Takeaways from CTIA: Karen Webster on Visa, M-Pesa, and Mobile Payments

CTIA invited 50,000 of its closest friends to gather in NOLA for its big International Wireless show. I moderated a panel on mobile commerce, plus wandered the exhibit floor and sat in on some sessions. Lots of people have covered the show but I thought you might enjoy some of my musings on what I saw, said, and heard about mobile payments and mobile commerce for the day and a half that I was there.

There was too much for one post so here’s the first of three.

The other 85%

No, this isn’t some crazy reference to an Occupy Mobile event. It’s a comment about developing markets, which was a thread that was present in many of the conversations and panel discussions. It was pretty much the topic of conversation during Visa’s keynote session too. John Partridge spent a lot of time describing how his network’s acquisition of Fundamo is creating “closed loop mobile money systems powered by an ePayment network” [his] all over the world. He claimed that there are 100 such systems in play today – with more about to pop, including something significant in India. All leverage Fundamo’s mobile money platform that was launched about 10 years ago in Zambia with Cellpay. Although Partridge did not offer anything specific about its plans for cross border money transfer, it seems that international remittances are on the Visa radar. The net-net is that Visa/Fundamo appears to be angling for its place as the interoperable standard to enable the movement of money away from cash and thru an epayment system throughout the developing world. He went so far as to say that mobile phones and such schemes would mean the end of cash.

It’s not surprising that this was such a focus of his talk. The 2.5 billion people in the world who lack formal banking relationships (or even access to banking infrastructure) today and who will soon become the emerging middle class is an attractive target for all of the payments networks – and each of them has made its own moves to enter this space. And since 85% of the world’s transactions still happen in cash, it’s where they can obviously count on getting long-term growth. But the operative word here is on long term: it will take patience, scale, new capabilities, and deep pockets to be successful in these nascent emoney markets.

M-Pesa is the gold standard of such schemes, yet there aren’t many (any?) others like them. Why? Even setting aside the regulatory and infrastructure complexities of actually getting set up, there are some serious economic obstacles to launching a viable emoney scheme. One of those very important obstacles is the size of the pie – as in it’s really small. In these markets, the big issue isn’t who gets paid what, rather it’s how many mouths that pie has to feed and then figuring out how to eke out a profit from that teensy weensy sliver. And since the mobile operator is by and large the enabler of these schemes today, they are a defacto sliver, which makes it that much harder for many other players to be involved. Most schemes, M-Pesa included, are able to make money now (and for the foreseeable future) because there are other pockets of revenue that can be used to subsidize their launch and growth. Visa and players like them have the size and the scale – and other pockets of revenue – to invest for the long term.

But they lack one thing that everyone always forgets about these schemes – and that is the cash access network. Yep – it sure sounds weird that the success of launching mobile money schemes rests with having access to cash network – but its true. M-Pesa ignited because it had gobs of agent networks all over the place that dispensed cold hard cash. There aren’t places that accept cards in Kenya – like none or close to it outside the cities and main tourist places – so a world where there wasn’t cash was completely implausible. People absolutely wanted convenient and secure ways to send money to family members living in the countryside, but those transfers were valuable because they could be turned into cash at agent locations to spend at local merchants. Visa and other schemes like this need to crack the cash piece of the mobile money puzzle if their schemes are to succeed. So, I am sorry to say that I disagee with John Partridge, but the end of cash is a very long way away. For more on my rather skeptical view of those who declare that cash will soon disappear, read my recent post here.

Related to this topic but in a very different context was the keynote delivered by the CEO of Mozilla, Gary Kovacs. His company has launched what he is calling a B2G capability – a browser based OS that is based on HTML5. For the developing markets, and the ignition of mobile money schemes, this could be quite interesting. It means that any mobile phone that can access the internet – and he says that 90% of the world’s mobile handsets can – could begin to leverage cloud based apps. If that is true, that could potentially be a game changer for developed and developing markets when it comes to mobile payments and mobile commerce. Here’s why.

Since most developing markets don’t have smartphones today, mobile consumers are tethered to SIM based schemes. The B2G capability could enable a whole new set of mobile money capabilities that are no longer tethered to the SIM card and operator based model and make it far more plausible that cloud-based solutions and players enter the market. In developed markets, it is sort of the same gig. Why be tethered to NFC when you can access everyone you need in the cloud? It’s a potentially powerful (and disruptive) concept that is worth watching and potentially leveraging if you have “just said no” to NFC as a mobile commerce enabler. As I learn more, I’ll keep you posted.

One final point. I think because all of us in developed markets view mobile banking as yesterday’s news, we have a tendency to label anything that has to do with money and mobile as being mobile payments. But, the mobile money schemes in developing markets are neither – at least not yet. When you really peel back the functionality that these schemes enable, it isn’t anything more than providing basic account information and functionality, including P2P transfers, which is mobile banking and not payments. Don’t get me wrong, it is a critically important service for these markets, but let’s call it what it is and not confuse the issue.

My next article, which will be released on Monday, will tackle the Big W (wallet) discussion in the Big Easy.