I have been woefully behind in my blogging as of late due to the volume of consulting projects I have had over the past 7+ months. That being said, these projects have given me fodder to think about linkages among seemingly disparate mobile payments projects…. from mobile money market assessments in Nigeria and Ghana for Grameen Foundation to developing the mobile payments strategy for a Middle Eastern Bank (in a highly banked market) to foreign entities seeking to enter the mCommerce retail market in the U.S.
With every new project, it has felt that the only commonality was the “mPayments” title. How can we link the commonalities of creating a brand new financial infrastructure for the 3+ billion unbanked poor with the trends in the U.S. to enter retail through loyalty, promotions, rewards, etc. on the mobile phone? Here’s the link…
- Of course we all know that the mobile phone is the most ubiquitous technological device in history
- We all know that it has certain features/functions that enable electronic data/communications for the first time… and we know that smart phones have even more features/functions that can be used for a richer consumer experience…
- But in emerging markets, we create a new infrastructure with a very different value proposition to those who have lived their lives transacting only in cash. For the first time, we have electronic systems (via mobile) to take the “friction” out of the economy, thereby releasing pent up demand for financial transactions/credit, etc. that will increase the GDP in these markets (see my 2011 article on this: http://mpayconnect.com/wp-content/uploads/2012/10/The_Mobile_Money_Movement_by_mPay_Connect_Dec_2010_-_Innovations_Publication_Winter_2011.pdf)
- In developed markets, in contrast, we have had sophisticated financial services infrastructures based on cards for banked consumers. Mobile becomes a new channel for cards rather than the infrastructure to leapfrog cash. So, why so much discussion around “Value-Added Services”… loyalty, promotions, etc. in developed markets?
- How do we rationalize these seemingly different industries, both called “mobile payments?”
- The answer lies in whom the value proposition targets. In cash-based economies, the value proposition very clearly supports consumers since electronic payments is far better than cash (safer, faster, more traceable, etc.)
- In developed markets, consumers already have cards. Using the mobile phone is not that much better than usage of their card (I never bought into the “it’s more convenient to use your phone than to pull out your card” argument). Instead, the value lies on the other side of the equation… with merchants. Merchants still tackle many issues around driving consumers to their stores, driving repeat sales by consumers, driving higher basket of goods, etc. For the first time, the (smart) mobile phone enables them to have rich 1:1 communication with their customers to solve these issues (loyalty, rewards, offers, promotions, etc. based on increased data around their behavior.) So, where does mobile payments come into play here? It becomes the “Trojan Horse” to close the final loop at the transaction side to redeem, sign up, etc. consumers. Mobile payments becomes a necessary component, but not the driver in this equation. Of course, this becomes quite interesting as one considers that payments and marketing are likely not complementary skills within one organization (which means there will be increasingly M&A activity in these areas)
- By the way, my strong belief is that it is only a matter of time that the emerging markets (once they have their consumer bases developed) will then seek retail solutions and, guess what happens, the trends we see in developed markets start to happen in emerging markets.
I never thought my seemingly disparate projects from one part of the world to the other would ever intersect, but I believe it is just a matter of time!