Sooner or later, the future is mobile payments


I wouldn’t go as far as calling it mental telepathy, but Peter Ayliffe was definitely saying what was on my mind: 

“In the short term we overestimate the impact of any new technology, but in the long term we absolutely underestimate the impact,” said Ayliffe, Visa Europe’s CEO, in his keynote address at the Open Mobile Summit in London in late May. “And that’s exactly what we’re seeing with the mobile phone as a payment device.”

Though it might be somewhat of a cliché, the contradiction between short-term expectation and long-term importance became all too obvious during the two days of the Summit.

On stage, you had major players like Visa and American Express preaching how their business is going to change dramatically. Elsewhere, however, you had newsmedia reporting how mobile payment is NOT happening.

On its “Breakfast” show that aired right before the conference started, BBC ran a story by technology correspondent Rory Cellan-Jones, who’d been trying to live on mobile money for a couple of days. So how did his efforts go, trying to give up cash and pay by phone alone? “Not very well, I’m afraid,” he concluded in his blog.

Then there was Shashi Verma, director of customer experience at Transport for London, who said in a speech at the Summit that contactless payments and the NFC (Near Field Communication) technology still are not fast enough to be used in the London Underground.

“The technology is still too difficult to use for ordinary consumers and if NFC wants to become a mass-market technology, it has to become less fidgety to use,” he said.

Ayliffe admitted to being frustrated by not being able to use mobile payments on the London Underground during the Olympic Games as previously planned.

“Pretty frustrated that we haven’t got that in place for the Games,” Ayliffe said. “But on the other hand, it is now planned for the end of this year and 2013. And that will be the thing that fundamentally changes the way we operate. Because once you’re used to using your mobile device on the transport systems … I’m 100% convinced from that point on, that this is going change the way we pay in the future.”

Newsmedia might not consider credit card companies very innovative, but they were the ones delivering the visions at the Open Mobile Summit. Dan Schulman, responsible for alternative mobile and online payment solutions at American Express, had a message that very much applies to newsmedia companies: “We can either make history or we can repeat history.”

Schulman pointed to the fact that, of the top Fortune 100 companies 50 years ago, 85 of them are out of business – despite all the advantages they had. Fast forward to the early days of the digital revolution. Remember the early leaders of the PC revolution? Tandy, Commodore, Atari, IBM. Remember the leaders of the early search revolution? Alta Vista, Magellan, Excite, Lycos, Yahoo.

“One after another – they fail to make history. They actually try to repeat history,” he said.

When times are changing, Schulman reasoned, most companies try to repeat the processes that made them successful in the first place, and try and do those better, more efficiently. Just redoing the things that made you successful does not make you successful going forward.

“My view of the world is that past success is in many ways the biggest impediment to future success. You have to look at the world in a very, very different way,” he said.

So mobile payment is happening and it’s not happening.

But with the eventual effect of m-commerce on retail, the nature of advertising will also change in ways we still cannot grasp, as I elaborated on in a previous blog post.

OK, the NFC technology is not ready – not quite yet. The infrastructure is not in place – not quite yet. Yet mobile payment transactions are growing at a pace of 61.9%, to hit US$171.5 billion this year, according to research firm Gartner.

But SMS is still dominating mobile transactions, and Gartner does not foresee contactless NFC to pick up until 2016.

“We expect global mobile transaction volume and value to average 42% annual growth between 2011 and 2016, and we are forecasting a market worth $617 billion with 448 million users by 2016,” Sandy Shen, research director at Gartner, commented in a recent study.

Gartner expects a fragmented market the next couple of years. Visa’s Ayliffe agrees that m-commerce is confusing and fragmented with offerings from brands like Google, O2, PayPal, and Visa. But soon there will be one or two winners, he adds.

“It’s similar to what happened with MP3 players,” Ayliffe said.  “Suddenly the iPod arrived. Some services launched to date are not very user-friendly, but soon someone will come up with the iPod.”

The lesson to learn for newsmedia companies is how to handle long-term impact clashing with short-term expectations.

“There is a lot of hype of what’s happening and how quickly it’s gonna happen,” Ayliffe said. “But if you don’t start investing in it now and start thinking about how you are going to use it in the future, you are not going to be around and existing in a few years time.”

Dan Schulman put it more bluntly:

“It’s basically like this digital tornado. It lands on your industry. It sucks everything up, it spits it out, and redefines the landscape. New players come in, new business models come in. And those of us that are larger companies need to adapt at the same speed as the new players do, as they come into the market. Very difficult to do, absolutely essential to do.”

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