A couple of things that happened in the mobile commerce space last week jogged a memory about the relationship between the level of hype over something new and its long-run sustainability. Those two things are related to the media frenzy over Coin and Google’s introduction of a plastic prepaid card and what’s being written about their respective impact on the future of payments and commerce.
Jonah Berger, author of Contagious and PYMNTS Mobile Commerce Summer School commencement keynoter, published some research a year ago that compared the popularity of names given to children born over different decades and the length of time that they remained popular. He and his team looked at nearly 2,500 names given to children in France born between 1900 and 2004 and nearly 2,000 names given to babies in the U.S. over that period of time. What he and his colleagues discovered is pretty interesting.
Names considered highly popular at any given period of time and triggered a raft of babies to be given that same name, almost as quickly lost their luster a few years later. For example, he says that names like “Kristi” that were the rage in the 1970s and hyped as the “it” name, crashed and burned just a few years later. The flip slide is that a “normal” name like Charlene sort of chugged along over a 40-year period between 1930 and 1970 in France, remaining popular over that period, but not exactly setting off a giant stampede of parents choosing that name for their female offspring. Berger’s conclusion is that names that were hyped as the “it” name may have caught on more quickly in a shorter period of time, but fizzled out just as fast. “Faster adoption means faster death” he said. [Apologies to any of the Kristi’s that I may have offended but it’s not your fault – blame your parents and Berger’s research.]
Coin was all over the internet last week when it issued a press release describing its innovation. Coin is a digital mag-stripe smart card that turns multiple credit, gift, membership and other plastic cards into a single mag-stripe card that can be used at existing points of sale. It uses Bluetooth Low Energy (BLE) to communicate with user smartphones which is how cards are loaded. To get a Coin, users need to fork over 5,000 of them (well, if you are using pennies – they are $50 until December 13) and its launch is scheduled for next summer. Coin’s news was that its Kickstarter campaign quickly blew its $50,000 fundraising goal out of the water. Here’s the video unless you aren’t one of the 5 million who have already seen it.
I swear if I closed my eyes, I can hear the iCache pitch. Identical use case and value proposition with one pretty big exception. It was made in 2006 before there were smartphones. Then, the idea was pretty clever – use an internet-enabled device to store a bunch of cards that could be programmed to produce a single mag-stripe card that could be used everywhere mag stripe cards were accepted – which, as we know, is pretty much everywhere. Unlike Coin, the iCache device was secured by a biometric on/off switch, very similar to what Apple released with its iPhone 5S device which authenticated the user and also gave consumers the reassurance that if they lost their iCache device it could not be used.
Seven years later though, the idea seems a bit dated, sort of like looking in the rear-view window at the payments landscape instead of where it’s headed. The entire world is investing in these things called digital ”wallets” – apps that leverage connected devices and enable merchants and consumers to interact in cool new ways that extend well beyond the simple act of paying for something at the point of sale. Today, those devices are mobile phones and tablets. Tomorrow who knows that they’ll be, but I’d bet my precious border collie, Annie, that they won’t have mag stripes.
Unless, of course apps is the Coin end game and we just don’t know it yet.
Coin users load cards into an app via a dongle that hooks into the headset jack of their mobile phones. So, Coin does have an app on a mobile phone that collects all of the stuff that consumers want to organize. Today, that app enables the use of the physical mag-stripe Coin card, but tomorrow, maybe Coin thinks that it could enable payment via the app directly using other technology and the mobile phone. Now, that would put them in a very different competitive set since they’d be duking it for merchant acceptance with the likes of PayPal, MCX and LevelUp, etc. But, the current Coin use case could give them time and a strategy to build a consumer base, since we all know that having consumers to present to merchants is never a bad thing, especially when you are asking them to change stuff to accommodate what you have invented.
Then again, I could be giving them way too much credit – or a new idea – who knows. But, if what I described is their end game, for now, it’s a bit irrelevant. The world is enamored with the digital smart card idea and a thousand or so people have plunked down $50 to order a Coin they can’t use for a while. That certainly doesn’t make Coin the “next big thing” in payments, however, and I wonder how many Coin devices will end up as Christmas stocking stuffers for that hard-to-buy-for early adopter, a cool gadget never to be activated at all.
The team (which includes Osama Bedier who lists himself as an advisor and investor on his LinkedIn profile) is adding features to make Coin more secure, which is its biggest criticism right now. They’ll have to do some hard selling with the networks to convince them that Coin isn’t an instant card skimming machine which was also a huge obstacle for iCache. Oh, and I’m sure that the networks and issuers are just loving the fact that they become even more invisible with Coin than they are in a digital wallet. Way to engage the ecosystem.
My own view is that Coin will have very limited appeal. If consumers are going to go to the trouble of trying something new and different for payment at the physical point of sale, they’ll make that move to something that their device of choice enables for more than paying for stuff, even if that solution is a step on the way to the something else that will ultimately become the final solution. As I’ve said many times, there’s limited value to fixing the payment problem and even less value to introducing a new device that doesn’t provide value beyond the simple act of payment. Sure, the whole fat wallet thing is what everyone uses as justification for why Coin will ignite, but if fat wallets were really as big an issue as everyone says they are, we’d have had massive NFC mobile payments adoption by now and ISIS would be on fire. Will there be people who will try Coin because they like new technology and want to be first? Of course, people like my colleagues and I are part of the 1,000 because we like trying all of the new stuff. Will Coin be the kind of innovation that will go mainstream? Nope. Does this mean, as some in the media have stated, that mobile payments are on life support because 1,000 people bought a Coin device? Uh. Double nope.
Speaking of life support, let’s turn to Google’s introduction of its plastic prepaid card.
Google’s new card is a prepaid card. It’s like the Starbucks card which is a prepaid card that isn’t linked directly to a user’s checking account. The Google card requires that users fund the card with a funding source – which could be a bank account or people who can send money to a Google prepaid card account or Google itself that is transferring revenue from ad sales to users. Users with those cards then spend the value that they transfer to that card, reloading it when the balance is depleted. I wish the media would stop referring to it as a debit card, because it isn’t one and it just muddies the water.
This is Google’s much ballyhooed move to plastic that was hinted at in October of 2012 and never materialized. And it is an interesting move, as much of the media has pointed out, from a company that has been all around Robin Hood’s barn with respect to its digital payments strategies. We did a pretty thorough case analysis of Google’s moves in payments over the last several years at Mobile Commerce Summer School which goes into a lot of detail about Google’s moves in payments and why they have not produced the results they had hoped for.
Let’s just say that the introduction of the plastic prepaid card isn’t probably going to change the course of payments for Google. Prepaid products are a tough business, ask anyone who’s in it. Retail prepaid is the hardest aspect of prepaid and ignition requires a “killer app” such as direct deposit, use as an alternative bank accounts, federal/state benefits, corporate travel/incentives, etc. to make it sticky. Even then it’s a slog. From a mobile payments standpoint, even Starbucks is an outlier as a successful mobile app tied to a prepaid product that has to be topped up. People don’t mind transferring $25 or $50 to their Starbucks account, since they visit Starbucks daily or multiple times a day to feed their caffeine fix but it’s hard to find other success stories like it. Mobile apps linked to existing credit or debit card products or bank accounts are far more common and far more successful. As an ignition strategy for Google Wallet, well, the plastic prepaid card seems like tough going.
What ties both Coin and Google’s prepaid card debut together for me is the conclusion that the media have now drawn about the future of payments – mobile isn’t as certain as it used to be. Amazing, don’t you think? Here we have 1,000 sales of a $50 gadget and a Hail Mary play for Google around the launch of a plastic prepaid product and all of a sudden mobile commerce is toast. Guess they’re not paying attention to all of the developments that leverage the mobile device and tablets today to enhance the shopping experience – and the moves that merchants are making to enable that. Not to mention the innovations now popping up all over the place as a result of location-based technologies and consumers toting their mobile devices everywhere and the availability of a real-time channel for merchants and consumers to interact. And how the future of payments is really about bolting it to other things that engage merchants and consumers, how merchants are now really interested in exploring their options and how they want to leverage mobile technologies to accomplish one and only one thing – to sell more stuff.
Sure, we’ll have mag-stripe cards for a long while to come, just like we’ll have cash for a long time to come. But, does that mean that mobile as the future of payments is just hype? Sort of think that it’s the other way around, don’t you?
But, I do have some advice for any aspiring entrepreneur thinking about jumping into the payments and commerce space today: put “coin” somewhere in your name and you’ll be guaranteed money and lots of media coverage. We have two data points now – bitcoin and Coin – and there is a disproportionate relationship between the hype and long term viability of both. Like the baby name research findings, maybe choose a name – or better yet, an innovation – that provides value for the long-term and isn’t the spikey hypey-shiney new toy du jour. [By, the way, have I mentioned I’ll be launching the karencoin sometime in 2014?] â˜º