Money, Money, Money

A year ago to the date I was drafting a blog post around my surprise that mobile payments had not enjoyed the success predicted, even though it was 2010. I didn’t expect plastic cards and coins to have been scrapped by then but it was strange to see that in most parts of the so-called developed world we were not able to pay for anything really using the mobile phone. The text was then stashed away in a deep, dark folder somewhere, unfinished. There are now reasons to re-visit this topic again because some very interesting development has taken place over the past year.

One of these developments is that it’s rumoured that Apple will include Near-Field Communication (NFC) in the next version of iPhone and possibly iPad as well. NFC is commonly used for “electronic wallet” type of applications, with everything from public transport to ski slope applications. Japan are great users of a NFC variant called Osaifu-Keitai that has become a local de-facto standard for making payments with your mobile phone. Given iPhone’s and iPad’s influence on the portable segment and its keen users, Apple supporting NFC is a great leap forward for the possibility of a wide-spread mobile payment. It has happened before that Apple inspires others to follow suite…

Another promising sign is that the latest versions of Google’s Android OS support NFC, with Google equipping their latest Nexus S phone with NFC hardware. A single mobile device won’t do the trick, but if other handset or tablet manufacturers like HTC and Samsung decide to include NFC chips in their handsets we suddenly have great momentum in NFC-based mobile payments. And Nokia has been hanging around NFC for long now but haven’t really made it stick, yet. There are also many rumours that Google is building a solution around NFC and advertising, yet to be seen. Combining local advertising with payments certainly seems a lucrative scheme if you’re able to build the scale needed. Google may be large enough to do it though we are not impressed by Google’s sluggish pace to implement payment on the Android Market.

The secret sauce in mobile wallet type of payments is to get retailers and consumer onboard at the same time; the classic chicken and egg dilemma, or as we nowadays call it – a virtuous ecosystem. You need to make sure that stores, cafes and buses accept your mobile wallet payments, a task completely different from building an online payment system. If too few physical venues support mobile payments, consumers won’t bother using it. This has been obvious from many more-or-less failed trials and roll-outs we’ve witnessed in the last years. Japan’s Osaifu-Keitai was completely different in this respect when the dominant and almost authoritarian DOCOMO teamed up with both handset manufacturers and businesses to launch mobile payment. To be able to pull off such a scheme you need to have huge market power, and great financial muscles. DOCOMO had just that, but few mobile operators in the rest of the world do today. It now remains to be seen if the new super-powers like Apple and Google are enough to make this happen in other markets, with the US being a likely first.

Even though we didn’t include it in our official predictions, we believe that 2011 will be a very interesting year for mobile payments and NFC. Banks and credit card companies hasn’t been eager to move to mobile because with their existing models they can only lose out, but unless they move in they may now be side-stepped by Google and Apple. The market is ripe for disruptive innovation and the only question is if Google or Apple will be the one finally delivering it.

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