Device operating systems

Mo'bile Money, Mo' Problems

AT&T Inc. (NYSE: T), Verizon Wireless , and T-Mobile US Inc. are teaming up to take over the promising mobile transactions market, according to a Bloomberg report today.

The carriers are reportedly joining forces to capitalize on an opportunity as large as 1 billion credit cards and nearly 4 billion cellphones -- and, more specifically, to take down current m-commerce pioneers Visa USA and MasterCard.

The theory is that AT&T and Verizon are working on a joint venture, in which T-Mobile would have a smaller stake and Discover Financial Services and Barclays Bank would lend their services, to test a mobile payments system in Atlanta stores, as well as three other TBD US cities. The system will use contactless technology to let consumers pay for goods with a swipe of their smartphone, and the carriers would presumably take a cut in the form of a transaction fee.

It'd be the mobile operators' biggest push into mobile money yet and is set to get off the ground once the group nabs a CEO. (See Operators Cash In on Mobile Payments .)

Juniper Research Ltd. is bullish on the mobile money opportunity, forecasting that nearly half of all mobile phone users worldwide will pay by mobile for digital and physical goods by 2014, nearly a billion more users than are doing so in 2010. Juniper principal analyst Windsor Holden says that, given the interest in the space, it will be extremely challenging for any newcomer to succeed in mobile money.

The mobile operators are, however, not your typical newcomers. With the fourth largest payments network, Discover, and Barclays Bank backing them up, as well as existing trusted billing relationships with their customers, they have a strong chance at success. Provided the enabling technology is in place, Holden asks, why should they not build on those relationships to use the phone as a credit card?

"Set against that is what might be termed the behavioral hurdle: having the enabling technology in place in the handset is one thing; persuading consumers to use it, and persuading retailers that consumers will use it, is another," Holden said in an email interview. "There is a certain leap of faith required on the part of the end user to transition from using a plastic credit card to fulfill a transaction to using the smartphone in that role; likewise on the part of the retailer."

The service would require retailers to put in new point-of-sale terminals and the handset makers to embed contactless or near-field communications (NFC) chipsets in their phones. Otherwise, consumers will have to affix stickers and cases to their phones to make it work. It's no small task, but something that handset makers Nokia Corp. (NYSE: NOK) and Apple Inc. (Nasdaq: AAPL) have been pursuing with patents and some commercial phones in the case of Nokia. (See Near-Field Inches Nearer and Nice Move for NFC.)

To ensure success, Holden says, operators will also need a combination of exceptional marketing allied to inertia from the major credit cards. Visa and MasterCard, the two largest payment providers, have such a large market share that new entrants -- even when they are as powerful as the wireless operators -- have a relatively short window of opportunity before the key players in that finance space respond with their own offerings, he says.

Outside of the big financial institutions, a number of third parties, including Obopay, startup Payfone (which received an $11 million cash infusion today), Zong, Boku, and many other quirky vendors are also targeting the space. (See Mobile Money Machines.)

— Sarah Reedy, Senior Reporter, Light Reading Mobile

theschnack 12/5/2012 | 4:28:12 PM
re: Mo'bile Money, Mo' Problems

I'm naive, of course, but I'm surprised at why PayPal - which is mobile(able) and easy enough to automate - doesn't get more play as a Mobile payment option.  Anyone?

FredStein 12/5/2012 | 4:28:12 PM
re: Mo'bile Money, Mo' Problems

There are many challenges to Mobilizing Money. The upside is also huge.

A few inherent advantages of Mobile Money

1) Unbanked Mobile phone owners = 75% of Mobile Phone owners. There are about 1B people who have bank accounts. There are over 4B Mobile phones in use. (Some say closer to 5B).

2) High cost of Credit Card for low price transactions. In the US (USD) the VISA charge is about .30 USD plus 1 or 2% of the transaction. That's 18% for a $1.70 cuppa java. People use their credit card like cash. But the CC system was originally set up to streamline extending credit and dealing with risk. Thus the CC will remain expensive for low cost transactions.

3) Value-add, Customer loyalty, Location-based promotions, etc. Even feature phone can support these programs. Large chain, and even small local merchants can deliver many of their sales incentives more effectively, and cheaply through the phone. (I still get hard copy, glossy stick-together promos in the surface mail for stores where I have a loyalty card. Think how much that costs.)

4) Convenience. It is much easier to let the phone handle things. Today if you have several loyalty cards you either carry them in your wallet, or enter your phone number - manually. Let SmartiePhone do it.

5) Security. The phone can add security features, and ramp them up as the dollar of the transaction increases. The phone can provide end-to-end encryption.

6) Proven. In So Korea and Japan, Mobile transactions have been in use for a decade and new use-cases open all the time.


If the MSPs are really smart they will add value-add features for their subscribers. For example, provide interfaces to automatically transfer all the transacations into the subs' financial management SW applications. Also MSPs need to charge a very low fee and make it up on volume.

FredStein 12/5/2012 | 4:28:11 PM
re: Mo'bile Money, Mo' Problems

Paypal has joined, in partnership with Bling Nation as outlined here:


We had Eric Duprat, General Manager, Mobile at PayPal, and Wenceslao Casares, CEO of Bling Nation on a VLAB.org panel discussion on the Mobile Wallet in October '09. Our video archive resides: http://www.vlab.org/article.ht...

theschnack 12/5/2012 | 4:28:11 PM
re: Mo'bile Money, Mo' Problems

Great bullets.  TM Forum's Enabling New Services initiative, as well as Revenue Management, would love your insight.

Going back over a decade, we've been talking about CSPs monetizing their amazing (and overwhelming) revenue management systems for use cases OTHER than "bill my subscribers".  Come 2010, the big picture is still out there.

theschnack 12/5/2012 | 4:28:10 PM
re: Mo'bile Money, Mo' Problems

Thanks.  With the not-quite-apples-to-apples mobile commerce market ranging from $300-$600B in the coming years, there's plenty of room for a variety of players.  Numbers show that carriers already account for 50% of billing for mobile commerce.

What'd be interesting is, with PayPal claiming 600+% growth last year in mobile payments over their platform, what's the uptake for mobile payment of physical goods and services?

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