network friendly.  Europe, Asia and America have all had their broadcast solutions, but a single standard would have gone a long way.

Yes, no carriers won!

The lesson I take out of this, is if the industry had worked together, everyone would have been better off, except maybe Apple.  Even the music industry would have been better off, since their music would not have been as discounted and they would not depend on one distribution channel so much.  It has been good for consumers however, since artists have had to go back to concerts to make money.

So what have we learned about working together as an industry when it comes to mCommerce?  Ah…nothing.  In fact things in m-commerce are worse, because banks have to be involved in these conversations and it is not just one part of the bank.  Merchant acquirers need to be involved, issuers need to be involved, the payment networks (Visa, Mastercard, American Express, Discover, JCB and debit systems) and of course handset manufacturers need to be involved.

Then the issue is who owns the customer?  The banks do not want to give up their monopoly on payments, and neither will not VISA and Mastercard.  The mobile operators want a piece of the pie and so does every part of the old and new value chain.

So what is happening and why is it taking so long?

In the USA:

Verizon, AT&T and T-Mobile teamed up to form Isis.  (Not to be confused with Isis the Egyptian goddess of religious beliefs, or the International Species Information System).  Unfortunately they left out Sprint and the other smaller players.  They have also included some but not many card issuers, Chase, Capital One and Barclaycard.  It will be available in two cities, Salt Lake City and Austin, Texas.   Last summer they announced deals with Discover, VISA, Mastercard and American Express, so at least this will not be a constraint.  While the mobile wallet will work with existing near field terminals, deployment of these has been slow, as they have to be funded by merchants or merchant acquirers and those are the two that do not really benefit in this new world.

So if you have the right phone, the right carrier, live in one of two cities, have an account with one of three banks and happen to visit a merchant who has a wireless payment terminal, you are in luck, this summer you can use your mobile wallet.

In Vodafone countries:

But Verizon wireless is a joint venture between Verizon and Vodafone.  And today, Vodafone also made an announcement, saying they had partnered with VISA and will offer a mobile wallet based on a prepaid VISA card that will be rolled out globally this fall.   So at least you will not be constrained by who you have your bank account with.  They are going head to head with card issuing banks.

In the UK:

Vodafone (again), O2 and Everything Everywhere have teamed up to form a joint mobile payment platform in the UK called project Oscar.  They have excluded Three, a mobile carrier in the UK.  Together they will submit a proposal to Brussels for a mobile payment system that includes advertising and mobile commerce.  Three is playing spoiler tactics.

In Google:

Then there is Google, who announced a deal with Citibank in the USA.  I believe they will also offer their own prepaid cards.  The Google wallet will work on any Android phone with NFC and they plan to integrate offers into their payment solution.  It also works online through Google buy and Google checkout.  There was an apparent security breach with their solution, but who honestly knows how valid this was.

In Canada:

We have Zoompass.  Which is a joint venture between Rogers, Bell and TELUS.   To my knowledge all new entrants have been excluded, but I could be wrong.  Zoompass has teamed-up with Western Union for international transfers, Mastercard for a prepaid card and also offers person to person payments like Paypal.   It does not seem to have integration into offers like the Google solution or into advertising like the UK consortium.   Also the mobile phone version does not work with any NCF phones yet, so you can’t actually use it in a store yet, but you can use your prepaid Zoompass Mastercard card!  Awesome.

Separately Rogers applied for a banking license and there are many banks that are frantically trying to be first to market.

In Africa:

In 2007 M-PESA was launched in Kenya.  They have over 23,000 agents who effectively convert cash into M-PESA accounts.  You can also withdraw cash at these agents or through an ATM.  You can pay bills, transfer money via Western Union, buy airtime and manage your account from your phone.  They also have mobile ticketing for travel, hotels and taxis.  Even businesses can process bulk payments and receive payments for goods or services using M-PESA.   M-PESA has nearly 15 million users in Kenya alone.   The service has launched in other countries including neighboring Tanzania, South Africa and Afghanistan, but it seems that it has struggled to get the same traction.


Although this is by no means an exhaustive list of all of the ongoing m-commerce initiatives, indeed we did not even mention Bump, Paypal or Starbucks, the message is clear:

The banks can do this without the carriers, and the carriers can do it without the banks.  The merchants only benefit if the transaction costs go down and this is unlikely since VISA and Mastercard seem to be at the heart of all solutions.   Consumers get to carry one less vital object around, but this will not work until m-commerce is ubiquitous.   Wouldn’t it be easy to solve the car key and house key thing and then we can leave the keys at home on purpose?

If the wireless carriers do not team up and agree a set of standards, they will not participate in the future opportunity.  Payments are global so we need a global solution.  We cannot afford to exclude any carriers and should not take sides with individual banks.

If the banks want to be part of this, go around the carriers and team up.  But you have to be quick.  You are not competing with other slow moving banks, but rather with wireless carriers that create more new products a day than most banks do in a year.  How many extra customers do you think you will get if you launch first?  And what if they leave their mortgage at their current bank and jump ship back to their mortgage provider when they too have a mobile solution?

Too many variables make it impossible for merchants and consumers, so hurry before Google and Apple solve the problem for you. And keep it simple.

It seems like it will be a while before e=mc2?  What do you think?


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