Tuesday, October 23, 2012

From cash to chaos (still)!

I had a mission. This weekend I would dig deeper on the mobile payment thing. What´s it all about? What kinds of options are there? Do we actually need a smarter way to pay for the stuff we buy? Hopefully, to take it from chaos to order (in some way). Oh, and main focus is Sweden. 


Right now we pay with either cash, with our credit card or with e.g. SMS that will be charged your phone bill. We pay for stuff we buy either physically in the store or online. If we buy/sell things from people we know (or don´t know) we do a bank transfer or we use more secure payment methods like www.paypal.com or Internetgirot.se The last one costs money and takes time. Not the best combination. 


We are moving towards a cashless society. In Sweden cash represents 3% of the Swedish economy. That´s not much and in my opinion a really awesome thing. Why: Coins especially are really annoying. They take space in your pocket (you might drop your pants), there is a great risk that you lose them, and it takes time to get them (withdrawal from the bank). For the businesses it is more expensive to admin huge amounts of cash.


Last week I attended a seminar about the mobile phone as a future wallet. The thing I´m taking with me from the seminar is: We are still in an experimental phase when it comes to mobile payments. No one has found a solution that solves all problems. Do we actually have a problem? To sum it up: Chaos and if industry people are confused what are the real folks then?


I read this article starring Google´s VP of Wallet and payments Osama Bedier. I like it. He got some great points. First: “There’s a lot of ideas and not a lot of problems being solved” which sums it up really well. Secondly, “Credit cards already work pretty well if all you have to do is payments.” We don´t have serious problems right now. What a lot of people are asking for are just secure payments. Of course it would be nice to be able to do it with your phone. Lastly, "It took 50 years for the credit card to become the dominant means of payment, so it shouldn’t be surprising that mobile payments haven’t immediately taken off." We need to be patient. It will take time for the industry to solve it and it will also take time for the mass to adapt to new technologies and to change behavior.

Let´s have a look at the big monster (read: All the different parties that want to take a bite of the cake). I´m pretty sure that I´m missing some players. Bare with me:


Banks - we got the banks. They handle our money (savings and loans) and you pay them for it. In Sweden the banks are collaborating on a mobile payment solution. It´s called Swish. Still a bit unclear what it means. However, the main thing I can read from it is that it enables transactions between people through a mobile device or a mobile app. So if your friend is a Swish member you can transfer money (via an app) with the use of that persons phone number. Sounds pretty straightforward, however, you need to download 2 different apps (the Swish app and a Mobile Bank ID app) and the process for getting it sounds slow. One thing that is crucial is the pricing? Will it cost - and in that case - how much? Today, if I transfer money (through my Internet Bank) to a friend or somebody I know there is no cost. Of course it would be smoother to do it through your mobile device, however, I´m personally not willing to pay for it. Another thing: Your friend needs to have it to make it work.

If transactions are free I will download the thing. However, it will take time before it is rolled out. The sign up process sounds a bit complicated - and it will slow down the reach to the masses. Another question: How often do people need to transfer money to other people on the go and in real-time? (I´m doing traditional money transfers less than 10 times per year). To be honest I have a hard time seeing how this collaboration of banks should be able to innovate the mobile payments thing. They are slow moving by nature, and being more parties slows it down even more. 


Note: There are other alternatives. E.g. Swedbank that created their own payment service, Bart. An app that is linked to your Swedbank bank account. In practice it works like: You enter the amount on your phone, a QR code is created - and the cashier will scan that QR code and the money will then be charged your bank account. They will open up for other bank holders. I have a hard time understanding whether this is smart or not. 


We are moving on to the evil operators. The one´s steeling all our money J


Operators - we got the operators. The one´s that take care of your phone and charge you for everything you do with it. They have teamed up and created the WyWallet solutions. Again, it´s an app that is linked to your bank account.  Today, premium SMS is an easy mobile transaction. Premium SMS will not disappear with WyWallet, however, you need to own a WyWallet account to do this. Again, the process of signing up, to load your account with money seems a bit complicated. P2P payments are free for now, but will you be charged 1 kr. from next year. Besides, there will be a fee included if you want to transfer money from your WyWallet account to your bank account. What is of interest: How will the flow be for paying for things (in retail) and other mobile payments.


One huge challenge from my point of view is the fact that you need to own a WyWallet account!? I´m not interested in having another account, and especially not willing to have one where it will cost me money transferring money from my WyWallet to my regular bank account. 

The heroes. The one´s trying to fuck the established players.


The start up scene - examples here are Square / iZettle - card reader payments (linked to your iPhone or Android phone) focused on solving local merchants problems only taking cash & P2P transactions.  Square is this little card-swiping plug-in for smartphones. iZettle  is a chip based solution. iZettle works in Sweden.


We got other parties like merchants (in US Walmart launched their MCX payment in collaboration with Target, Best Buy); credit card companies (Visa, Amex etc.), Paypal, Amazon, Klarna etc and I´ve probably missed a whole lot of arguments and important take-outs.


However, looking on the big players I think the startup scene will win the business to consumer transaction race. They actually solve a real problem. Reasons: They innovate faster and got a natural user focus. Something that e.g. banks and operators are lacking.


When it comes to P2P payments I think it will take time. It is not a real (and frequent) problem, but more a nice to have thing. Still. It may cost a fee & it is dependent on the counterpart having the exact same payment solution (in most cases).


There are other aspects that need to be take into consideration like: receipts, all kinds of user-friendly statistics & if you get the chance to consolidate all your cards in 1 mobile solution. Plus, if new technologies like NFC gets standard. However, it will take years from now on.


I´m gonna finish it with a few quotes:

- "There needs to be consolidation within mobile payment options." and continues: "Until there is uniformity, mobile payments will not become widely used," says Max Goldberg, founding partner for the Radical Clarity Group, on the RetailWire forum. I totally agree with him. 


And do people do have real problems with payments today?


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