So, at the end of a very long third day of SIBOS, I attended the final session on mobile payments which began with Laurent Desmangles of the Boston Consulting Group (BCG) presenting some slides on their view of how the mobile space is developing.
Laurent quite rightly made the assertion that cards would still be around in five years or so, as only 87% of merchants will have NFC terminals by 2020. That sounds like a lot but, in the USofA, that is the same number as Discover cardholders, and Discover cardholders keep Visa and MasterCard in their pockets and purses as 87% is not good enough. You need 99.9%
Laurent’s opening led into the full panel debate which included:
- Kelly Bayer Rosmarin, Business Product and Development, Commonwealth Bank of Australia
- Dan Schatt, GM Financial Innovations, PayPal
- Dr Kiyoyuki Tsujimura, President and CEO, DOCOMO Engineering Inc
and chaired by some chap from the Asian Banker, called Emmanuel Daniel.
The main reason I was there was to hear from Kelly Baker Rosmarin of Commonwealth Bank of Australia (CBA), who launched Kaching last year, and Dr. Kiyoyuki Tsujimura of NTT DoCoMo, the pioneers of mobile payments, so here are my highlights (impressions, not accurate quotes).
As Tsujimura-san noted, NTT has eight years of mobile payment experience, which is way ahead of anyone else I know.
They have 120 million NTT customers and 60% are using mobile payment enabled handsets. OF those, 60% are using mobile payments at least one a week, which means that around 50 million Japanese people are making a mobile payment on a regular basis.
They use it for convenience and financial benefits as the merchants are issuing ecoupons at the point of sale (POS) with additional discounts if they use mobile payments. Merchants also like it, as they have no cash to deal with, and they can get 1:1 marketing benefits by having the customer’s mobile details.
NTT also provide money transfer via mobile, but it’s not competitive with banks as money transfer is limited to a maximum of 120,000 yen (about £1,000 or $1,600) in a single transaction.
When asked why mobile payments had succeeded in Japan, Tsujimura-san said that “we are the largest operator in japan with 50% market share in mobile, so we set the standard for how customers deal with mobile payments”. In a fairly typical Japanese statement of the world, he then asserted that “we are leading how customers use mobile payments”.
If only our banks would do the same!
Next up was Kelly Bayer Rosmarin from CBA to talk about Kaching.
Talking about why a bank would lead customers into mobile payments, Kelly stated that: “people have an intimate relationship with their money, and they trust their bank with that relationship, and so we should own that relationship with their money”.
Yes, I agree, although ‘owning a relationship’ is always questionable.
Kelly then underscored how things had changed in the relationship when she said that: “the month before last, more than fifty percent of people were doing their banking with the CBA with a mobile, compared with just ten percent just two years ago.”
Wow! She made it clear that this means that most of their bank transaction are through mobile today, rather than internet, ATM or other channels. That’s rapid fire change.
Why did they do this? “Our customers are already mobile and we have to be where our customers are”. Simple.
In a similar way to Square, the real secrete of mobile success through merchant acquisition. You have to have the retail POS enabled for mobile before mobile will succeed, and CBA is the largest Australian bank in terms of merchant acquiring. They have led the roll-out of merchant NFC payments, but not using a standard terminal as there was no generic NFC POS out there that suited the customer experience they wanted to deliver, so they developed their own.
I first heard about this last month at Next Bank Europe, and found that the CBA NFC POS (how many acronyms can I throw in here!) is one of the best. If you haven’t seen it, take a look:
Next up was industry incumbent (they are no longer upstart!), PayPal. Dan Schatt, General Manager of Innovation, talked about various aspects of their service and honed in on money transfer as a key opportunity for banks in the mobile space, in a similar way to NTT’s experience.
“Banks have a very small share of the global money transfer market”, Dan said. “Today, it’s about 30% whereas, a few years ago, it was more like 100%. We’re helping banks get that back from Western Union and others.”
Good for you Dan, the banks’ friend.
After tackling remittances, Dan identified two other markets worth over a trillion dollars each: cash and cheques.
Dan made clear that “if you can make the experience of using your mobile banking app as easy as handing over cash, that’s an inflexion point when people will be more likely to use an electronic payment more than a physical payment”.
So mobile can cannibalise cash and cheques. I hope so, and Square is doing this already. When asked what he thought of Square, Dan was quite dismissive: “we are and we always have been a digital wallet; square is just a dongle”.
Hmmm … I’m going to watch that space.
Emmanuel then got into an area that is my personal hobby horse: is NFC relevant or is it a technology past its time already?
Dan was polite to start with: “NFC really solves problems for the retailer or is it a solution looking for a problem. Things are changing so quickly, because if you look at all the infrastructure providers serving these retailers, they’re all going onto the internet. You no longer have to run things over legacy standards or wiring as a result, and you can do it in a very secure way. When we started rolling out to large retailers in the USA, we had a card that is actually a token, but we now find that 83% of people using PayPal at a POS are using a mobile and a pin and not the card. The card networks insist that you need something in your hand, but that’s not the case.”
In other words, Dan is saying NFC is dead. What about Kelly?
“With so much fighting going on between providers, NFC has missed its chance. Cloud will take over rapidly and NFC will have been strangled at birth.”
Nice one Kelly, so that’s that.
After the mobile payments session, it was off to party and did we party? We sure did!
Would tell all but the bank swore me to secrecy, threatening me with a politically exposed person order if I blogged about what happened.
That’s fine, as I was already an exposed person when they threatened this!
Will tell all at some point this week.
Anyways, today is an innotribe day with Muhammad Yunus of Grameen Bank and more. Should be a great day. See you later …