ISIS: Dialed Back or No Dial Tone?

Next to the content of bin Laden’s hard drive, what I’d most like to see today are the PowerPoint decks that led AT&T and Verizon to actually think they could start a mobile payments network. My guess is that between the two companies and their management consultants the following questions weren’t addressed or were glossed over as not being that important to pay attention to:

• What are consumers getting that is a lot better than cash or swipe? Paying with cash and swiping a card have become incredibly fast and convenient methods of payment. Cash has a new life because it is so easy to get from ATM machines, thereby reducing one of its major disadvantages. New technology has made swiping ever faster for people and clerks. If you don’t have an answer to this question or the next one, you will never ever get a new method of payment off the ground.

• What are consumers getting that is so great that they are willing to put up with a worse experience at the point of sale? You don’t have to have something better if you can bundle more value. Look at Apple—it managed to ignite the smartphone business even though it was far worse as a device for making phone calls compared to other phones on the market. It added so much value to the device that people were willing to put up with having it work more poorly as a phone. My guess is the figuring out of the value-added services, e.g. (the killer-app(s) that incorporate payments) is what will result in someone igniting mobile payments. Improving the time and convenience of paying is just too hard given where we are today.

• Are there enough consumers pining to use mobile payments, or is there something else in it for merchants that merchants are going to invest in new point-of-sale equipment, in retraining their clerks and in disrupting the flow at the checkout counter? If not, it really doesn’t matter whether consumers like the mobile payments method since they won’t be able to use it anywhere.  That, of course, leads to the next question.

• What’s the ignition strategy? Having a value proposition is a threshold question for whether you have a viable business. But it is only the start in a multi-sided market. You need to have a strategy for getting merchants and consumers on board, getting enough consumers to attract merchants, enough merchants to attract consumers and enough of both quickly enough to ignite the platform. Even companies that have great propositions for consumers fizzle because they haven’t thought through a feasible ignition strategy.

I was quite dubious about the chances for ISIS when it was first announced (Read: Will the Mobile Payments JV Trounce MasterCard and Visa?). But I figured that maybe they had thought this venture through more deeply than their announcements and press reports were suggesting and I had given them credit for. The Wall Street Journal article today by Robin Sidel and Shayndi Raice confirms my initial concern that this was yet another badly thought through adventure into mobile payments in America. Lots of hype, lots of money spent, not much to show for it, a sideshow on the long-haul to ignite mobile payments in this country.

What should the mobile carriers do now? There’s certainly nothing wrong in their trying to create disruptive innovation including mobile payments. They might succeed, make a lot of money for their shareholders and create valuable services for consumers and merchants. But maybe they don’t have it in their genes to do that anymore than I could, if I were younger, go from being an economist to being a singer. Instead of working on trying to be the mobile payments network or trying to control the mobile wallet, it might be best if the mobile carriers just concentrated on providing the best possible pipes for mobile payments and commerce and stopped trying to control other pieces of what will become the mobile payments workstream. That would probably speed up the development of mobile payments, and the carriers would probably make more money sooner.

David S. Evans is an economist and a business advisor to payment companies around the world. His recent work has focused on helping companies create, ignite and profit from payments innovation. He is the originator of the Innovation Ignition Framework®, a tool provides a systematic way for companies to evaluate and implement innovative ideas and achieve critical mass. David is the Founder of Market Platform Dynamics. Read More