Mobile transaction tipping point is right around the corner


The future always looks bright from a distance. But does it stand up to a close encounter?

I’ve had the privilege to try on the future for a couple of days. Somehow it turned into a man-against-machine kind of thing.

It was during the NFC & Mobile Money Summit that some 800 delegates were equipped with a smartphone containing NFC (Near Field Communications, a technology that enables mobile phones to make electronic transactions by just holding it near another device), as well as a real mobile wallet.

The initiative is part of a pilot that Telecom Italia has begun in Milan, in advance of a nationwide rollout in Italy in 2013.

But before we embark on a spree with the mobile wallet, let’s look at the big picture.

I’m among those convinced that mobile money, mobile transactions, and the mobile wallet together will be the next big thing around the corner. When it reaches the tipping point, it will change our daily lives.  

And for newsmedia companies, it will change the traditional advertising model, as I’ve preached on this blog before.

It’s already happening in parts of the world:

  • In Kenya, more than 70% of the adult population uses mobile money. Five years ago, Kenyans were basically depending on cash only. How M-PESA (M for mobile and pesa for money in Swahili) has transformed society is described in a new book, “Money, Real Quick — Kenya’s Disruptive Mobile Money Innovation” by Tonny K. Omwansa and Nicholas P. Sullivan.

    M-PESA facilitates US$1.4 billion per month, according to data from Central Bank of Kenya. Every day, transactions through M-PESA in Kenya exceed Western Union transactions globally.

  • In South Korea, more than 10 million NFC handsets have been sold. In Seoul’s busiest shopping district, some 200 merchants accept payments made with NFC smartphones. 

    But that’s not the only service provided by NFC; there are also loyalty programmes, couponing, and cinema tickets. In some restaurants and cafes, customers can order drinks by just tapping an NFC tag on the table.

    South Korea’s KT Telecom has more than 500,000 of its subscribers signing up for a service to pay for public transportation by just tapping the NFC smartphone on buses, subway trains, and taxis. At bus stops around Seoul, KT has deployed 22,000 NFC tags, which provide information about the bus route, arrival time, etc., with a tap of the NFC handset.

  • Globally, mobile payments are projected to grow at a pace of 61.9% to hit US$171.5 billion this year, according to research from Gartner. SMS is still dominating mobile transactions, but Gartner is forecasting 42% annual growth between 2011 and 2016, and a market worth US$617 billion with 448 million users by 2016.

So here I was, outside the majestic Gothic cathedral, Il Doumo, in Milan, mobile wallet in hand (disguised as a Samsung Galaxy Mini II) and eager to try it out.

The design of the wallet is simple enough. You click the icon on your home screen and get four options: my cards, my coupons, a prepaid card with €15 to spend, and a map locating where you can find NFC services.

I’m hungry; let’s get something to eat.

I browse the coupons and choose a restaurant that looks nice with a neat discount. In a corner of the coupon is an icon of a map, which you can click to get directions. So I let the map guide me to the location. Great, so far.

In the restaurant, nobody has heard of the mobile coupon. The staff gathers around the display to look at it. The guy in charge calls a superior to check, and concludes, “Yes, we obviously have on offer.”  

So, where is the device that can validate the coupon? I ask. He looks around the cash register, but it is nowhere to be found. “But, don’t worry, you’ll get your discount anyway,” he says with a big smile.

So my first experience with the mobile wallet is a failure regarding information, infrastructure, and lack of proper technology. But the staff is very friendly and eager to make it work, anyway.

Man against machine: 1-0.

Back at Milano Congressi, I decide to swap business cards with fellow delegates of the conference. And it works! I tap my NFC phone to a colleague’s and, with a buzz, I have collected his electronic business card in my contacts.

But then I run into Pedro Martinez from NXP Semiconductors, who has an even cooler feature. He hands me a traditional looking business card, but with “an embedded NFC chip,” he says.

It looks and feels like any business card, but when I hold it close to my phone a buzz alerts me that I have a new contact to import. That is really cool!

Man against machine: 1-1.

Somewhat upbeat, I head for the vending machine to try to buy some drinks with my phone. “Oh, sorry,” a gentleman says when I try to tap the phone to the machine. “It doesn’t work yet. We’re waiting to get it programmed. Come back tomorrow.”

I do so, but then another gentleman points to a dark spot on the carpet and explains that the vending machine is out of order due to water leakage.

Man against machine: 2-1.

When the day’s conference sessions come to a close, I head for the train station to go downtown. In my mobile wallet, I have a ticket that is valid on all public transportation for 24 hours. I approach the gates and click the icon “Public Transport.” A warning sign informs me of an “unexpected error.” I close the wallet and try again. Same thing. Damn!

I come to think of all the videos demonstrating new technology, where everybody’s always smiling, never in a hurry, and absolutely never, ever sweaty.

But on the third try the application works, and I tap the phone, and the gate opens.

The combination of a ticket for public transportation in your smartphone and an interactive map to show you where you’re going is about as good a service as you can get in a foreign city.

Man against machine: 2-2.

Before leaving Milan, I’m eager to use the €15 in my mobile wallet, so I check the map and decide on an international bookstore that supposedly accepts mobile payments.

At the register, I show the display with the Visa prepaid card. “Scusi, we don’t accept that,” the cashier says. I show her the map with the logo for mobile payments. “I’ll talk to the manager,” she says, disappearing. But no, no mobile payments accepted. “But I’ll give you a discount for the inconvenience,“ she says with a look of sorrow.

Man against machine: 3-2.

So the revolutionary technology lost this time. But I’m still convinced — when bugs are fixed, when infrastructure is in place, when people are enlightened — that mobile payments, mobile transactions, and the mobile wallet, will change our daily lives.

It will happen sooner rather than later. Let me quote Michael J Abbott, CEO of Isis —  a joint venture between AT&T Mobility, T-Mobile USA and Verizon Wireless, which recently launched a mobile wallet in Austin and Salt Lake City:

“Five years ago less than 5% had a smartphone. In five years, few will have a wallet.”

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