Mobile Commerce

If Mobile Is ‘Everything,’ Why Haven’t We Seen More Progress?

“Mobile is everything.”

That’s the theme of this year’s Mobile World Congress. The conference organizers make a great point.

Mobile is everything because just about everyone in the world now has a mobile device. About half of those devices are smartphones – the fastest selling gadget in the history of gadgets. By the year 2020 – just four years from now – about 80 percent of the adult population will own one. The lion’s share of the growth over that period of time will come from Asia, the Middle East and Africa, giving consumers in those markets unprecedented access to payments, commerce and financial services.

Mobile is also everything because those devices are a natural and essential extension of every aspect of our lives. We all know the anecdotes about how many emails are opened via mobile phones (54 percent), how many consumers check their phones within 15 minutes of opening their eyes in the morning (80 percent), and how many times a day the typical consumer checks their phone for messages or calls or texts (150 times).

And it’s everyone across a variety of use cases.   

My 80-year-old father sends me text messages regularly because smartphones make it easy. Millennials pull their boomer parents and aunts and uncles into the world of P2P because they tell them to just “Venmo” the money they want/need. U.S. online merchants suddenly find themselves serving customers from China, India, Africa and every other country in the world because mobile phones, quite literally, put the world of commerce at their fingertips.

But as transformational as mobile has been so far, when it comes to commerce and payments, well, we’re still very much making our way to first base.

And that’s more than two decades after the launch of the commercial Internet and nearly a decade after the introduction of the iPhone that gave us the access device to connect people and the Internet via the iOS ecosystem and apps.

And that’s despite the hundreds of initiatives and billions of dollars invested around the world to enable mobile money in most developing countries.

And despite the hundreds of initiatives and billions of dollars invested in developed countries around the world to swap out plastic cards for mobile wallets in stores. 

And, despite the hundreds of initiatives and billions of dollars invested in mobile apps and mobile-optimized websites in order to get consumers to buy stuff on those phones.

There’s still just too much friction. Friction because of regulatory or infrastructure impediments. Friction because of technology decisions and merchant inertia. Friction because it’s just still too hard to checkout on mobile devices.

In all cases this leaves vast sums on the table for everyone in the ecosystem – and consumers wanting more. 

Yet, optimism reigns. After all, we are just getting started and we’ve learned a lot over the last several years as the ecosystem has experimented with a variety of schemes, business models and technologies that have mobile at their  core.

And, like years’ past, conference tracks at MWC 2016 will address a broad number of topics covering the very broad slate of issues that impact the mobile ecosystem.

But if we really believe that mobile is everything, and that we, therefore, need to do everything we can to move us in that direction, there should be a few of the topics of conversation that pop to the top of the list in Barcelona this week.   

Like for instance …

THE ROLE OF THE CARRIER

Mobile World Congress is hosted by the GSMA – the association that represents the interests of the 800 mobile operators around the world. Yes, there are that many. So, not surprisingly, the CEOs of many of them are speaking on one topic or another.

And whether they say it out loud or not this year, they all desperately want in on the mobile commerce game.

And whether anyone says it out loud to them or not, it’s a game they need to sit on the sidelines and watch others play.   

Instead, we’re watching a fascinating turf battle take place in real-time.

Over ads and mobile.

Digicel in Jamaica, and European carrier Three in the U.K. and Italy (coming soon to Austria, Ireland, Sweden, Denmark, Hong Kong and Indonesia) are using ad blocking software from Israeli company, Shine, to block display and video ads at the network level. That means that Three’s 30 million users in Europe, and Digicel’s 13.6 million subscribers across its 31 (mostly Caribbean) markets, will have to opt in to enable ads to appear on the websites and apps they surf on their phones.

Unless, of course, advertisers agree to pay the carriers 10 percent of their ad revenue. 

The carrier’s argument is that ads consume a huge part of a consumer’s data plan — unknowingly, they contend — and advertisers leverage their infrastructure for their own advantage without being compensated for it. Ignoring that fact that they are being paid, in data services fees that their subscribers pay them. Just like cable operators and satellite providers are paid when subscribers access the Internet over their lines.    

Advertisers – and quite possibly regulators — have a different point of view. They say that blocking ads is against every net neutrality principle ever created and they’re fighting back hard.

Of course, the carriers are ignoring that ad blocking isn’t just their purview. Ad blocking software is alive and well and used a lot, primarily by the target audience coveted by many of the advertisers they want to pay them their 10 percent toll: millennials.

But this sets up an interesting conundrum/dilemma for the carriers – and quite possibly the moment of truth for them.

The facts are that the mobile operators in the U.S. are the dumb pipes that they always feared they would become. Smartphones have driven consumers to be brand loyal to the handset operator who can give them the coolest phone that can access the coolest apps. Carrier choice is driven by the phone that those consumers want to buy. And, consumers will shop around to get the best deal they can, thanks to number portability. Some handset manufacturers, like Apple, make it as easy as pie for consumers to do just that. And we all saw what happened when carrier-backed Softcard aka Isis tried to enter the U.S. market with a scheme that gave carriers a cut of the commerce pie. Everyone threw up on that idea. The result was a $55 million fire sale to Google after reportedly nearly a billion dollars of investment by the carriers. 

In developing countries, the story’s not much different, but for different reasons.

Carriers have strong relationships with consumers since they are the most familiar, essential and developed institution that they have a relationship with. The mobile money schemes that have gotten traction, are those that are carrier — not bank — driven. Yet even in developing economies, consumers often have relationships with multiple carriers. They have multiple SIM cards that they swap in and out of their phones with ease. So, as a category, telcos are much more likely to have consumer affinity, but on an individual brand basis there’s no guarantee.

In an effort to establish preference, we’re starting to see partnerships that mash up wallets with financial services providers, with the hope that a wallet/financial services consumer will be less likely to switch away to another provider. And, those sticky customers give the telco an opportunity to monetize those relationships in many different ways, through the sale of handsets, through data usage plans, and through basic services that add value to their core product.

But not by being the toll collector on the mobile commerce highway.

So, perhaps now is the time for the carriers to acknowledge that there’s nothing wrong with being a pipe that enables consumers to use a device to access services and apps via their network on those devices. That sounds pretty smart. Insisting though on being the toll collector on the mobile commerce superhighway will only give lots of smart innovators the incentive to work around the carrier since access to the Internet via mobile devices opens up lots of new possibilities that could threaten the very core of the mobile carrier’s business model.

And that would be pretty dumb.

THE INTERNET IS EVERYTHING

But where carriers could and should get in the way – and where the big money really lies – is where the “Internet of Things” has the potential to reinvent just about every single segment of business. Machine to machine interactions enabled by data and the Internet is transforming the business of business – and doing so before our very eyes.

Supply chains are being transformed as machines, not humans, process data and react in real-time to speed up or slow down the flow of raw materials, inventory, people or vehicles. The ability to data and Internet-enable the delivery and monitoring of medical services, medication, chronic disease management and patient billing and management, will improve the quality of care at the same time it reduces the cost of service.

IoT is making power grids and meters smarter and transforming the costs and methods for how energy is managed, monitored and delivered. Cities are being made smarter, too, as the data related to transportation and traffic flows eases congestion, and informs the creation of new business models for how services are priced and delivered. 

Smart sensors that help farmers gauge crop and soil conditions promise to yield larger crop sizes and help better manage against weather and other external threats.

All of those things require powerful Internet backbones – the domains of the carriers – making carriers in an IoT world anything but dumb pipes. The big opportunities – and dollars – are in the B2B use cases that power this new world.

THE POWER OF THE GATEKEEPER

The mobile is everything movement is rearranging the balance of power across just about every ecosystem that touches it. And it’s given rise to a few very powerful gatekeepers (or wannabe gatekeepers). 

Like Facebook.

They want to be a gatekeeper even if it doesn’t sound that way at first blush. Giving more consumers in developing economies free access to the Internet via its Free Basics program sounds like goodness. And it is. Until you start to peel back the layers.

Which the telco regulators in India did.

It turns out that one in every three Indians online access Facebook at least once a month. Free access to the Internet via Facebook’s front door meant that Indian consumers would be allowed to surf Facebook and a few other apps without it interfering with their data plans.

That put Facebook in position as a potentially very powerful gatekeeper for anyone else wishing to access those consumers. Free Basics may have all but guaranteed “free basics” for Facebook, Messenger and Instagram, but the telco regulator in India thought that it would kill any chance of it ever wresting that power away from Facebook down the road. And, that was enough for them to kill it.

But Facebook is at the mercy of its own gatekeeper, Apple. And, truthfully, so is most everyone else in payments and commerce on some level.

Apple controls something like 65 percent of all of the traffic on mobile devices. And they control everything that happens on their platform – from who gets access, to how much that access costs, to the standards that are used. That makes Facebook and everyone else who relies on the iOS ecosystem to enable app functionality vulnerable to the whims of Apple. Facebook, in particular, faces an interesting dilemma in reconciling its own gatekeeper aspirations with those of its host, Apple. It’s not only Facebook that relies on Apple’s iOS to enable the eyeballs that consumer 20 minutes a day on its platform, but also Instagram, Messenger and What’s App. Collectively, they consume a ton of the time that the average consumer anywhere in the world spends on apps and online. And the great majority of that time is via iOS devices.

Could Apple decide one day that all apps on its platform pay up or get out? So not just Facebook, but Uber and Amazon and PayPal and every other app that is accessed frequently on its platform? Who knows? But it is a war room scenario that every player with a mobile app should be scenario planning.

Which could, ironically, set up some rather unlikely partnerships between carriers and mobile payments and commerce players as they seek common ground in enriching their own positions of strength with the consumer – who ultimately will decide who wins and loses the mobile commerce game.   

THE POWER OF GLOBAL, MOBILE COMMERCE

It’s a fact. Armed with mobile devices, the world, literally, can be shopped. And, any merchant that’s online, as far as those global consumers are concerned, are open for business. Over the last year, we’ve benchmarked the degree to which online merchants in 10 countries are able to capitalize on this global commerce opportunity. The evidence suggests that many merchants simply aren’t ready to welcome those consumers with open arms.

Yet merchants think they are.

We’ve learned – as have they – that it’s not enough for merchants to throw a few globally accepted payment methods on their checkout page. Merchants need at least 15 – and the ability to add more, literally, at the flip of a switch. Doing business on a global scale means being transparent about prices, solving for shipping costs and returns, and guaranteeing that what one orders is actually what’s received.

And making that all happen, without undue friction, via a mobile device for a consumer who’s likely not fluent in the language of the merchant’s business or home country.

Merchants have also learned that payments becomes an impediment to global commerce when a consumer picks a payment method at checkout and the platforms that support that merchant can’t see the transaction through, securely. Scale matters on the global stage.

THE POWER OF DIGITAL FINANCIAL SERVICES

Mobile is increasingly everything with respect to the delivery of financial services, too. What used to be a discussion about access based on where one lives – in either a developed or developing economy – is now a discussion based on access – period.

There are just as many people in developed economies who feel – and who are – excluded from access to the financial services that they want and need as there are in developing economies. It’s just a matter of degree and perspective. 

Mobile, of course, is the access device that will deliver that access. It levels the playing field by making it possible for a host of new players to provide access to financial services and capabilities in an affordable and efficient way.   

Today, whether a person lives in New York or Nairobi, mobile now enables those people to send money to others and to access account information via a mobile device 24/7. And, mobile is also the access device that now enables “cardless cash” – whether it is from ATMs in the U.S. or an agent network in Zimbabwe. Mobile makes it possible for virtual banks to serve the needs of consumers efficiently and cost-effectively, even in economies where there’s a bricks-and-mortar bank on every corner. New players – some even banks themselves – see the mobile device as a powerful tool for enabling financial services, and even including access to capital.

The baseline proposition across all of those use cases is using the mobile device to help everyone more easily and efficiently manage their money – with less friction.

And this is where carriers in developing economies have a critical role to play. As the most familiar and trusted provide of critical “infrastructure” telcos can enable access to the services the consumers in those countries most want and need. Countries with regulatory environments that recognize that fact have and will continue to make the most progress for the benefit of their citizens and their economies. And as we’ve seen in Kenya and are starting to see in other nations, as well, once those platforms are in place, commerce capabilities can flourish as ecosystems emerge to complement and leverage those foundations. 

THE POWER OF MOBILE TO REINVENT RETAIL

Perhaps nowhere is the power of mobile as everything more visible then in the world of retail right now. Mobile and online – together — is creatively destroying the retail model that’s been in place for millennia – a model that used to rely only on consumers and merchants coming together face-to-face to do business.

Mobile now makes those interactions fluid, seamless, always available – and quite disruptive to the status quo. 

And when Walmart, the biggest retailer on the planet posts its worst results in 35 years, at the hands of digital commerce, then you know the pain, and the trend, is quite real.

We’ve been looking at this phenomenon over the last year, too, and we’ve done our own research about the degree to which online and mobile is changing the balance of power on the retail playing field. You recall the rather controversial Census Bureau data error that we reported on a month or so ago, a piece of work in which we challenged the Bureau’s reporting of the mix of online and physical retail sales over the last 5 or 6 years.

Their work suggests that online is but a small fraction of physical retail sales – something like 6 percent.

Tell that to Walmart, Macy’s, Target, Best Buy and every other physical retailer whose bottom line has been decimated by the impact of online and mobile.

Our statistics support something that is closer to 10 percent, on average, and in certain categories like apparel and electronics, much, much more. Over the next several years, we’ll see categories where physical retail never thought it would lose its grip – segments like grocery and gas – feel the impact, too.

What makes this aspect of retail tough to fully measure and absorb is the degree to which mobile blurs the lines between what may be bought online but fulfilled in a store. “Omnicommerce,” which is the term of art for when that happens, is a lot more than a buzzword — it is a retail reality. A reality that will blur even more as cars become conduit for commerce and every place that mobile can enable a contextual commerce experience become more pervasive.

Carriers have no role to play here either – as I mentioned earlier, this is an area where they should simply stand down.

But it’s one where everyone else in the payments and commerce ecosystem better stand up – and fast.

A review of more than 39,000 data points suggests that those who will weather this reinvention of retail will meet the needs of the consumer on four key dimensions: product selection, availability, merchant integrity and customer intimacy. We’ve also learned that being “omnireadi” isn’t just the bastion of the big guys – size doesn’t matter in this case, unless, of course, you’re measuring the impact to the bottom line. Those who aren’t – or who don’t get there soon – may soon a big dent in their bottom line.

Check back tomorrow when we will release the results of the last OmniReadi Index, which delves into each of these areas in greater depth.

And, join me at Innovation Project 2016, March 16 and 17 on the campus of Harvard University. We’ll tackle these issues – and many more – with some of the brightest minds on the topic sounding off on what we need, what we don’t need and who’s likely to lead the way. This year we have an unprecedented number of CEOs and Founders, executives who aren’t often on the public stage (like Visa’s CEO), as well as some of the most interesting global luminaries to open our minds to new possibilities.

After all, if mobile is everything, we better have thought of everything, too.

The world is waiting.   

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