Mobile Payments Discussion Part 1 - Problem Setup
There’s an event called BarCamp Bank coming up in Berkeley in a few weeks. I saw that a few people signed up for the event were already listed as interested in digital cash or mobile payment systems. I figure it’ll be a good chance to gather some folks and discuss what options we have available, and I want to kick the conversation off so that we can get to the real meat of the discussion while we’re there.
The first thing I want to say is that existing mobile payments do not work. I’ve heard it said a number of times that mobile “comes with a built in payment system”, but that’s really a load of shit. Allow me to elaborate.
First of all theres the structure and revenue share of the existing payment infrastructure. In the cases where it’s possible to bill back to the customer bill the functionality is backdoored in frequently through premium SMS messaging. The carrier generally takes a large share of the transaction (I hear numbers like 50 percent here in the US, and I’ve been told it’s even worse in India). And of course the transaction isn’t directly from merchant to carrier to customer. Oh no, of course not. Theres the premium SMS provider in the middle as well also wanting their cut. It’s a hostile environment for merchants with way too much lockin for existing players. The base costs to use these systems are so high, and the overhead so steep, that it really discourages lots of potentially interesting usages.
Second is the off-deck payment systems. Stuff like Google Checkout for mobile, PayPal Mobile, and Obopay. First is of course that there are some user interface or user perception issues around the services. They also assume a credit based economy. No problem in the US and Europe, but a horrible problem in Africa, India, and China. “Who cares about people in China” you say? (particularly if you live in the Bay Area, people around here just love to dismiss the rest of the world) Well, ask anyone who watches construction and commodity markets where they think interesting stuff is happening. I bet those folks are interested in China at the very least. For all the nastiness of carrier billing, at least it handles the cash based economy and prepaid cell plans relatively well.
And finally, say we had a magic system that everyone could use with minimal setup and a great experience, every user had access to it, and every online merchant accepted it. Now you start having to worry about some pretty heavy regulation. There are banking and financial regulations meant to insure the basic level of trust. But recently there are also more regulations meant to curb money laundering and nefarious activities. How many people are familiar with those regulations on a global level? Even if we crack the technical problems and solve the user interface issues and gain user trust there’s still some potential issues with the G-men, whoever those shadowy puppetmasters might be.
So thats what we’re looking at. Tough, but things worth tackling normally are. Next post on this topic is a bit of background on whats been tried in the past and what technologies exist. The hat will be tipped to David Chaum I’m sure, but I need to read up a bit before I’m ready for that.
March 2nd, 2008 at 11:38 am
Even here in Europe, credit cards are WAY less used as in the US: I believe only about 25% of the people have one (this number could be off), while in the US everyone has a creditcard. Here we have direct debit cards…
March 13th, 2008 at 1:28 am
[...] of mobile payments posts I’m making to get ready for BarCampBankSF later on this month. The first part was a problem overview for the issues. This part is about the Fear Uncertainty and Doubt (FUD) that stand in the way of trying to get a [...]
March 28th, 2008 at 4:21 am
[...] Mobile Payments Discussion Part 1 - Problem Setup [...]
July 10th, 2008 at 8:18 am
[...] So my question was are there any holes in the usage patterns? If people are tending to do the same things mobile as they do desktop, what are the places where there isn’t an equivalent amount of mobile activity for a corresponding slice of desktop usage. And the main answer there was commerce. People aren’t buying things with their handset the same way they buy things from their desktop. Mobile payments and commerce is a topic I’ve been paying attention to for a while. [...]