Not About the Benjamins

Money Phone
The last couple of years have been a fascinating story about the failure of mobile payments to achieve any signficant traction in the mobile payments space. Until the last few months, retailers and restaurants have dipped their toes into the mobile payments space, testing different solutions and trying to replicate the gold Starbucks found years ago.

Yet, for all this flurry of movement, for all the announcements of large merchants rolling out mobile payments across their systems, the consumer demand side of the equation still seems to be lethargic at best. At times, it doesn't seem that customers really want this, merchants only want it if they can achieve cost savings and some platform makers (most notably Apple) don't seem to be having much interest in reall maturing payments on their platform.

So what gives with mobile payments?

That's exactly what I want to explore over the next few months. This is the first post in what will likely be an irregular series exploring different aspects of the mobile payments game that intest and amuse me. My hope is that this series entertains you in reading as it will me in writing.

No, really. Its not really about the Benjamins

Seriously, its not. That seems a strange thing to say, but in truth it really is not. I hear you thinking, "You're talking payments and isn't that the process of exchanging money for goods and/or services?" Well, yes, it is, but that's not why people are so interested in mobile payments.

We already have credit cards, and for all their security faults, they're actually pretty good at what they do... facilitating that exchange of money without dealing with the actual mess of said money. We are rarely without them, they take up minimal space and they are accepted nearly everywhere. Swipe, sign and move on.

But isn't using your smartphone as a repository of that card data better? No one can see the card number and steal it. No one can use it when they steal our phone (assuming you properly secure your device). Most of us carry our smartphones and our credit cards, so if we merge the card into the phone, that's one less thing to keep up with!

All very valid points, but they completely miss the real point... cost.

Merchants, right or wrong, feel that credit card fees are too high. Its just moving bits across a wire, so why should the credit card company take such a big bite out of the cost of the transaction? With cash, I don't have those fees!

Not true. Cash has a lot of hidden fees, such as theft by employees and outsiders, bank deposit fees, buying a safe for your establishment and even the time spent to count it multiple times each day. Cash is far from a cost-free medium of exchange; the fees are simply hidden in sunk costs and indirect costs. It is painful to see a couple percentage points taken out of every transaction but those are taken out of every transaction regardless of if you directly see it or not.

So what is it about?

I can sum it up in one word... engagement. That might seem strange, but I think you'll get it once I walk through it for you. Lets take a look at how engagement really is driving the push for mobile payments for just about everyone with a stake in mobile payments.

Lets start, as we should, with the consumer. We love our smartphones. They are with us everywhere. When we are bored, they are our entertainment. At work, they are the devices that feed our desire to know everything that is happening. Through mobile apps, we are connected with family and even friends we probably haven't seen in decades. In short, we love them because of how engaged we are with them.

For merchants, the engagement takes a different approach... data. With a credit card, the only data you really collect from your customers, at least in most markets, is data you have to secure with numerous layers of lock and key, because that same data is the link to the customer's bank account. But if the mobile device in the middle, you can think take that link and use it to match that customer in a much less security restricted way.

And beyond just the payment, think about all the ways you can now, once integrated into an app on their device, market to them! Push notifications! Banner ads in apps! Personalization based on shopping history! Omnichannel! You open up a large range of possibilities for engagement simply by changing the way in which customers pay.

The card companies want this as well. Imagine if they can figure out a way to distribute cards digitally and no longer have to spend the time to produce the physical cards? Customers download the card company's app, sign in and load the card into their phone's wallet. But now the credit card companies are on the customer's phone. They can use that as a way to get data, especially if they have direct integrations to the digital wallets, they can't get today. They can even start to use the device as a way to detect fraud that is currently impossible with a dumb, plastic card.

And the device makers... you already love your phone, but if they give you another way to spend even more time with it, they win. They especially win if they are also the company who sells digital ads as their primary source of revenue (ie, Google).

Are you Experienced?

The real frustration here is that, while its all about the experience, as of yet, the experience is mostly bad. Its not really easy to use. Many of the entrenched intersted have little motivation to move more fully and rapidly in this direction. Customers aren't adopting because merchants won't pay for software and hardware upgrades. Device manufacturers haven't made it easy to integrate into their platform.

How do we solve these problems? The next few posts in this series will start to unravel some of these issues and take a look at what it will take to make this a truly revolutionary experience.