Mobile Payments: Opportunity is big, alright! But, what's it going to take to get it off the ground?
I wanted to follow up my last blog post on Mobile Payments with my thoughts on how the Mobile Payments ecosystem is evolving and the need for all the players to come together to get it off the ground.
Today's digital consumers are willing to handle most of their transactional needs themselves through self serve applications. This is evident from their adoption of Mobile Apps for doing just about anything in their everyday life. The ubiquity of mobile devices coupled with the advent of ePayment instruments has resulted in the convergence of Wireless industry and Financial Services industry with a potential to transform the way financial services are delivered to the consumers.
Given the market opportunity and the consumers' willingness to adopt, there is no doubt that mobile device is poised become a very integral part of consumer's daily transactions. Many players have emerged in this space and are making major investments in an attempt to cement their position and benefit from this new growth engine - Banks, Credit Issuers, MNOs, OEMs and other Technology providers.
Today, mobile payments technology has evolved and has reached a stage where it can support large scale deployments. But the reality is that we are seeing most of the growth in this space occurring in the emerging markets like Africa and Asia. Growth in these markets has largely been driven by the need and relevance of such services where even banking has not yet reached the masses and in some places mobile devices present the only way to financially transact. Hence we see a huge push from players and uptake from consumers.
When it comes to developed nations, the story is different. The Mobile Payments market is evolving relatively slowly in these markets compared to the developing markets. One of the main reasons for this is because these markets have fairly advanced banking setup. Amongst countries in Europe and N. America, banking services has already reached the masses. There are extensive banking networks already available for the consumers. These countries have achieved the so called "financial inclusion" to a greater extent across the strata of the population. Prevalence and wide spread adoption of other channels for making financial transactions have also contributed to this slow growth. Hence enabling financial transactions via Mobile is seen as more of a value added service or a luxury for the consumers. Hence a lot of doubt exists amongst industry players about the adoption of such services by the consumers, the value that can be realized and hence the extent to which these would be successful.
Moreover, even with the technology evolving, the growth of mobile payments has lagged because of the inability of the ecosystem players to build a reliable business model that is compatible with everyone in the value chain. A majority of the effort and investments that have been put into this space by Banks, Credit Issuers and MNOs have been to deploy market trials and pilots. But none of them have clearly emerged with a successful business model that can be taken mass market and a model in which every player has a value that can be realized.
We have been hearing about so many pilot initiatives in these markets driven by diverse players. Most of these initiatives are closed with participation from a limited set of players like one bank, one credit issuer, one technology vendor or one MNO. Such a closed model will succeed in the emerging markets owing to the need for such services. However, in the developed markets, there has to be a model (and an ecosystem) that is more "general" and more "open" which drives multi-party participation. Unwillingness on the part of the players to shed their "competing interests" and collaborate to come up a mutually beneficial model is the primary reason behind why the developments in the mobile payments space has been a laggard in the developed nations.
Everyone agrees that barriers exist for mass market mobile payments initiatives in developed countries. And everyone also realizes that there is a fantastic opportunity that exists in this space and there is a lot of revenues to be made. Unless the diverse players come together, build an open ecosystem in which everyone can participate and benefit, and aggressively make a push to educate consumers, the developed nations are going to continue to lag behind in the Mobile Payments space.
What are your thoughts? I would like to hear about your observations and learnings in this space?
