Are mobile payments really about payments?
Especially in banked markets, where payment card penetration is often above the hundred percent, we have all learned to recognize that mobile payments needs to be more then "mobilizing" payments by changing the form factor from plastic card to a digital format on a handset. The market needs more to drive consumer and merchant adoption.
Most suppliers of mobile payment solutions do apply a strategy to go beyond payments by offering value ad to both the consumer and merchants in the form of offers, deals, and coupons which save money for the consumer while generating traffic and boosting sales for the merchant. Mobile payments are no longer just about payments, but rather are shifting to a full commerce experience. Google Wallet, Square, Groupon, ISIS, Weve, Paypass Wallet – name a payment initiative and "payment and offers" or "consumer engagement and merchant sales activation" will be in their pitch.
Will consumers soon face an avalanche of offers and coupons each time they step out of the door or pass a brick-and-mortar store? Will we face "offer fatigue?"
And if the industry is moving altogether toward an advertising driven innovation of payments, where will be the differentiation points?
Two-side business model
First of all, it is not easy to market a value proposition to both merchants and consumers simultaneously, simply because lots of players are good at only reaching one of these market segments.
Card issuers have a link with the consumer, but not with merchants. Acquirers have a strong retail footprint, but have no direct connection with the consumer base. Typically MNOs have strong consumer assets, but not all of them (especially Tier 2 players) have strong enterprise units to sell solutions to retail or long-tail merchants.
Here a partner strategy is required, such as the French telcos creating a joint venture with IT provider ATOS so they can jointly market the mobile payment app Buyster to consumers (telcos) and merchants (ATOS).
Even Google, despite its advertising ecosystem and consumer reach, has continuously attempted to adapt its Google Wallet partner strategy to foster merchant acceptance for offer redemptions. The latest rumors point to a Discover companion card for acceptance and easy redemption of coupon and payment transactions on non-NFC terminals.
Organizations with a two-sided business model and customer base have an inherent advantage to foster adoption of mcommerce. Take American Express, which is issuing cards and controlling its acceptance network directly and is quite successful in marketing their Serve solution. MCX, the retail venture created by more than a dozen top retailers in the U.S., can scale given the consumer access from their members and the obvious acceptance of their mcommerce app at all participating chains.
Consumer data to guarantee relevance
Consumers look to their mobile phone as a highly intimate device. As a consumer, we don’t like to receive intrusive notifications if there isn’t a key value. And we don’t want to expose personal context without consent and control. But if brands or retailers want to engage consumers with highly valuable and relevant offers an in-depth understanding of the consumers’ interests and context is required.
Who knows best how to recruit consumer opt-ins? And who possesses the best data to provide highest relevance?
Mobile operators have access to big data pools. They know the key socio-demographics from post-pay subscribers and own significant traffic patterns including where we are and to whom we are connected (as well as which apps we use, sites we browse, people we call). But they lack our purchase behaviour, and without consent, telco data can only be used in an anonymous way (e.g. retailers can work with operators to get anonymized analytics on the demographics of the consumers passing a certain location to make commercial decisions).
Opt-in rates for permission based marketing services vary. Carrier O2 in the U.K. is seen as a success story with more than 50 percent of their consumer base opted-in for permission based targeted marketing.
Card issuers sit on transactional data pools and start to build opt-in pools so they can deliver card linked offers to stimulate card use and retention.
Retailers know real purchase behavior at the item level, but lack information from the "outside."
Google has our search and browsing behaviour but lacks context information from the real world.
So, all of the above players have a sound amount of data to derive profiles, but all miss a key component. Therefore, they are positioning themselves in the mobile payment and wallet space: mobile payments can be an enablerfor them to fill-in a missing piece of information about a consumer.
Mobile operators hope to get visibility on transactions to enrich their consumer data. Google is funding part of the payment transactions initiated via the Google Wallet to tap into the payment value chain and track brick and mortar purchase behaviour. And card issuers get real-time context including location.
And that is the real game: mobile wallets don’t need to be the money maker as long as they can help in collecting the missing piece of consumer data. Monetization will follow in multiple ways, such as within the wallet, in form of relevant offers, and also across existing products. (For example, Google can provide superior ad products from search to coupon clipping and redemption tracking.)
It’s all about the data!
Anthony Belpaire Anthony Belpaire is managing alliances for the Alcatel-Lucent mCommerce Business Unit. Alcatel-Lucent mCommerce supplies digital media, mobile advertising and payment solutions to telecom operators to enhance the monetization of their subscriber assets. Mobile commerce solutions typically glue an eco-system together of payment issuers, advertisers, merchant acquirers, telcos. www