by Tim Attinger
LESSON 2 DISCUSSION QUESTION: What is the “killer app” or feature that will finally tie mobility to payment and information in a way that is truly transformative and catalytic for the major ecosystems converging on commerce? Can there be only one? Click here to respond.
So, if all the industries we discussed in our first class this week are headed to a middle place where commerce converges with their evolving business models, what fundamental trends are key to the creation of commerce and innovation opportunities in that white space? What are the foundational underpinnings of that convergence in the unclaimed midst of the larger commerce ecosystems? As with much of the curriculum from this semester, the answer to that question lies in the intersection of information services, consumer payments registration, and mobility.
The ecosystems we’ve listed above work to capture the middle space to create commerce, as their businesses converge on opportunities to register a customer, deliver information to a consumer, stimulate demand, triangulate a purchase location, motivate a sale, and follow up with post-purchase data.
Mobinfolialbs. Let’s make up a word for use in this class, shall we? This word is for all of you hardened, hard-charging road warriors out there who (somewhat sadly?) identified with the constantly on-the-go professionals from the George Clooney vehicle “Up in the Air.” We’ll take a page from the lexicon of Anna Kendrick to coin a new term for the opportunity in front of the ecosystems we’ve discussed in our Day 1 lesson. Just as Anna’s character, Natalie Keener, combines “global” and “local” to describe the opportunity for firing people from a distance over the Internet as “glocal,” we will describe the commerce convergence opportunity in front of the industries from our first lesson as a fascinating combination of “mobile,” “information,” alias,” and location-based services (LBS).
While the opportunities in the middle space where commerce converges are legion, these are the major trends driving the convergence of commerce and the business models of retail, eCommerce, online advertising, social media, and mobile. Setting the stage for what changes may come to the business of payments as all of these industries drive to add commercialization solutions to their own networked businesses, let’s explore the key trends — and the solutions major players are building to realize that commercialization opportunity — in greater detail.
Loyalty and Location-Based Services. As online advertisers and marketers work to deliver customer-acquisition and marketing solutions to their packaged goods and retailer clients, they are increasingly looking to remote mobile communications as the way to deliver timely, relevant, and local information to consumers seeking purchase opportunities. Mobile solutions for retail marketing began with the delivery of basic information-only functions through the mobile — typically Web-enabled smartphone devices. Store locator and location mapping services were the first functions delivered to the market, helping that jittery, caffeine-deprived consumer find the nearest Starbucks location for a much-needed fix.
As mobile operators and device manufacturers improved their networks and devices to locate the device on a map within a few yards of the actual consumer location, these services evolved to include capabilities that helped a consumer locate both the location of a retailer’s nearest store and helped a consumer find how to get there from here. While most of us may take this for granted today, when this capability first emerged it was nothing less of revolutionary. To imagine the evolution of mobile devices from basic telephony to smart-devices with graphic interfaces coupled to search and mapping functions that could compete with GPS navigation systems was an amazing leap that is today commonplace.
Well, it didn’t take long for marketers to conclude that, if it was possible to help a consumer find and navigate to a retail location, it might not be such an alarming stretch to drive the consumer from where they are to that location with a promotional message or the promise of a benefit. And so the business of mobile device location-based coupons was born. In a networked world, in which consumers walk around with smart devices that can be located in space, retailers have jumped at the opportunity to deliver proximate promotions to consumers that communicate and locate benefit for them. Business models, like Fourquare, depend on this capability to deliver local and relevant marketing messages to consumers. Innovators, like shopkick, use this same capability to drive consumers into retail stores, using location services to prove to the retailer that the consumer was there and providing a benefit to the consumer in the process.
Mobile Marketing and Advertising ROI. Taking the application of mobile services one step further, advertisers and marketers have begun to use the combination of online advertising to stimulate consumer demand, promotional messages delivered to mobile devices, and registered payment products identified from the point of sale to begin revolutionizing the advertising industry. Online media and search companies have created a large and growing technology-driven sector within the advertising industry by providing enriched data about consumer use profiles and search activity to marketers, while at the same time providing relevant pre-purchase information to consumers in search. As we discussed in last week’s class, this simple innovation has dramatically changed the landscape for advertising, creating a fast-growing multi-billion dollar sector practically overnight.
As revenues in that sector have grown, and as the information on consumers has become much more sophisticated, online advertisers have begun to realize that they may finally be able to grasp that brass ring on the advertising/marketing merry-go-round — namely, the ability to prove that a marketing or advertising message to a consumer actually resulted in the sale that is the purpose of the message in the first place. And as online advertisers have come to realize that opportunity stands squarely in front of them, and that it comes with an enormous upside potential in revenues, they have begun to invest in solutions that will help them tie online browsing to offline buying. In particular, the leading online advertiser — Google — has invested in building and deploying a mobile platform to take marketing and advertising messages into the consumer’s hands and to tie those messages and discounts to registered card products to prove return-on-investment to its advertising clients.
Alias Engines and Remote Transactions. Meanwhile, the major players in the mobile ecosystem are building enormous databases of consumer identities tied to card products, creating a potential juggernaut of remote payment capability. Mobile operators as a collective sit atop a system of consumer identities tied to address, payment card, and mobile number. Today, those identities are used primarily for billing airtime, data use, and the occasional ringtone or game download for the vast majority of consumers. However, the smartphone platform managers — most notably Apple — are creating major consumer identity databases of their own, taking a page from the eCommerce checkout model to build simple username+password registered payment access to sell digital content for themselves and on behalf of others (developers, recording artists, movie producers, etc.) to the consumer users of smartphones.
It is not at all a stretch to see the managers of these databases decide to begin using their alias/identity functions to begin executing transactions for consumers at retailers and merchants outside of their tightly-managed marketplaces but in adjacent businesses. Like that digital copy of “Despicable Me” you just bought for the kids to watch on your iPad? Want a complement copy of a physical DVD? Just click here to buy the DVD from Best Buy — delivered to the billing address on your card within two days. Not a stretch at all.
In our last class, we will take a look at where all this may be headed. We’ll examine what the implications may be for the payments companies that still manage the majority of consumer transaction today. But first, let’s engage the discussion:
LESSON 2 DISCUSSION QUESTION: What is the “killer app” or feature that will finally tie mobility to payment and information in a way that is truly transformative and catalytic for the major ecosystems converging on commerce? Can there be only one? Click here to respond.
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Driving Payments Innovation through Education- PYMNTS University
Durbin Debit 101 (required): Retail Deposits Have Changed Radically Overnight
Debit 201 (Required. Debit 101 prerequisite): Is Prepaid “Debit-Lite?”
Point of Transaction 201 (required): Competition for Consumer Choice
Mobile 205 (required): GPC Payments Value Proposition
Mobile 206 (elective. Mobile 205 prerequisite): Emerging Payments Value Proposition.
Cloud Payments 210 (required): Building Value in the Network
eCom 301 (elective): Evolution of Online Commerce
eCom 302 (elective): Emerging Competition
Mobile 305 (elective. Mobile 205 and Debit 201 recommended): Emerging Markets Mobile Prepaid
Cloud 310: Adding Value to Network Transactions
Cloud Payments 311 (Cloud 210 prerequisite): Monetizing the Information from Payments
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