There has been much debate of late on Finextra and indeed everywhere about mobile wallets and mobile payments; with some very diverse opinions. Some argue that
uptake of mobile wallets and payments is poor; there’s
data that supports that view.
Others argue that mobile devices are dramatically changing the way consumers and corporates interact with financial services providers; there’s so much data to support that view that
The problem’s in the question. ‘Mobile payments’ can be used to describe all sorts of services, products and technologies. And frequently is, perhaps to justify some of the predictions. It has become meaningless.
Is M-Pesa a mobile payments service? Undeniably; it’s also a realtime clearing and settlement system. What about Square? Well it’s involved in the payments process, and it’s centred on mobility; many people would say yes. Since Bitcoin is a mechanism for
transfer of value, and
can be tweeted, then that too?
The problem arises partly because payments is itself an abstract. 'Nobody wakes up in the morning and wants to buy a payment' - Eric Sepkes. Sure there are lots of them and they are easy to count, but as a banker once told me, the payment is like the scene
of crime after a murder - chalk marks around where the body was. Accurate, but it doesn't tell you a great deal. What's interesting is what happened before.
It’s also because making a payment is a complex process. We use the phrase ‘payments’ to mean far more than the transaction acquisition, or authentication, or accounting, or clearing and settlement, or reconciliation. And it’s a regulated activity – if you’re
touching client funds, there are laws to be adhered to, and failing to do so has potentially commercially fatal consequences.
Nor is it (just) about the ‘mobile phone’. It's about whatever device is closest to hand, most convenient, at any particular time. Mass market adoption of inexpensive handheld supercomputers (aka smartphones and tablets) means that the whole of the payments
value chain can be unbundled, and each component thereof is up for grabs. Plus some new ones. Not all involve handling client funds, which is very costly and hence is best done by firms which have economies of scale.
I use a phone, a tablet (sometimes two), a laptop and a desktop in the course of most days. So do my kids, who are at University. When I first went, my mum was lucky to get a landline call once a week. We’ve undergone a lifestyle shift.
And since that’s revolutionary, the lexicon and measurement methodologies of the pre-revolutionary era may well be misleading. Uptake of mobile wallets or mobile payments may be slow, but the
use of smart devices within financial services isn’t. It all depends on perspective; on getting the questions right before considering the answers. Clay Christensen, the author of ‘the
Innovator’s Dilemma’, thought the
iPhone wouldn’t be a success – he thought it was sustaining technology relative to Nokia, and only later realised it was disruptive to laptops.
Measuring uptake of mobile payments, or mobile wallets, or
even mobile cards (perhaps there were once fixed ones?) is about as useful as measuring uptake of computer programs as people started to use PCs. Just because something can be counted doesn’t mean it’s worth counting. ‘Mobile payments’ is an outdated -
dare I say legacy - concept. We need to get back to articulating what the consumer (and the treasurer) wants, needs, expects. Though that’s far harder to 'count', or to include in a soundbite or Tweet.
What we use to measure the outcome after the fact may tell us little about what drives the change in the first place. People have supernatural powers of hindsight, but you can’t predict much by looking in a rear-view mirror. Near 100% of world wealth is
held or managed by people who have a portable supercomputer
at their fingertips. That creates entirely new ways of assembling the financial system, delivering value, making money. It makes the market bigger. Old terms, old ways of measuring things, and old ways of looking at things can get in the way.
My favourite quote from the ‘the Innovator’s Dilemma’ – (in the case study about
the innovative manufacturers of hard disks) - 'Their customers were pulling them along a trajectory of 22% capacity growth in a 14 inch platform that would ultimately prove fatal'.