Obopay’s CEO, Carol Realini, spent this week at the World Economic Forum’s India Economic Summit, which was held in New Delhi 14-16 November. She has been a featured guest blogger covering the event. You can see her blog posts on the WEF site at the links below:
http://www.forumblog.org/blog/2010/11/more-with-less-for-more-indias-global-leadership.html
http://www.forumblog.org/blog/2010/11/implementing-india-the-financial-inclusion-opportunity.html
November 16th, 2010
Seems like more US mobile payments announcements are happening – Do you agree and what does this mean?
I agree. All year the number of mobile payment announcements has been on the increase. Last week was an especially hot week for rumors. It is increasingly confusing – what is happening, what does it all mean? Therefore I am writing a series of blogs to explain the market in a way that non-mobile payment specialists can understand. That way as you read news and other commentary it will provide a framework for what is going on. In some parts of the world mobile payments have already gone mainstream, but the US is behind. I expect in the next few years that will all change.
But to specifically answer your question about what it means – it means that mobile payments are happening in the US and it will be big.
What is Apple up to? Are they interested in competing with Visa or Paypal?
This will be a long answer but worth it…so bear with me while I talk about Apple.
Apple is a clear market maker in “Open Mobile” (call it what you want – mobile 2.0, social mobile, convergence of internet and mobile – I call it Open Mobile). They took on that role with the success of the iPhone and App Store. Others had to follow – Android, Windows, Blackberry etc. Apple led the way and showed everyone else how it is done.
Apple for a while has been rumored to be interested in and working on mobile payments. This is very big – especially given the strength of Apple’s great innovation track record. So when they talk about getting into mobile payments – that is big news because they could have that same kind of influence they had with Smart Phones – change the game and then everyone else has to catch up.
Really, Apple is already doing mobile payments and has been since they launched the iPhone. Their solution was built on an existing payment relationship – iTunes. Most of their iTunes users long ago set up an iTunes account to download music on the web. As part of this account, they probably linked a payment card (credit or debit) and may have loaded value from an iTunes card they bought at a store. Since they have so many users and music downloads – the volume is very high and the users trust this as a reliable, easy, fast way to pay for music, games, and other digital content. It is very big (160M users have cards on file, volumes are massive) and it is done globally. An iTunes account is used for music on an iPhone or an iPad. But in addition, Apple has begun to open up its payment platform and make is accessible to others as iTunes users have begun to use it for purchasing applications from the app store. Again – it’s easy, users do it all the time.
What else might Apple do?
They are a great innovation company – and mobile payments are all about innovation. Really hard to predict exactly what they will do but there has been two separate waves of rumors – one is that they are going to launch something around proximity payments via NFC, the other rumor is that they may make a bigger play in digital content payments by doing something with mobile carrier billing payments.
Can you say more about Apple and NFC?
NFC is where the consumer can now “wave or touch” their phone in a real world situation to make a payment. This means there will be a special chip in your phone and that chip will be able to talk to something else – a merchant terminal (where you swipe you card today) might be modified, or some other new kind of machine or display will allow you to do transact by waving or “touching” your phone. Another phase used for this is contactless payments – called this since these systems usually work when you are close but the devices don’t actually have to touch. It is better than Bump or Bluetooth for some applications because it can be faster, more reliable, and more secure. That being said – it requires a lot of physical infrastructure for it to be useful in enough places for anyone to care. And you have to have a new phone that has the right hardware and software.
When Apple puts the NFC chip in their phone and starts to build their own applications or encourages others to build applications – then things could happen quickly. Just like the iPhone broke down the mobile carrier’s “walled garden”, this move could open up payments and they could help create new business models for in store payments. They could also couple this with location based ads and other applications. Apple drove the development of new business models with the music and smart phones – depending on what they do they could change the rules by which different players interact to do payment and commerce. So they have the potential to move the NFC world forward significantly by developing a new tapestry of the hardware, software and business models to move it forward.
This is what is needed since NFC technology has been around a long time but mostly in pilot because nothing has ignited the market. And since the infrastructure will cost Billions – someone really needs to get things moving to make it happen. (Obopay works all over the world and in only a few countries do we see scaled NFC applications. Most places in the world it is all about remote payments.). Apple moving into this space should ignite the market – and get lots of folks moving faster. But as it moves faster it will be much bigger than just Apple.
So is mobile payment in the US all about Proximity Payments and NFC?
Here are things to remember about NFC:
- Apple is not the only company that can ignite the market. There is a rumored that three of the four major Mobile Carrier will form a new company to work together on making this happen here. This announcement and their combined investment can get things moving – but only Apple, with the success of the iPhone and now the iPad is the leading Open Mobile innovator. So Apple’s moves will have a particularly powerful impact. Some players won’t take a Mobile Carrier JV as seriously because those company structures are more complex and have failed in other places in the world. I personally take both things seriously and think they both have lots of potential. Of course they are other large players, like Google or large merchants, that can make a move and have a big impact also.
- NFC takes time – it is a massive physical infrastructure upgrade and will require a new ecosystem for payments to be defined and successfully rolled out. Japan – where it launched many years ago (date?), is just beginning to see adoption. There it was used primarily for convenience stores and trains – where time is of the important and you have smaller value payments. So it will be big and it will take time. In the US we have some of the physical hardware already – because we already have many merchant terminals accepting NFC cards. That being said there is still work to make sure the business relationships and payment infrastructure to leverage the card based solutions in mobile.
- Since Open Mobile is changing everything, NFC may not be used as much as some predictions by market analysts. Some things that are proximity may move to remote. Just like the internet moved lots of in store shopping to web shopping. When we have all kinds of payments and applications on our phones – some of the things we buy standing at a Register or a shopping line, may move to remote. Definitely when you buy remotely but maybe even in a store – we may not have to go through the today checkout process in the future. Sounds futuristic but we have all the building blocks today to make lots of changes in commerce.
- The same technology can and will be used for non-payment activity also. An example is mobile boarding passes. Some airlines allow you to download your electronic boarding pass and then you take a mobile bar code displayed on the screen to check in or when you board. This could also be done with NFC solution. In Japan you can use NFC to walk up to a poster and hold your phone and you can get more detailed product information.
So Proximity and NFC will be a part of mobile payments, but this will take time. In the meantime there are many other categories of mobile payments; remote purchase of digital content, buying from App stores, buying on the internet, buying from a mobile application, paying bills, texting a donation, paying a small business remotely and person to person transfers. All of these will be big and those will most likely be mainstream long before the physical infrastructure for NFC is fully built out in the US.
What about the latest rumors?
Last week Boku was rumored to be in conversation with Apple and Google. Speculation is that there is a potential acquisition by one of them that will happen soon. Boku is not the only company in their business, there are others - Zong and Bill to Mobile to name two others. These companies specialize in allowing users to use their mobile phone number to purchase digital content on the web using their phone number and their phone bill. It is a simple check out, simpler than putting card information into the website, and then the user gets the item immediately. The user pays later when the charge shows up on their phone bill. Now that people are buying digital content directly from their phone – the potential is the same is to do it all directly from the phone.
So would Apple or Google buy one of these companies? Not sure. So what do these companies do?
- They really aren’t exactly payment companies. They are gateways to mobile carrier billing for now. But this is important since people want to purchase digital content and this is a really easy way to do it. The mobile carriers get additional value added service revenue whether they are involved in digital content distribution or not. It also is great because these distribution and payment systems can be international. A buyer can be in one country and the digital content creator can be in another. It can cross boundaries. It does require lots of relationships behind the scene – but once they are established, it all works. The fee paid the mobile carrier varies depending on where you are in the world – but in our country it is probably as high as 35%. Also the content provide payment is delayed – again differs depending on where in the world. But it can be 45 – 120 days before the content provider gets the money. Still it is a benefit for them since it increases volume significantly.
- This mobile payment application is helping create consumer behavior around using phones and phone numbers to buy things. This can be built on by other solution providers – since consumers understand how to do it and that it works – it builds trust and understanding. Since this method doesn’t work for everything – like buying more expensive items or physical goods- providers that support that will have less training and evangelizing to do. In fact, consumers will start asking for this.
- These solutions aren’t really that innovative in that they have been available in the market for some time. They are just new to us and are gaining popularity. In Korea, it was started by the mobile carriers developing systems to do this but they were spun out and formed independent companies. When I visited Korea in 2008 the two companies that did this told me that 90% of all digital content on the web is purchased. Their economics are more favorable to the content providers and I think that is partially why it has become so dominate.
A few weeks ago AT&T announced that it will enable Boku, Zong and BilltoMobile begin interfacing directly with the AT&T billing system. Previously their integration with AT&T were through premium SMS systems which were less reliable. This is an opening up of carrier billing which will help these solutions grow.. Apple and Google partnering with these companies would increase their role in mobile payments for digital content. Apple or Google could also replicate what those companies do, but it takes time to build the mobile carrier relationships around the world. Because of the economics of carrier billing, this solution won’t really work for non-digital content purchases or digital content purchases that is very margin sensitive.
What are the take away’s
What Apple does is important but we will have to wait beyond the rumors to see what happens. I will say that there are many large opportunities for mobile payments and it is not just about digital content or proximity payments. There is significant opportunities in remote shopping, small and medium business, and money transfer. Just a few numbers for you to keep in mind.
- Over $75 Billion in money exchanged between families in the US alone will quickly go mobile
- 70 trillion transactions per year that are cash and check today will quickly go mobile
- 80 percent of sellers of goods and services are underserved today without access to digital payment acceptance (credit/debit card and electronic check acceptance). Huge opportunity for mobile payments
These areas are all where P2P payments come into play and will prove to be a large market opportunity too. In markets where P2P is fully implemented it represents over 50% of the mobile payment transactions. Users want P2P for money transfer, casual payments, payments to individual merchants, cross border remittances and check replacement. This is a big opportunity and right in Obopay’s sweet spot.
Back to Apple – they are clearly already big in mobile payments with iTunes and the App Store. They are going to do more – most likely a bigger play in online payments and in store payments, and they are not the only big player that is actively looking at this space. I expect Apple’s focus will be as it always has been – on innovation and delighting the Apple customer. What they do, will make others move faster. That is their role in Open Mobile.
Two more blogs in the works; one on the rumored AT&T, Verizon, and T-Mobile JV, the other on segmenting the mobile payment space by types of users and uses.
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November 9th, 2010
This week we announced new functionality for our Mobile Money for Banks offering. The announcement broadens the scope of mobile transaction capabilities for banks and their customers. The new capabilities are based on the feedback and requests that we have received from the most active mobile money users of our service, and from the bank partners that we have been working with. We have continued to get great feedback on the new capabilities since they have become generally available, and we welcome your feedback regarding what you would like to see from our service and how you would like to use it.
The new capability for Mobile Money for Banks include first-of-its-kind instant mobile transfer capabilities between accounts at different banks, get paid tools including text-to-donate and text-to-pay and features that make it easier for small businesses or even individuals to accept electronic payments.
The new functions empower users with the ability to transfer money between banks instantly, and accept card payments and electronic checks. This is especially important for bank customers that represent small businesses or organizations, or who need to get paid as individuals and who have been unable to accept electronic payments due to high fees, start-up costs, or denial of card services by their banks. The number one request we have gotten from users interested in our service has been for solution that enable users to accept card payments for personal and small business payments, followed by the need to get instant access to the money the are sent. This is what our new capabilities address. There are currently 24 million individuals just like the users who have asked us for this functionality who need to get paid for goods and services, but who have not been able to accept electronic payments according to the Philadelphia Federal Reserve. While less than 30% of all small businesses accept any form of electronic payment, the new functionalities of Mobile Money for Banks allow any small business or individual to get paid electronically via theirs and their clients mobile phones. This latest addition to our Mobile Money for Banks offering allows the banks that service these users to work with Obopay to bring this capability to market quickly and easily.
Read the full release here.
September 29th, 2010
Earlier this week Obopay announced its partnership with the STAR Network, offering an instant and easily integrated offering. This will enable banks or credit unions to easily bring their own branded mobile money service to market and offer it to their customers. The partnership enables banks to leverage their existing connections and back office processes that they already have established with the STAR Network. Read about it here.
1. What is the significance of this announcement?
a. As you might expect, Obopay is very bullish about this announcement. We have a long history of firsts in the United States – first to launch mobile money transfer, first to deliver a smart phone application for mobile money, first to form a major partnership with a global financial leader – MasterCard – to name a few. Now we are the first to deliver the mobile money solution that allows people and businesses to instantly receive money directly into their bank account.
2. Is this different than what others are offering?
a. Our instant transfer to over 80 million STAR debit accounts (at over 4800 banks and credit unions) in the US is unique in the market – and the sender need not be in the same bank as the receiver. Instant is expectation in mobile. Many of us have been conditioned to waiting for transfers into a bank account – like if I use PayPal it could take days to show up in my bank account. But in mobile everything is instant – calls, texts, application downloads – no one waits. So for this mobile generation they want things to happen as fast as a text message. We deliver this. No more waiting to have you money where you want it.
3. What is the long term role of the debit networks in mobile financial services?
a. Debit networks help consumers and businesses get access to their funds from anywhere and right away – but have traditionally been tied to branch banking. Now, with our solution, that same infrastructure becomes relevant, and even more valuable, in the new world of mobile. This will allow new mobile functionality based on powerful existing infrastructure. And everyone wins – especially the consumers.
4. Will debit networks be important globally or just in the US?
a. Yes, in fact we are already rolling out similar capabilities in other markets.
5. What do you see being the next critical step for Mobile Money adoption in the U.S.?
a. US consumers want mobile money, we see that everyday. The next critical step is distribution. That is why we are focused on offering our services through companies that have reach to all the consumers that need and want mobile money. The next critical step is marketing and distribution.
September 10th, 2010
Today we announced our partnership with the STAR Network. STAR is a First Data company and a leading debit card network. Our partnership with STAR will enable over 4800 banks and credit unions that already use the STAR network to easily bring their own branded mobile money service to market, leveraging their existing connections and back office processes that they already have established with STAR.
This new offering is instant, making it unique in the market. The feedback that we get from users is that instant is expected in mobile and our work with STAR is designed to deliver on that expectation. It is exciting for us to be the first to offer this. Now, 80 million plus account holders that have a STAR debit card have instant capabilities that are connected.
This new offering enables banks to give their customers the ability to send and transfer money to anyone who can get instant access to the funds, even if they bank at different banks. This is great for families in different parts of the country who may have accounts at different financial institutions. It will also enable customers to get paid for goods or services and receive those payments right into their own bank account with instant access to the funds.
September 8th, 2010
The State Department had a half day event for employees and guests about Mobile Money. Well attended and great interest in mobile money for “development” (improving political, economic, and human conditions around the world).
The group was diverse in experience – which is a challenge for a presenter. Since I co-presented the first session my goal was to create a common understanding of mobile money, how it is successfully implemented, and what are the benefits. I wanted to make sure the audience came up to speed quickly and got beyond the simplistic view. The feedback was overwhelmingly positive about the opening session (partial credit goes to Jan Chipchase my co-presenter who started the session with a look at the needs of under-served people around the world) .
What is the role of State in Mobile Money
In conversations I learned that although State is enthusiastic about mobile money for development, their engagement model is still to be determined. They want to see these solutions go to places like Haiti as well as large markets like India. Yet I don’t think they yet know exactly what their role should be in helping make that happen. I was able to give them some initial input and plan to follow up in the coming weeks. Here are some of my thoughts on how they should get involved:
- Encouraging financial services regulatory certainty for mobile money. As they “encourage” they have vast resources of knowledge and experience on regulations. Obopay operates in diverse regulatory environments – which is one of our great strengths. Yet it is prohibitive to launch mobile money in markets where regulation is uncertain. State has the influence and resources to accelerate this in some cases.
- Discourage anti-competitive and anti-innovative practices. We have seen around the world financial and telecom actors take action to inhibit new entrants and innovation. The State Department can encourage mobile network operators and financial actors to adopt open access practices. This will encourage innovation and create a vibrant market. And this will in turn translate into more services reaching more people that need them.
- Help trusted actors connect. Especially important in challenging markets. We have passed the test and demonstrated we are trusted to US regulators as well as regulators and partners around the world and, as a result, we get inquiries from many developing countries (for example Nigeria, Pakistan). We would like the State Department to help local actors know about us, since we have the trust of US regulators. And we would like their help in understanding which local actors are good partners – especially in challenging countries. Of course, we would want this for the industry – not just for Obopay.
Tell us about your other meetings in Washington DC.
I have to confess that although I have been to DC many times, I have never reached out to talk with law makers. I met with staff from 6 Congressmen and 1 Senator. I was impressed with how accessible their offices were and how open they were to discussing important topics with me. I wanted to focus on legislators who were involved in foreign affairs, and banking regulations—two areas where we have a great deal of experience to share.
All were keenly interested in mobile money – learning more, understanding how it works, asking how they can be helpful. Most meetings were primarily initial discussions but clearly there is opportunity to engage government in the dialogue and policy setting to ensure we maximize the opportunity to create growth and jobs.
One surprise was the lack of cross government coordination. I ended up educating people about what activities were going on in other agencies – treasury, state. Although we are a collaborative government in spirit, our size and complexity makes cross functional sharing difficult.
This administration is young and clearly tech enthusiasts. I am hoping that it will help build more communication between the Legislative and Executive branches. While most offices where watching CNN or CNBC – maybe in the future they will be reading blogs and watching tweets from each other. No question that social media should have a strong impact on intra agency communications
Do you expect follow up and results from your visit?
Hard to say. I know it was worthwhile to make the connections. I will keep in touch with many of the groups and individuals I connected with and we shall see what comes out of it. I have to admit it made me a little patriotic coming to Washington and meeting with different organizations. Despite all our challenges, we have many great qualities. One is the number of smart, passionate, hardworking people working on the “Hill”.
August 5th, 2010
What will be the impact?
For a time, we’ve been saying in this space that the tipping point for mobile payments in the United States was upon us. A story covered by Bloomberg news yesterday serves as corroboration of this belief. Shortly after the final bell rang on the NYSE yesterday, Bloomberg reported that unnamed sources claimed AT&T and Verizon Wireless were planning a joint venture(JV) to uproot the hold traditional plastic credit cards have on electronic transactions by developing a smart phone based payment system. T-Mobile was also reportedly a minor player in this consortium.
- The pilot of this JV is reported to be in 4 cities with smart phones and proximity payments as the key application (instead of swiping a card you wave your phone in front of a special retail terminal).
- Discover and Barclays are participating as financial services partners
- They don’t yet have a CEO for the JV and are undertaking a search.
- This is being seen as a potential threat to Visa and Mastercard and their 82% share of consumer retail payments in the US. This could also have a big effect on banks since they have significant revenue from “interchange” – the fees tied to MC and Visa transactions.
It is too soon to predict the full impact and the speed at which this new venture will be rolled out. If, however, it is successful the potential is huge since more than half of all the new phones shipped in the market today are smart phones. What is predictable is a response from the other players in the US. Some, like banks, VISA, Mastercard, retailers, have had a “wait and see” attitude about mobile money in the US. Compared to their counterparts in other parts of the world, the US-based companies have been slower to invest in mobile. This news will accelerate their plans, serving as a call to action for financial institutions in the US to quickly begin planning how to enter the mobile payments market, not just launch mobile banking solutions.
Is the opportunity for mobile payments in proximity payments or wireless payments?
Both, only proximity payments take a lot more time to gain broad adoption. In Japan it took a decade. The opportunity is very large – the biggest segments are retail, check replacement, money transfer, and online commerce. All four represent significant opportunity.
One of the big questions is what will get things started here. We think the US market is more likely to ignite around wireless payments first, then move into proximity due to challenges in bringing together the number of players required to roll out proximity payments and the expense involved. Once started, people will expand their use to other types of payments. We see this in every country where we are – it starts with one compelling reason but once the consumer trusts it they are looking for other uses.
This venture into retail proximity payments could change how we pay for things when we are doing in person transactions. Visa and MasterCard were responsible for processing 82 percent, representing $2.45 trillion of consumer spending on cards in the US according to the Nilson Report. If mobile payments from the mobile operators take off, this could be impacted. This would also impact the banks since they generate revenue from VISA and Mastercard payments.
Do you think the mobile carriers will be successful in payments?
They can be. And mobile carriers playing a lead role in mobile payments in the US may be a concern for financial institutions, which have traditionally played that role here. We see and even work with mobile carriers in other markets who are creating successful solutions. However, in the US the mobile payment market is the financial service providers’ to lose. But they must act quickly, and move into a full range of mobile money transactions because the carrier efforts have already begun—and they have already seen some success in other areas like “text to donate” and digital content billings. In the US consumers are first looking to other financial service providers to provide mobile money. If they move quickly, they definitely can be a part of consumer solutions. There is a window open right now for financial service providers to move quickly into wireless payments, since proximity payments will take some time to rollout. The necessary physical changes required in phone and merchant terminals will increase the time for implementation.
How will Obopay respond and what does this mean for Obopay
We offer a comprehensive mobile money service operating in 4 countries. Today, we offer our partners Mobile Money solutions which will allow them to deploy their own branded mobile money service. Designed to make the bank’s accounts or existing prepaid offerings the anchor for all current and future mobile money transactions, the service combines complete brand control, and a full range of mobile transactions and applications with simple low-cost integration and deployment. Obopay’s Mobile Money for includes the ability to send and transfer money as well as payment card acceptance available to everyone. It can be implemented in 30 days or less.
We know that this JV will accelerate interest in mobile payments and with it the adoption of our service. And those financial service providers that prefer to get the capability from MasterCard can adopt MasterCard’s Mobile MoneySend or FIS Global’s People Pay solution–both of which are offered in partnership with Obopay.
August 3rd, 2010
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