Deloitte reports on M-Payments

First off an appology to those who do bother to read this blog, I have been busy with work and so not spent as much time writing as I would have liked.

One of the assignments that I have been working on is the possible future of the Handset business.  Very soon I think that we will be in a position where the incremental improvements become so small it will be difficult to sell them as the next great leap forward.  I think that Italy will be the first country that this happens as nearly 40% of the users have a 3G handset, France will be the last of the Big 5 to adopt such a model as it has the smallest number of 3G users.

I think that what users will adopt is a "Business Watch" play in that they will have a Work Phone, Dress Phone and Weekend Phone which they swap a single SIM between them.  The Network will provide its services on a SIM only contract and the user will buy handsets in something closer to the Apple store than CPW.

If we accept the premiss that this might happen, then the networks are going to look at services rather than products that will retain staff.  If that is true then M-Payment that is based on SIM NFC could be something that aids just such a retension.  Tarriffing will not be something that helps retain the users as regulation will lower prices, just look at what has happened with International Roaming.

What Deloitte does not address is the fact that at present the Networks strategy is to just rent space on the SIM to a Payment Processing Group rather than understand the customer segmentation.  But then my Network fails to understand that as well as a relationship with them, I also have relationships with tow of its rivals so how can it understand my Banking relationship?

 

Want to see what Mobile Money is all about?

So the GSMA sent me an email this morning asking if I wanted to attend a two day conference on mobile money in Egypt. Out of professional interest I looked at the web site for the event and discover that I cannot see who is speaking, they have no Sponsors or Exhibitors and so it looks like a work in progress. The only problem in that the event is some two months away and so if this was a professional conference everything would have been in place.

This sums up the whole get rich quick mentality of the GSMA when it comes to mobile payments. Rather than look at the ecosystem for Mobile Banking and debate the need for joined up thinking the GSMA have decided to host a two day demonstration on why they have the magic box that will see everyone bank on their mobile. The GSMA solution is to develop a whole new approach rather than look at the banking sector and say how can we move customers from branches and atm's on to handsets? At this moment the consumer and Banks need to understand the functionality and features needed fot payments.

What we have from the GSMA is the movement of Remitances onto mobiles. Now ask youself if what you want is the ability to pay the window cleaner by text message rather than cheque rather than send hundreds of pounds to a relative overseas phone to phone.

I understand that the project manager for this has moved on from the GSMA. Perhaps they can now kill the assignment and accept that the fees paid to consultants proved that they have little chance to make money selling something that no one needs.

Sunday Times looks into mobile banking

Yesterday's Sunday Times had a good analysis about mobile banking. Just a shame that the vision of Orange has not been executed by the New Owners!

The final sections where they talk about Mobile Banking in the UK should be something that is read and understood by the GSMA before they start the push into Remittances. Once again the focus needs to be on micro payments rather than competing with Western Union for those Operators in Europe. My Polish builder returns home every 6-8 weeks on a cheap flight carrying cash, he trusts no one when it comes to his money.

However the ability to replace small value transactions with a simple test message will cut the ques at Starbucks and as the FT's Undercover Economist shows the use of gift cards is not something that everyone approves of. If you want to give a small present why not send it as a top up someones phone credit rather than a crisp new bank note?

The problem is that with five network operators we have too many billing systems to connect if we are to make m-money work. We cannot allow a third party to facilitate cross network payments as they would expect to be paid a commission. Perhaps we need to move towards structural separation and thus billing just becomes a service layer?

New steps in M-Payments

Total Telecom reports that the Italian Post Office's MVNO will have a number of Payment services available in an effort to distinguish itself from it carrier Vodafone.

Thus we finally have a Western European network looking to offer customers replacement of paper money and coins. The Italian Banking environment is still what underdeveloped compared to most with a number of regional banks rather than National banks when it comes to the retail sector and so the Post Office is still a major player when it comes to payments. This makes the target of 2M subscribers look somewhat conservative. Perhaps they need to take a leaf out of Tesco's book and look to grow more aggressively?

I hope that they are successful, and I hope that the GSMA take note and start to back M-Payments for the benefit of the Market rather than a get rich quick scheme as the seem to be with the present remittance based approach. Perhaps if they engaged with consultants that know the payments market rather than Blue Chip accountants they would be more flexible and finally manage to develop Mobile Payments. But that is unlikely and this has all the hallmarks of the dotmobi plan to "get rich quick" rather than aid the market!

Another organisation that could do with some Consulting help is Transport for London who are pushing ahead with a trial of NFC based handsets from Nokia on the O2 network. Whilst I support the movement of my Oyster Card onto my handset I do not think that the use of the UK network with the worst billing system will be an effective proof of concept. The Independent today writes about the trial; something the Guardian did on Monday. This is the second trial that I know of, a very small test took place in the summer with some 200 people using handsets I hope that this one will be bigger. I would also have hopes that they tested on the other networks to see how the billing systems function there both Pre and Post-Paid.

UPDATE: The press release has now been sent out and what 500 lucky O2 customers can now expect is the use of a Nokia handset for the next six months whilst they trial  the system.  Thus we have no great leap forward, rather we can expect another small step.  

I wonder if the move will force the  other networks to open up mobile payments or if we can 
expect to have to wait before we  have open access. The good news is that it's not expected to work on an iPhone!

Economist says that 2008 might be the year for m-payments

I picked up the 2008 edition of the Economist's magazine The World in... and one of the features in the business sector was Buying and celling by Tom Standage which looked at how NFC will start to gain traction.

One of the data points that gained my attention was a graphic that shows that only in the US the population has more access to cash machines than mobile phone.

I still think that mobile payments face a challenge in the UK and US where we are too reliant on credit cards rather than bank cards. For M-Payments to work they have to be a replacement of paper and coin based payment rather than an alternative to electronic fund transfers. If mobile networks start to try and compete with Banks then the Banks are going to ask that they are regulated in the same manner. However if the networks can replace micropayments of a value of less than say $20 then we can look to a rosy future.

I think that the introduction of M-Payments will also reap benefits for customer retention, the Networks will seek to establish a stronger relationship with its customers which will see them move from PAYG to Contract. Once the mobile phone has more functionality than just talk and text consumers will be less price sensitive. The functionality will not in my view be the Internet it has to be something more than just a window.

Western Union's new mobile service

Yesterday the GSM Association and Western Union announced that they had struck a deal to bring the Money Transfer Service to mobile.

An agreement to use the GSMA platform does not mean that the service will be available on all if any of the 35 operators networks that are taking part in the scheme.

This is something that I see as a backward step in Mobile Commerce. The introduction of Western Union has to be a backward step. With G Cash in the Far East it is a service that works because it's cheaper to use than Western Union. The same is true in South Africa. Thus in an effort to get traction for a product the GSMA have allowed the fox into the chicken house.

The whole platform in general is something that I see as likely to fail as others GSMA projects have because this is not something that is driven by Operator demand. This like .mobi is something that the GSMA sees as a way to raise income for itself. They have not been able to demonstrate that the consumer or the networks want any form of mobile remittance or mobile commerce product.

In working with the Operators on M-Payment solutions the first thing that they look at is the risk of being seen as a bank. If you start to undertake remittance based payments then you are competing with the Banks on a transaction that has a good profit margin, thus they will ask that you are regulated in the same way as they are. This is something that no mobile operator can accept because of liquidity requirements. However if you were to build a platform that replaced low value transactions and thus reduce the banks cost base then you can work in partnership providing that you have something that is available across all of the mobiles in a particular country. Getting everyone to join a micro payments based service is however very difficult, so far every attempt in the UK has ended in failure.

Now if the GSMA was a trade association rather than a commercial organisation it might be able to do something in the world of payments. This action show that they are about income for themselves even if it does evil.

Another missed opportunity for m-payment

Today's Guardian has a feature on new contactless payment cards for micropayments. The service is due to start in London this Autumn and the roll out nationally. The service is aimed at those looking to make payments of less than £10 and will need a pin number to validate on a random basis.

So once again we have the mobile networks missing out, if SIMPAY was still in operation then we might have seen this service miss out the Contactless Cards and move straight to mobile. This is something that I would have used for my Daughters when they start secondary school in September. We are about to open two bank accounts for them that will have SOLO cards that allow them to make micropayments. If Orange had woken up to the opportunities for M-Payment then they would have got a larger share of my Daughters pocket money.

I guess that the fact that the former head of M-Payment at Orange has left to joining Microsoft demonstrates the lack of commitment to the product!

Others in MoMo pointing fingers at Mobile Commerce

Thanks to Ged, I picked up on the MoMo Global post about Jupiter's report on too many initiatives in mobile payments are slowing development - will have to send this to GSMA and see if they agree that!

Yesterday the Sunday Times had a feature on how GSMA and Mastercard were going to bring credit cards to the phone by this time next year! As I said last week I don't think so. Catching up at the London MoMo event this month with some who have been working on mobile payments for the last few years they said that the depressing thing is that the US are driving a number of trials that failed in Europe FIVE years ago.

I believe that payment services are key to the mobile industries long term growth. In South Africa they launch of M-Cash on the MTN network has seen a shift socially with an underclass now able to access banking services as well as payment of welfare services. In Europe I see M-Payment as something that could move the customer base from prepaid to postpaid services. Such a transition would be allow the networks to control costs, in the UK £4Billion is sent each year by networks on SAC. It could also mean that if we are to progress down the NFC route are handset can become much more than phone. What about using the handset as a key for example, such a development could see me gain access to my house, start my car and enter offices.

Nokia and others try another M-Wallet push

Reuters reports that Nokia, Mastercard and GSMA have released a few more details on the trial that they plan for October!

The technology used is yet to be outlined in detail; as well as Nokia, Samsung and LG have signed up along with a number of tier two networks. No sign that this is something that as yet has the backing of those who failed with SIMPAY.

This looks like fluff to me! The mobile commerce trails that have become products are based on the replacement of paper money rather than the expansion of electronic cards. When I travel to mainland Europe the locals are still big users of Paper Money it is only here in the UK and in the US where you find people trying to pay for a coffee with a card!

Whilst I agree that some form of mobile payment system will evolve I think that it will be as a form of replacement to paper and coins and not an adjunct to cards. I would like to be able to ring fence a funds that I give my twins when they start traveling to school on their own so that it can only be used for transit systems, school food purchases and say WH Smiths as well as airtime on their phones. I do not want to discover that they have had the phone taken off them by someone on the bus who has then used the credit to buy Vodka and Fags!

Thus what I see as mass adoption of M-Payments will be for micro payments i.e. those of less than £10 and the fees for these need to be lower than the current charges made by Mastercard and Visa. Not sure if this is news, could just be a slow day for Reuters!

More on M-Payments

Having just finished off my latest assignment I have at last had an opportunity to catch up on developments in M-Payments post 3GSM in Barcelona.

Last week in an article in Business Week, Nokia's R&D Lab were talking about how they are developing payment solutions following a field trip to Africa. Not too sure I like the fact that Nokia have decided to patent something that was happening naturally in Africa, but thats business.

Yesterday I missed a roundtable by CSFI on Mobile payments that could have been interesting. Would have been nice if one of the speakers had told me and then I could have joined in. Guess I will have to add Digital Money to my Blogroll so I can keep better informed.

Looks like Belgium could be the first Western European network to roll out a commercial M-Payment service with Banksys. Whilst in France on a Skiing holiday with the kids last month, the evening news carried an item on continued trials for M-Payments which showed the reporter using her phone to pay for coffee and bread in different shops. So it looks like the traditional cash based countries will be the first to adopt rather than us here in the UK who are leveraged when it comes to credit.

Mobile's as a tool of social change in Africa

This week is Geek Week on Newsnight and to start things off Paul Mason presented on how Kenyan's have adopted mobile on mass.

An informative film sees Mason travel along the main highway. We saw M-Pesa demonstrated by the Vodafone partner Safaricom which saw Mason being paid by text and him cashing it in. Mason was impressed and said that in a country that has few users of bank accounts it could revolutionise things.

On his travels Mason sees a farmer using his phone to check prices in Nairobi before selling his produce locally. The most impressive for me was when Mason went down into the Masai farmland. Talking to a teacher we discover that she has a phone and that she bought another for the tribesman that looks after her cattle so that she can check on her goats health. She went on to explain that in her region over half the men have phones and they are charged via solar panels. The upside is that thanks to text messages the Massi are starting to learn to read. The downside is that husbands and wifes now row over who has been calling the phone!

The headline is when someone from a University says that the success of mobile is showing people that Kenya is not a basket case. If the phones have been launched so quickly why is the road and water systems such failures after sixty years of aid funded development. Mason demonstrates this with a clip on how the people in the largest shantty town are using flash mob tactics to stop evictions.