Mobile featured heavily throughout the International Payments Summit and it is clear that mobile is not only important; it is imperative.
This was made loud and clear by a comment from Daniel Marovitz of Deutsche Bank that it used to be that online and offline worlds were separate because, to make an online payment, you had to go to a computer and hit enter on a keyboard. Now that’s all changed as the mobile allows you to make online payments immediately 24*7 through a device in the pocket. That’s new and radical, as it means the online world is now integrated with the offline.
Through the course of such exchanges about mobile, several things became clear to me.
- First, mobile is lumped in as one area, but is actually about a hundred different things;
- Second, banks are finding mobile challenging because it has merged the online and offline worlds;
- Third, banks see mobile opportunities based upon partnerships and joint ventures with mobile carriers, but this is wrong;
- Fourth, the underbanked and unbanked are the initial targets to be serviced through the mobile carriers;
- Fifth, apps are incredibly disruptive; and
- Finally and most importantly, mobile is a real game-changer.
Let’s start with the fact that mobile is not one thing.
There is mobile internet and mobile texting; mobile apps and mobile devices; mobility and wireless; SMS and NFC; SIM and EMV …
There is mobile payments and mobile banking; mobile bill pay (checkout Danske Bank for this one) and mobile bill deposit; mobile balance checks and mobile cheque deposits (USAA et al); mobile account opening (Jibun Bank and eBank) and mobile telephone calls to contact centres (!) …
There is mobile identification and mobile biometrics (Voice Commerce); mobile secure tracking and mobile proximity marketing; mobile as a payments device and mobile as a point of sale; mobile for texting money and mobile for reading QR codes …
There is such a rich variety and diversity of what is meant by mobile now, that it is plainly annoying to talk about mobile as though it is a single thing in banking.
I would suggest that talking about mobile is like talking about banking.
“Oh, I want to talk about mobile” is the equivalent of saying, “Oh, I want to talk about banking.”
What sort of banking do you want to talk about?
Retail, investment, commercial?
Brokerage, wholesale, branch?
International, domestic, regional?
FX, derivatives, exotics?
Online, offline, direct?
Get some context around mobile and start talking the specifics, not the generics.
Second, the merger of offline with online.
I’ve already mentioned this, and said it was a challenge.
It was already a challenge, when we talked about having customer contact 24*7.
When we moved into call centres and then the internet, it was a challenge as customers were suddenly making demands at 3:00 in the morning.
But we handled it.
Now customers are using mobile devices to use bank services 24*7 electronically.
And yes, we will handle it … but it’s slow.
Take the example of making a mobile payment,.
During the conference this week, David Birch of Consult Hyperion challenged any bank in the room to make a payment using a mobile directly from their bank account to any individual in the room.
Sure, you can use mobile to do bill pay, balance cheques, money transfers and more; but a simple exchange of £20 between me and you? Forget it.
The only way to do that is via PayPal!
So banks get mobile, but they’re getting it v e r y s l o w l y.
It reminded me of how Chip & PIN was born.
Chip & PIN was conceived in the year 2000, developed in the year 2003 and implemented in the year 2005.
Five years to get from an idea to the delivery of a new security system.
In that same timeframe, Facebook created over 600 million users and took over the planet.
When I asked the leadership for Chip & PIN why it took so long, he explained it has to be a cohesive and consensual process.
So ok, you move at the speed of the slowest.
When I asked him why they went for Chip & PIN rather than Mobile & PIN which, by 2005, would have made far more sense; he said it was because mobile was not advanced enough in 2000 to be used as a security device via SMS and OTP (One Time Passwords).
But it is now!!!!
So why banks still take five years to make a decision and implement it when it takes Zynga six weeks to release a social game and garner 100 million users is beyond me.
Third, banks think winning in mobile is through JVs and partnering but this is wrong.
Banks are not the best organisations at collaboration, except amongst themselves.
It is difficult to name a single successful bank and non-bank partnership, but easier to point to others that failed.
This is because bank business models are completely unique and different.
Banks deal in basis points – bps … who else deals in bps???
Banks are regulated for resilience, security and robustness, whilst mobile operators are regulated for agility, innovation and fees.
If a mobile call fails to connect it's irritiating but there's no problem; if a payment fails to get through, there's a problem.
That's why banks want to control everything which, in a partnership, is not a good thing.
The result is that for all their good intentions, banks find partnering tough.
I could point to 1,000 examples but the best is NTT DoCoMo.
NTT DoCoMo and their e-wallet Osaifu Keitai, is liberally pointed to everywhere as being the most advanced mobile service in the world.
Its financial usage as an ewallet, NFC device and more is second-to-none.
So when NTT DoCoMo wanted to get bank services on their mobile, what did they do?
They bought a credit card company.
Far easier than trying to partner with a bank that didn’t understand them or their business model.
The same can be said for several other carriers, such as easypaisa in Pakistan and, in the case of established mobile carriers like Vodafone’s Safaricom in Kenya who operate M-PESA, when a mobile carrier does partner with a bank it will be on their terms, not the banks.
Which brings me to my fourth point: the underbanked and unbanked are the target markets for mobile carriers.
Nokia Financial Services, Ericsson, Telecom Italia and others attended this week’s Summit and they all underlined the same view: it is the underserved that will use mobile first.
This is why mobile has succeeded in Africa, and is now crawling across other regions where markets are under-served.
Where people had no access to bank or payment services, being able to suddenly make and take a payment wirelessly via the mobile is nirvana.
You suddenly have a service that previously was only available by walking 100s of miles or having someone do that on your behalf for a massive fee.
You have a service that used to cost a bucketload, being commoditised into a cheap wireless activity.
For the unbanked and underbanked, mobile moves the world from high cost remittance services to low cost wireless services.
That’s a big deal.
It is the reason why the mobile carriers will go for the high volume, low value first.
Grab the customer base the banks don’t want.
Look after the microfinance and low profit pool.
It’s only just over three billion people.
If banks ignore three billion people, that’s ok.
Someone can make money out of that.
High volume, low value money, but money all the same.
And that’s the mobile carriers’ mission.
Intriguingly, that’s also a classic innovator’s dilemma approach, in the words of Clayton Christensen.
Start with the bottom-end, then upscale.
The fifth area is how apps are really disruptive.
I’ve already talked a bit about disruptive apps such as Angry Birds, a $0.99 mobile app that generated $75 million for its creators in a year.
Apps create micropayments and micromoney.
More importantly, apps deconstitute banks into components.
BaaS allows the user to mix and match apps to suit their financial lifestyle and build their own bank in the cloud.
That’s new and different, and is something unthinkable even a few years ago.
Which brings me to my final point: mobile is a game-changer.
When the online and offline worlds meld into a seamless service, the world has changed.
When everyone on the planet can be connected P2P, B2C, E2E, the world has changed.
When anything can be moved electronically and wirelessly 24*7, the world has changed.
When industries that were delineated are merged and integrated, the world has changed.
When you can balance check with an app or text your partner money at three in the morning, the world has changed.
When money can be transacted from an African village to an Indian paddyfield via a Chinese entrepreneur and an American taxi driver, the world has changed.
The world has changed.