Do the Carriers Stand a Chance? Atlanta Fed, MPD Founder Play mPayment Oddsmakers

Earlier this year, MPD Founder David Evans wrote a blog entry for PYMNTS.com that was fairly dubious about the carrier-led payment initiatives. He recently offered his revamped review of the mPayments playmakers and technologies that he feels have the best odds to ignite in the mass mobile market during the Federal Reserve Bank of Atlanta’s Payments Spotlight podcast. 

Exclusive NEXTcast Interview: Fed’s Predictions for the Future of U.S. Mobile Payments

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November 2011

Jennifer Windh: Welcome to the Federal Reserve Bank of Atlanta’s Payments Spotlight podcast. Today we’re joined by David Evans, who is the founder of Market Platform Dynamics, a veteran consultant in the payments industry, and the [co]author of Paying with Plastic, a guide to the history and economics of card payments. David will be speaking to us today about the future of mobile payments in the U.S. David, thanks for joining us.

David Evans: Thanks a lot, Jennifer. Glad to be here.

Windh: So, earlier this year, you wrote a blog that was fairly dubious about the carrier-led mobile payment initiatives. Can you describe the context for that piece and explain the reasons for your skepticism?

Evans: So, this back when Isis was being talked about, and the idea was that the carriers were going to form a joint venture and try to get something off the ground. The source of my skepticism is—I think that the likely role of the carriers in payments is basically being a pipe. It’s not clear that they really have any relevant skills needed for running mobile payments, and I think that it’s more likely that they’re going to turn out to be a very important source of pipes for other people developing mobile payments alternatives. Obviously, they would all like to get a piece of the mobile payments pie, but just the desire to make money doesn’t mean that they’re going to achieve that. With rare exceptions, most of the mobile carriers that have tried to get into payments—not just in the U.S. but in other parts of the world—again, with rare exceptions, have not been very successful.

Windh: Well, we really haven’t seen too many mobile payments taking off at the actual brick-and-mortar point-of-sale so far in the U.S. What do you think are the main barriers to mobile payments adoption of that form in this country?

Evans: There are two interrelated main barriers. Barrier number one is that there is not a very persuasive mobile payments alternative for consumers to use at the point-of-sale, and the second is that there’s really not the technology at the point-of-sale capable of processing a mobile-payments-type transaction. So, kind of working back from that one, in order for a mobile phone to be used as a payments device at the point-of-sale, there has to be some way of transmitting that information to the merchant’s point-of-sale technology and that has to be NFC [near field communications], or bar code, or browser-based, or something, and, at the moment, I think, as is well known, a very small number of merchants have NFC at the point-of-sale and have little motivation to adopt it. (Bar code may work for some of them.) So, there isn’t a lot of technology at the physical point-of-sale for mobile payments to work.

In order for merchants to be motivated to want to interrupt the process at the point-of-sale, in order for them to want to invest in new point-of-sale technology, they’re going to have to be persuaded that there are a lot of consumers out there who want to use a mobile payments alternative at the point-of-sale. Now, in order for consumers to want to do that, there’s going to have to be something really persuasive for them. And I think a fundamental problem at the moment is, no one has really come up with a great way to use the mobile phone at the point-of-sale that is really compelling for consumers. So, there’s a barrier on both consumer adoption and on merchant adoption.

And then the final barrier—that I will just mention—is that there’s a real hurdle for anyone coming up with a mobile payments alternative, which is that they have to beat something that at the moment works extremely well. So, at the moment, I can pull out a credit or a debit card at the point-of-sale, I can swipe it, and it works beautifully. Takes about a second. No fuss, no muss—the clerk knows what to do. The technology is all there. So we have this wonderful system that works really well right now that’s extremely efficient. And, in order to persuade consumers or merchants to do something different, someone’s going to have to come up with a really great alternative that adds value to the merchant and adds value to the consumers to make both of them want to do something different than [what] they are currently doing. (continued)