Mobile 206 Lesson 3: Emerging Mobile Implications

Mobile 206 Lesson 3: Emerging Mobile Evolution

Lesson 3 Discussion Board: What kind of value proposition would a consumer need, and how rich would it have to be, to get him to adopt a new private label credit vehicle from a mobile operator? Click here to respond. 

Mobile Payment Options: Over the course of the past two weeks, we’ve explored various ways that financial services and mobile industry participants might consider implementing financial services and payments capabilities through mobile devices. The ones that have been most successful to date have involved some combination of information or payments access through remote communication on the device, as opposed to using the mobile as a physical payment vehicle at the point of sale. That said, it is fair to say that there haven’t been any significant investments by major players to scale a mobile point-of-sale or remote payments solution in the U.S. marketplace. So, before we interrogate the presumed approach the U.S. operators are taking to launch their program, let’s take moment to look at another option that might have been considered. We’ll set up that analysis with this quote, assuming that the operators somehow concluded that they should put “NFC” and “payment” in the place of “democracy” and “government.”

“It has been said that democracy is the worst form of government, except for all the others that have been tried.” – Winston Churchill

Payment Tryouts: Were there other options the mobile operators might have considered on the road to private label credit via NFC? What might those have been? One potential option for creating a payments capability from mobile devices might have been to build off an existing base of consumer information to add a remote payment component.  As we mentioned earlier in the course, the U.S. carriers sit on an enormous amount of information provided by consumers to execute monthly bill payments, including billing address, payment card data, and (obviously) mobile number. If you were interested in building an alias database to execute remote payment commands from consumer mobile devices on behalf of other merchants — think Amazon 1-Click from via text or mobile web — it would be hard to think of anyone in a better position to scale that approach than the major U.S. operators presumably launching an NFC venture.

So why not start in mobile remote payments transactions that walk, talk, and act like eCommerce transactions, generating consumer adoption of and familiarity with mobile payments? Driving that behavior to a point of sale might be a more viable migration path than the one they appear to be on at present. And it would, one assumes, be a path that generates transaction revenues from mobile remote payments while the physical infrastructure is built out. That is, assuming that you don’t just move to a remote text-to-buy solution for face-to-face retail? As an aside, much of the emerging world executes mobile payments in exactly this way. Consumer facing merchant, text strings between them, payment commands up to the mobile network, commands delivered to the payment cloud, money moved in the cloud, confirmations sent back to both parties at the physical point of sale with nary a card or reader in sight. Could that work in the United States? Stranger things, like a run at NFC adoption, have happened.

GPC? But that’s not Me: Perhaps the mobile operators considered this approach, but concluded that negotiation with the existing payments networks and participants would be, in light of their previous NFC business case trials, too long and not lucrative enough. Maybe some compromise position was discussed around mobile operators facilitating NFC handset distribution, processors implementing merchant acceptance, and networks (read: issuers via sharing interchange) compensating both for the trouble. But that might take a really long time to work out the details of who does what to whom for how much on what schedule.

But why would the answer be to take all the complexities and complications of mobile NFC rollout and compound them with the additional challenge of driving consumers to adopt a new payment type and payment brand? What would be the assumptive driver of success that convinces a mobile executive that this payments solution might see major adoption?

Watch This Rewards Space:  Perhaps the answer lies in a combination of the remote communications capability of the mobile device, the broad adoption and use of location-based services, and the coming sea change in GPC consumer rewards propositions in light of merchant litigation, the CARD Act, and the Frank-Dodd Bill’s Durbin Amendment. What if the “killer app” that mobile operators had in mind to drive adoption of their solution was a merchant-driven rewards program that turns the existing points-driven spend → earn → bank → redeem card proposition back on itself toward the merchant sale that generated the benefit in the first place? Could the answer be a combination of consumer opt-in for rewards propositions, location-based delivery of permissioned (!) propositions from merchants to proximate consumers via mobiles in real time, and execution of benefit through the private label payment vehicle? That would certainly create a compelling value proposition for merchant adoption, and it would certainly drive consumer value. Would it be enough to get a large enough segment of consumers to switch primary payment card to the private label solution? Maybe. Would they necessarily have to switch for the mobile operators to deliver this kind of benefit to consumers and generate some share of revenues for themselves? Maybe not. But we can guess that somewhere deep in a business case spreadsheet behind this product launch there is a revenue assumption that 100 percent of a smaller private label transaction launch is greater than a much smaller percentage of the total current card population in the carrier customer base. It remains to be seen if that assumption holds.

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