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The less barriers to adoption and the more universal or "Future-Proofed" solutions are, the greater the chance of adoption by all tiers and types of stores.
The biggest winners will be the solutions that are ubiquitous as cards are now.
About Mobile Wallet Media
Mobile Wallet Media is a news media, analyst, marketing and consulting firm focused on the future of mobile: payments, marketing, loyalty commerce, security, prepaid, virtual currency, daily deals and the convergence of them all with social and local. The Chief Editor, Randy Smith, was the primary founder, inventor and former CEO of MobilePayUSA, a TechCrunch Disrupt Award Winner.
NFC and 2D Lead the Way to Scale Mobile Wallets, but is there a Black Swan?
The 7 S's Required for Success in Mobile Payments > A 7-Week Series
Retail commerce has never been at such an exciting time as now, nor has is been at such a technological crossroads. In the late 90's it was e-commerce, loyalty and gift cards that retailers and service providers were busy implementing. Now a mirror-image of the 90's is being re-enacted with the goal of enabling mobile to replace plastic and paper cards & coupons. With literally next to zero infrastructure in place to date, the solutions that can move fastest, in their move to mobile, will win the most market share.
In a recent article I questioned if Pay with Square is scalable. You may want to read over this article now to in order to gain more from this article.
The scalability problem is directly related to the multitude of Point of Sale (POS) systems and terminals. There are literally hundreds of POS software vendors and dozens of stand alone payment terminals. Adding to this, in the U.S. less than 5% of merchant locations are enabled to accept mobile payments using their existing system and terminals. As touched upon in week one of this series, I highlighted the key problem is the lack of 'Standardization' for mobile payments. Mobile Wallets must seamlessly connect through and leverage existing POS software and terminals to acheive the greatest adoption.
Thus far the two Mobile Wallet solutions that appear to have the most scalable solutions are 2D bar codes and NFC, however very few retailers, large or small, have adopted either technology. Most major POS software vendors are all set up to add NFC terminals and 2D scanners, but the cost of adding one or both in one that must be backed by the assurance of quick and absolute ROI in order for retailers to pull the string on the purchase. With all the attention in the last 3-weeks and more broadly in the last 3-years on transitioning to mobile payments and marketing, the tipping point for adoption has finally arrived.
LevelUp seems to be making waves in the news every few days with announcements about new value-added services such as loyalty and giving users the ability to donate a portion of their reward to charity.
Kuapay, PayPal and TabbedOut have also made big advances as of late, as has Square and Dwolla. What all this activity, announcements and traction add up to is pressure on ALL players to move faster and broader. This is not such a bad thing and is exactly what is needed to get the bigger players Visa, AMEX, Discover, Apple, PayPal and Amazon into the game. MasterCard several years back established PayPass (NFC terminal tech) and is a key enabler for Google Wallet and other mobile wallets.
Though it must be pointed out here that the payment networks do not necessarily need to come up with their own Mobile Wallet to have a high degree of success in mobile payments. Mobile Wallets will still be processing network credit cards as this is the most simple way for consumers to pay right away. However, there has been a break in the dam, as PayPal, Dwolla, Carrier Billing, Prepaid and 'Virtual Currencies' are in the battle to divert transactions away from the networks. I spoke more about this in week 3 and in Daily Deals Manifest Destiny
A truly scalable solution will provide seamless solutions for all types of payments and commerce. If the Mobile wallet is going to replace all cards, coupons and tickets it must do just that and do it better, with more convenience, speed and security.
I elaborated on Digimo's solution to point out that their solution, or one like it, or even more seamless, could already be in the works or have been invented by a Mobile Wallet startup or veteran and we just have yet to see it. All that may be necessary to change the mobile payments landscape overnight here in the US is for technology like Digimo's, that requires no new hardware or software for merchants (hmm I've heard this somewhere before), may be a single partnership with one of the payment networks, a group of processors, a company like ACI Worldwide or the top 10-20 POS software vendors.
Such a technology that removes the barriers to merchant adoption can quickly scale a Mobile Wallet, thus mass adoption is likely. But, as touched upon in week one, patents protecting an invention like Digimo are key to defending it from cloning. However, even if it only had a patent-pending status, a partner like Discover, Visa, MasterCard or AMEX could take advantage of this technology, even if it only serves as a bridge until NFC terminals reach mass saturation in the U.S., in 3-5 years. And who knows, perhaps DigiMo does not have patent claims in the U.S.. If this was the case, then a payment network or group of processors could quickly build out a scalable product. Heck, there could even be a U.S. based company with DigiMo's technology and patent-pending status and we just don't know of them. You no longer have to wonder as I know of such a company.
The race for Mobile Wallet market share could potentially be disrupted or hinge on a Black Swan technology or IP that very few may thought was possible or existed. So will this prove to be a game changer for the industry?
In the very least it makes sense that a company with such potentially disruptive technology or IP would be acquired by one of the major payment players, even if it is to just keep it from competitors such as Facebook, Amazon, Square (Twitter), Yahoo, FourSquare or fill in the blank. The main reason that the larger players would not use such technology is simply because they already have so much time and money invested in other technology. This however, is the world we live in. A world of change and disruption cycles that are increasing at a breathtaking pace. For one to stick their head in the sand might leave some of the 'Current Kings of Commerce' with the same relevance as the payphone. Though this race is a marathon, the pace just stepped up. For those wishing to compete pride must be swallowed, truth and reality adhered and ten's to hundreds of millions spent to insure a prominent place in the future of mobile commerce. This is the time to burn the nitro, exhaust all measures, revamp the plan and acquire the talent, IP and companies that will best ensure your future.
Scalability's key driver is set around enabling merchants to engage in mobile payments while also tying in marketing and social by requiring as little change as possible
@POS .
Scalable Mobile Wallets will enable mobile payments with whatever the merchant's infrastructure will allow. With this the Mobile Wallet may interact with each merchant's POS regardless of which hardware they have adopted, be it 2D readers or NFC terminals. It is my opinion that many merchants will adopt both NFC and 2D as this broadens the number of wallets they may embrace and thus the customer base.
For an alternative solution to scale, it must be integrated with the POS systems, including their ledger or accounting systems. This is why partnering with networks, processors and leading POS software and terminal manufacturers is so vital.
Take for instance the recently announced PayPal and Discover partnership. PayPal, though it had it's own unique IIN and partnerships with terminal manufacturers, it could only make the IIN useful on newer IP terminals and this still takes a partial download to terminals. The deal with Discover, come next April, will make PayPal's new card accepted everywhere Discover is now accepted. While this is not mobile payments, it does tie the transactions to PayPal's Digital Wallet, which connects users to pay with any one of the cards on on file with PayPal. What would be even more interesting is if a like deal was struck with Discover or for that matter any of the payment networks that would instantly connect and enable mobile payments in the same manner. What if there was a solution that did not require merchants to add new hardware or software and all the accounting and reconciliation was performed away from point of sale?
It seems like Digimo, covered earlier this year by TechCrunch as the company debuted it technology at the Mobile World Congress, could have such a product. It sure sounded like all it needed to be accepted everywhere was a partnership with one of the major networks.
To review their technology, the merchant is provided a card encoded with a BIN (the article did not specify which Sponsor bank or network BIN was being used). The mobile customer scans a 2D bar code that represents the terminal register ID and hits the pay button. The customer notifies the merchant they are paying with Digimo and the merchant then swipes (could be a tap with NFC) their merchant card. The terminal actually thinks it is running a normal transaction. The transaction is rerouted to the Digimo server and paired with the authorization request from the customer's Digimo app. From here all the information is present to complete a conventional payment transaction ($ amount, MID, TID and card credentials). Once the transaction is run, the confirmation is sent back down to the merchant terminal and the customer's phone. If NFC is in phone, this can replace scanning a 2D bar code, which for some can be a tedious process. I assume Digimo partnered with a company that securely stores card credentials and processes transactions for e-commerce.
The 7 S's Required for Success in Mobile Payments set the foundation for further discussion of the future of mobile commerce. We pick up the next leg of this journey on Wednesday, September 12 with The Tour De Mobile Payments.
Scalability
