Mobile Payments Speed Dating

I attended FINOVATE yesterday, a great conference focusing on Online and Mobile Banking services. Mirroring DEMO, the Silicon Valley conference that serves as a launchpad for many fledgling companies, FINOVATE provided 14 companies the chance to perform a 7 minute pitch on their service, much like a speed dating event. Held in the global financial center of New York, the place was packed with representatives of FIs (Financial Institutions) and a few mobile guys such as yours truly.  The conference was a great success with overflow rooms having to be be booked for the 300+ attendees. A great conference organized by Jim Bruene, editor of the very informative and thorough "Online Banking Report."  His February 23, 2007 edition is a great play book for Mobile Banking--check it out at his site.

[If you're really interested in Mobile Payments head directly to Mobile Banking  a blog written by Brandon McGee, a VP & Sr. Mobile Product Manager at Huntington Bank in Indianapolis in the US. I had the distinct pleasure of talking with Brandon and I came away impressed with his command of the mobile platform which he is building services around. I've been reading his first rate blog for about a month. He's got solid industry analysis as well as clear perspective. Check it out and subscribe. ]

Social Personal Finance Untethered

The morning started off for me with a brief by Lending Club, an online lending community where people borrow and lend money, bypassing the banks and therefore getting better rates. Essentially P2P lending. A similar play to micro financing in emerging economies, this is not lending a few bucks here and there, but tens of thousands at a time. It is a remarkable connection between social networking and lending, which empowers both lenders and borrowers to have a non-traditional source for money. Very clever. Quickly having to leave the room, I returned a few minutes later to see the presentation by Online Resources, a virtual collection agent.  A well laid out solution to provide a better way for collection agencies, as well as debtors to capture a means avoiding the conflict of tardy payment calls, greater payment options, etc.  Two great ideas at opposite ends of the lending value chain.

Mobile Payments & Mobile Banking Similarity

After sitting through the mobile focused presentations, I came to the conclusion that both the mobile advertising and mobile payments segments are very similar in their stages and even following parallel developments. Consider. Notwithstanding the heavy hype out there, they are both still in the trial or test stages. Some are arguing that both provide greater efficiencies in reaching customers, especially interesting to bankers, and more precise in contextual delivery, especially interesting to advertisers.

But, the reality is no bank is focusing a great deal of resources in capital, time, talent or people in the mobile banking space, yet. similar to the mobile advertising space. All the big bank boys were in the audience including the lead mobile banking executives from Citi, Wells Fargo, and JPMorgan Chase and regional bank leaders such as Huntington. Everything from my conversations indicate that it is still just at trial stages, and in limited deployments. This is bad news for many of the Mobile enablers of banking applications. Granted there is much interest in the potential for the channel to access and initiate banking transactions, but this is still very early in the development of the segment. My caveat is that this was practically an exclusively North American audience. How the markets are developing off shore could only be glimpsed indirectly through the US subsidiary of Monitise, a UK mobile payments solutions provider. Given the time constraints of 7 minutes their was little background on how the UK initiatives were similar or different from the US offering.

Bottom Up or Top Down Development

Which leads me to proffer the following. The tension in the development of the mobile payments and mobile banking market is going to be between the top down development interests by the FIs and the solutions providers or bottom up from the rank and file consumers. To a great extent, at least in emerging markets and developing economies where great growth opportunities exist, the tension will also be between local mobile network operators and global banks. From the FI perspective mobile payments are merely a segment of the overall means of connecting for banking purposes.

The banks are betting that in the great majority of instances you will be banking through a desk top, not untethered via a mobile handset. Tied down will be where the real grunt work is executed of balancing checkbooks and paying bills. The mobile will be where you check your balance before using a debit card, pass social payments when you owe your mates some coin after a night out on the town, or use your phone as a near field communications payments device. This especially plays into the belief in the FI industry that the youth cohort already are accessing and banking via a desk top. While in secondary school they are ideal buyers working with mobile, then periodically balancing their check book as the funds dwindle. They'll know this since they will be accessing balances via SMS inquiries. Around the time they turn 25, they'll flip to the desktop to make the diaper payments and mortgages.  That's the top down perspective.

Here's the bottom up perspective. Much of the mobile banking segment is going to be driven from the consumers up to the FIs, with a considerable dash of operator influence. Much of this is going to be driven primarily from the prepaid market and users that are functionally already engaged in "banking-like" transactions. First, in the Philippines for example, Smart and Globe already offer a means to move funds via "sachets" where you can top off your mobile phone accounts, or extend payments for school tuitions.

In the prepaid market, mobile users already are transferring funds from one cash account to a credit account inside the operator. Viola, they are engaged in banking functions and actions already. And this is a big business. Two years ago in a conversation with Napoleon (Paulie) Nazarone, the CEO of Smart, Paulie relayed that the sachet program was roughly a US$50 million business, and most of the transfers were from US$ 0.16 to US$3.00. No typo there, that's 16 cents. In other parts of the world, this already exits, and it's the prepaid mobile market. Layer on SMS alerts and notifications, and perhaps more operators should be examining the banking programs such as G Cash offered by Globe in the Philippines, or Smart's Parabel.

In Part 2 of my Finovate coverage, I'll be highlighting what I consider the differences in the offerings of the mobile banking providers MFoundry, Firethorn, Monitise, MShift and ClairMail.

Comments

[Mobile Money Machines]

I agree that mobile companies should merge to different banks

[John]

I think the really interesting use of mobile payment platforms is when telecoms (like Globe) combine their efforts with multiple banks, especially those which are already focussed on the bottom of the pyramid like the rural banks in the Philippines. It is at this point that the technology of mobile payments and real mobile phone banking can achieve tremendous growth and also provide the opportunity for smaller banks to bypass larger banks. From what I am seeing in the Philippines, far more people own cell phones than computers and this is true for all of the developing countries of the world. Based on this fact, and the fact that people already are quite familiar in countries like the Philippines with sending and receiving text messages, far more people in countries like the Philippines will bank as well as buy and sell goods and services using mobile phone banking and mobile payment platforms than will ever be able to use the services of internet banking or use traditional credit card services. Just take a look at the website and videos put up by the Rural Bankers Association of the Philippines at www.mobilephonebanking.rbap.org to see the tremendous potential.