Monday, August 08, 2011

Get ready for mobile payments

It’s not a matter of if, but when, your ever-smarter smart phone replaces currency and credit cards as the way you pay for everything from a latte to a load of lumber for the deck you have been meaning to build.

The arrival of mobile payments will restructure the way marketers interact with consumers, leading potentially to epic shifts in the balance of power and dollars from financial services like Visa and American Express to technology providers like Google and Verizon.

It also is almost certain to lead to further disruption for media companies, unless they can figure out a way to nose into the action – which already is well under way.

The mobile payments revolution will be enabled by a technology called Near Field Communications (or NFC), which adds a micro-range radio to the cellular, wifi and Bluetooth arrays already packed into every smart phone. (More on NFC here.)

While only a smattering of Android devices today are equipped with NFC, there are hopeful rumors in the ever-breathless Apple press that the next-generation iPhone will have the feature when it debuts later this year.

Whether Apple takes the plunge now or later – thus leveraging the 125 million credit cards already on file at its successful iTunes service – the company will join a frenzied land grab including the following players:

:: Google Wallet, which will be seamlessly integrated with the Android operating system that ComScore says powers more smart phones (40% of the market) than its closest competitor, the iPhone (27% of smart phones).

:: Isis, a collaboration among Verizon, AT&T and T-Mobile (the latter of which AT&T is seeking regulatory approval to acquire). These mobile providers, who utterly dominate the U.S. market, are partnered with Discover, MasterCard and Visa.

:: Visa Wallet, a parallel effort by Visa to partner with its network of member banks to create a branded payments app.

:: Serve, the American Express equivalent of the Visa Wallet effort, which has entered not only into partnerships with Verizon and Sprint but also the fast-growing Foursquare mobile check-in platform.

:: Verisign and the other point-of-purchase equipment companies who make the gizmos used to swipe cards. Verisign has a mobile banking suite that it markets with a variety of tech and banking partners.

In a way, mobile payments already have arrived.

You can flash a barcode on a mobile phone to complete a purchase at most Starbuck’s, but it’s a far more complicated process today than it will be in the future. Now, you have to establish a Starbuck’s account by handing your credit card to a clerk, who loads the funds on a Starbuck’s card. Then, you have to download a Starbuck’s app and link it to your Starbuck’s account. Finally, you have to fuss with the phone when you make a purchase to generate a barcode that can be read at the register. If you run out of money, you have to slap some plastic on the counter to recharge your Starbuck’s card.

In the future, this rigmarole will be unnecessary. Sitting on a bus or walking through the park, you will be able to virtually create and manage accounts with individual merchants, simply waving your phone and confirming a transaction whenever you happen to be in a store. More likely, you will have a generic buying account that works with all merchants. Once established, you will be able to top it up from time to time for use at a gas pump, vending machine or furniture store. You might even be able to wirelessly lend a friend $100.

Paperless banking almost is upon us. Chase has an app that allows you to deposit a check by merely taking a picture of it with your Android or iPhone.

Once the mobile payments ecosystem fully evolves, currency and plastic may well become relics of the past.

For consumers, this will provide greater convenience and arguably more security than ever.

For the winners in the land grab, it will unlock vast new markets, potentially shifting revenues from banks and credit card companies to companies like Google, Apple and the mobile carriers.

For marketers, the systems will capture a wealth of information about purchasing patterns, including who, what, when and where people bought something. Even when this data is collected without identifying individuals by name, the volume and specificity of the information will enable marketers to sharpen their messaging and tactics.

Going to the next level, sites like Blippy.Com encourage consumers to disclose and write reviews about their purchases. If such platforms take off, they will provide merchants with the ability to link specific individuals with particular purchasing patterns, enabling brands to reach consumers with unprecedented precision.

At the level beyond that, it seems entirely possible that a significant number of consumers would be willing to have all their purchases tracked in return for such incentives as discounts or frequent-shopping points that can be redeemed for cash or products in the future. This, of course, would enable the Holy Grail of target marketing: Putting the right offer in front of the right person at the right time.

Although the outlook is unclear, there can be no question that mobile payments will revolutionize marketing by creating an ocean of real-time, granular and precise consumer data.

This matters to publishers and broadcasters, because it means that marketers in the future probably will vector ever more of their advertising dollars into direct connections with consumers, instead of mass media.

As mobile payments combine with the power of digital publishing, masses of eyeballs – which happens to be what traditional publishers and broadcasters sell – will diminish in importance in the typical advertiser’s media mix.

Where does this leave the traditional media companies?

Because rich data – not mass audiences – will be the name of the game in the future, every local media company should be gathering as much data as possible about every household and individual in the community it serves.

The most immediate opportunities to do this are through newsletter programs, contests, site registration and smart mobile apps. Obviously, all of these tactics require close attention to government and corporate privacy policies.

The other thing media companies need to do is pay close attention to the evolution of the mobile payments ecosystem. Then, when the time is right, they need to buddy up with the likely winners.


Anonymous Anonymous said...

This is precisely why the smart money in media should have trying to break the addiction to ad dollars years ago, or at the very least, develop alternatives for the obviously approaching day when advertising disappears almost completely from their business model. That day is getting closer and closer, yet most publishers are still almost wholely dependent on ad dollars. Technology has made their ad supported platforms obsolete, and without a viable alternative, the carnage in media, particularly print, will be far worse than what we've already seen.

6:17 AM  
Blogger Investidor Pessimista said...

your blog is the best, congratulations.
I am a newspaper publisher from Brazil and here we are still seeing double digits growth in all newspapers segments, including classifieds, due to a booming economy. But of course we all know that the print classified will perish sooner rather than later in competition with the internet and at least here where I work we are doing the best ans fastest as we can to move to digital. the point is, some newspapers here are investing in a overlooked area of revenue: commercial printing services. They are ramping up their print technology and becoming more of a commercial printing company. printing Jobs demand ( weeklies, institutional newspapers, supermarket and pharmacy offers booklets and the likes ) are not directly connected with media habits and are a HUGE market in Brazil at least. Dont you think that this could be one of the ways newspapers could bring in considerable extra revenue to help finance the transition to digital? One of the biggest newspapers in Brazil, Supernoticia, a popular daily that came to fame last year for briefly surpassing the print circulation of Folha de Sao paulo, the long time leader, bought a state of the art new press; and what nobody knows is that the press brings in big revenues from commercial jobs that helps pay for the - shocking - LOSS of their flagship newspaper, that never turned a profit. Dont you think this stream of revenue is being overlooked by publishers? Newspapers could use their brand, strong local expertise and existing printing facilities to enter this graphic segment and dispute dollars with existing graphic companies. For the first time you can see a trend that is not negative for newspapers assets; the trend in printing / graphic to move to cheaper printing, low cost products, faster delivery and production, where offset presses, the kind that print newspapers, can benefit hugely. What do you think? Thank you and all the best

7:53 AM  
Blogger Dotto Athumani said...

Hi Allan,
i enjoyed ur last introductory seminar...actually back in Tanzania we have witness the take over of mobile companies in an attempt to play banking roll. With your any type of phone (not just smart phone) you can send, receive and pay utility costs via mobile money account (Mpesa, Tigopesa, Airtel money/zap and zpesa)- these are Tanzania Major Mobile companies which offer money transfer services through mobile phone. I remember to pay my visa fee application via these service, i had two options- to pay through city bank of which require travel to beat heavy traffic jam/two hours plus transaction charge. Or and to pay via mobile money transfer which reqiure nothing than having some money in my mobile account (ZAP). Not to mention, electricity bill, school fees and even fuel.

So i agreed with you, the technology is all already here and we cant run away from it. With many traditional consumers of financial transaction i think they need to get ready as new market is about to rule them out.

10:42 PM  
Blogger Unknown said...

Awesome post, I'd love to hear your thoughts on how newspaper marketers can utilize technology to enter the mobile payment arena now vs waiting for credit card companies and OEMs to build NFC or other solutions into their networks and devices. People (newspaper consumers in particular) have only just become used to the idea of online purchasing, so an intermediary step before we start asking them to pay through their phone may be a wise course of action.

I'm a single-copy marketer working for a Canadian national newspaper, and I'm going to be expanding into this area by year's end. I'd be interested to hear what you think about how mobile payments could influence sales of the printed product. Do you think it may provide high-tech (massively appealing) access for a low-tech product?

1:08 PM  

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