Paying By Cash, Credit, or…Mobile?
Last week, as I walked into my local butcher shop, I noticed this sign on the door. At first, I was shocked, my freedom of chose (of how I pay for my meat) was suddenly taken from me. Ironic enough, that same day, I read the article in Wired by David Roth called The Future of Money, which once again made me ponder about the significance of the sign (for the merchant) and how we (as consumers) pay for stuff and how it potentially could affect our shopping behaviour.
Alternative Payment Methods On The Rise
According to Javelin Strategy and Research, 20 percent of all online transactions now take place using so-called alternative payment method (i.e. mobile, etc.). They expect that number to grow to nearly 30 percent by 2013.
At first, 30 percent doesn’t seem significant, but with crowdsourcing initiatives like Paypal X in full swing, and companies such as Zong, Square, and Obopay quickly making headway in the mobile payment space, is it possible we could see a wave of innovation (and growth) unlike anything we’ve seen since self-publishing and social media entered the Web scene?
According to the Wired article, “two months after Paypal opened its platform (via Paypal X) 15,000 developers had used their platform (APIs) to create new payment services, sending $15 million through the company’s pipes.”
Here is just one example that was submitted to the PayPal X Developer Network (video length: 2 min). Disclaimer – No Wookies were harmed while making this video.
PoxPay uses voice biometric technology to uniquely identify and authorize purchases or money transfers. With PoxPay there is no need to enter any password or pin, since the users voice acts as one. To initiate a payment, send us an SMS (alternatively call in to our IVR) with the amount and to whom. The whom can be a phone number or a paypal email. To authorize a payment, PoxPay, we’ll place a call to your enrolled phone and ask you to repeat a series of digits. If your spoken words match the voice imprint on file, the payment will go through.
The Evolution of the Mobile Wallet
Many mobile experts (see presentation below) who attended this years Mobile World Congress believe there will be phenomenal growth in mobile payments over the next 5-10 years. They predict the mobile phone will ultimately replace your wallet. Not only will you be able to manage your money via your mobile phone (actually you can now via the new CIBC iPhone App) and use it to pay for products in authorized retail outlets both online and offline, but peer-to-peer mobile money transfers will be the norm.
Presentation by Rudy De Waele
The one area mobile payments will definitely increase (thanks to friction-free platforms like Zong and a surge in Facebook users past 350M in 2009) will be social apps and games such as SmallWorlds, which (as a market) reached $1 billion in the U.S. in 2009. Thanks to easy integration, low barriers for customers to pay via their cell phone, and conversion rates of up to 65%, mobile payments could not only see huge growth in 2010, it could even drive growth into other categories.
Demo of Zong Web Payment Service implementation on Smallworlds
The biggest challenge, however, for retailers selling “physical” goods via mobile payment methods (using a PIN method similar to Zong) is renegotiating the revenue splits with carriers. Currently, most retailers only retain a small profit (if any at all) of goods sold. In most cases, after factoring in the carrier, aggregator, and mobile marketer split it actually ends up being unprofitable.
Zong actually addresses the issue right on their site:
Until the revenue split makes sense for the retailer selling physical goods, I can’t see 2010 being the year consumers will have the option of using their mobile phone to buy meat from their local butcher – one can only dream!
As a final thought…a generation ago, when people switched to credit cards it changed how we spent money. The ease with which people could make purchases encouraged them to buy much more than they had in the past. As money becomes more digitized, friction-free, and gives us the ability to purchase “physical goods” could mobile payment options once again alter people’s spending habits?
What do you think?