Mobile 206 Lesson 1: Emerging Mobile Landscape

Mobile 206 (elective. Mobile 205 prerequisite): Emerging Payments Value Proposition

Lesson 1 Discussion Board: Are mobile payments models that rely on direct statement billing viable and scaleable? Why or why not? Click here to respond.

Industry analysts have predicted the convergence of the mobile ecosystem and financial services into a powerful combination for many years, but as we’ve shown, convergence has so far taken the form of small forays by each industry into areas that only touch on the business propositions of the other. No true hybrid combination has grown from the space that lies between these two powerful industries. It may be that someday soon a strong company with a compelling value proposition may arise that ties together the best of anytime, anywhere online connectivity from mobile telephony and anytime, anywhere access to funds from financial services. Both ecosystems could certainly benefit from a common services platform, firmly grounded in an understanding of each industry, integrated with them both, but operating as a neutral network. That company or platform may yet appear, or may already exist, but the role described is far from filled.

Both the mobile and financial services industries continue to hold out for a hero here to bridge the spaces between them. In the last course, we reviewed the current landscape for mobile GPC payments, the most prevalent mobile financial services applications in the marketplace today, the evolution of near-field communications devices, and the forecast for potential payments origination from mobile devices. We also reviewed how the financial services industry is spending the waiting time investing in mobile applications and services that complement the payments capabilities at the core of its business, including account access and real-time transaction information, to wrap information around the core payments experience. The financial services ecosystem has begun to move, tentatively, toward the middle space between payments and mobile by adding mobile information to core financial services.

Adding Payment to Mobility:  In this course, we will explore the ways in which the mobile ecosystem participants are investing to bring payments capability to the core mobility offering — that is, how the mobile operators and providers are moving toward financial services by adding some basic payment function to their core mobile offering. As you might imagine, mobile operators and third-party service providers in developed markets have begun introducing payment as an extension of the payments processing they perform for billing. The vast majority of consumers in developed markets like North America are post-pay customers (as opposed to pre-pay) who pay operators for activity associated with their mobile account monthly in arrears. While there may be other, far more compelling examples of mobile payment for discussion in developing markets — where large segments of mobile users are relatively unbanked and purchase services on a prepay basis — we will treat with those, and how they may apply to emerging market (and some developed market) underbanked consumers, in the Mobile 305 course discussion. So, if you’re on fire to learn about and discuss those models, be certain not to miss that lecture.

In North America, the majority of mobile payments services facilitated by mobile ecosystem participants — including operators, device manufacturers, and platform managers — have been in support of selling ancillary services and digital goods to consumers within the existing closed-loop environments that each manages. Typical examples of these include: operators selling ringtones and games; device manufacturers selling software, service enhancements and digital goods (songs, games, videos, etc) to enrich the handset experience; and most recently — and most visibly — platform managers facilitating the sale of software application downloads from a broad population of developers to deliver a richer experience of the platform to consumers.  In almost every case, particularly in the most successful ones, consumers pay for these digital products and incremental services by adding the charge to an existing billing relationship. And in almost every case, the billing mechanism used to settle that bill is a general purpose payment card that rides and existing payments network.

Put it on My Tab? In effect, the overwhelming share of mobile payments executed today are for digital goods and services, bought remotely from the mobile handset, delivered electronically, and billed to a general purpose payment card on file to settle regular bills with the mobile ecosystem participant – monthly for the vast majority of recurring bill consumers, and every three to five days for consumers registered with iTunes and other mobile marketplaces.

But what if someone, say the mobile operator head of strategy from our previous class, wanted to bring consumers a mechanism to pay for digital goods provided outside of the operator environment? Or better yet, bring a way to pay for actual physical goods to be delivered to the consumer from remote merchants? Or maybe, after years spent watching the continued growth of electronic payments at the point of sale from afar, you’ve decided you’d like to be the one to bring to market the first face-to-face retail payments from a mobile device. Would you start your solution with the payments mechanisms your consumers have already registered, working to facilitate transactions from a new way to pay back through the vehicles consumers have already adopted? Or might you, in a true triumph of technologist’s optimism over payments marketplace experience, bundle together a new way to pay (mobile) with a new payment vehicle (private label credit) provided by a new combination of providers (traditional credit issuer behind mobile operator brand)?

If you guessed the former, you might have the best answer for consumer adoption. But then you wouldn’t have been following recent announcements coming out of this space. We’ll discuss why tomorrow.

Lesson 1 Discussion Board: Are mobile payments models that rely on direct statement billing viable and scaleable? Why or why not? Click here to respond.

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