Mobile Money – Navigating in the Fog

5 April 2010

Great recap of CTIA session:

Being an ex-Gartner guy I love to analyze the spin machine. What has been the return on the “mobile investment” made by established payment players (approx $500M in US/EU over last 2 years), or the $200M /yr that VCs (MobileMonday services estimate) have pumped in?

As an investor or P&L owner… a look at the hard numbers of teams focused in this space over last 2-3 years would not drive you to bet aggressively on mobile payments. For example, QCOM’s 2009 10-k shows a 4 year old Firethorn unit running at $34M expense generating $3M in revenue (page F-29). This is a “successful” team that had contracts w/ Wachovia, Citi, Chase, USBank, …

Obopay and Firethorn

Citi is out of Obopay

Mobile investment exceptions revolve around delivering short term value or supporting an existing value chain. Within the US, payment data would show that PayPal and the banks are the clear leaders here. Customer listening data shows that the average US consumer today does not view mobile as a separate channel, or a  separate product, but rather as a convenience which supports existing products and relationships. As my mobile head in HK said to me “what is so urgent that I must use my mobile and can’t wait to gain access to my computer”? There are times when all of us do have that urgency, but it is difficult to build a business case on irregular, sporadic use of mobile payment services. There are certainly “niche” needs, but few result in a profitable ‘stand alone’ business case (the banks are very adept at serving the market). It is far easier for banks (or existing players like paypal) to “extend” into the niche then for a new product to enter (the nature of network effects).

Bank of America, Wells, and Chase have solid plans for supporting “mobile payment”. Rather then creating a separate organization, they have treated it as an extension of the existing customer experience (online or on the phone). As the payment head of one of the majors told me 2 months ago “what payment problem can I not address today with one of my current products”? This same “extension” approach is taken by AT&T and PayPal as well, extending existing products and services into a mobile experience.

Within the US, as Obopay/MA, Firethorn, MPAYY and other mobile specialists struggle to keep 2,000 active users (I’m not missing any zeros) existing players are meeting their customers needs and making plans to expand services for a seamless “inter bank” experience.

Similarly, outside the US,  MNOs are extending their existing value chain by adding payment services. All of this seems to prove the axiom that “payments” is a challenging “stand alone” business (perhaps a separate blog on this?).

Beyond value chain extension, there are significant investment opportunities in infrastructure. Mastercard and Visa are very pragmatic here, investing in upgrading “rails”, rules, and “riders” which will drive increasing volume. An example of which we will see from Visa next month in a mobile marketing engine integrated with card use. “Payment innovation” history shows that adoption follows infrastructure 20 years after investment. Early adopters will be the consumers with the compelling need (or the trend setters).  For most US/EU businesses, being a “late follower” has limited downside as infrastructure is built and consumer behavior adapts, there is little risk in waiting.

Within emerging markets, common payment infrastructure is required in linking all nodes of the network: Bank, MNO, Agent, Consumer, Merchant… This is a much more exciting space as consumers evolve from a model where they must travel 2 hours to reach an agent to pay a bill in cash. It would seem that investment will be driven by MNOs as they have developed an economic model which has adapted to serve these markets. MNO efforts will be driven internally and by vendors that already serve them today (example Roamware/Macalla).

Comments appreciated.

Related Post


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s