From Drop Labs Blog by Cherian Abrahan:  ‘Being on Week 3 of a self imposed Google Wallet embargo, I had instead been writing about the ongoing turf wars between Platform providers and Carriers, which is starting to sound like an episode of ‘Mob Wives’. Though the bulk of it was to be focused on Android, it became impossible to ignore rumors around iPhone 5 and NFC. ‘  Continued.

Trish’s Comment:  Today I just want to share with you all Cherian Abraham’s latest post.  It is a very thoughtful and insightful review of the options that Apple may be considering around NFC and mobile payments.  I agree with all the points he makes and the questions he raises.  Maybe I would just add another question:  Will Google change its strategy to focus on a cloud-based wallet?  Could this be the key to overcome the current issues and gain traction?

Certainly worth reading his blog and, why not, the comments!  Thank you Cherian!

From On-Line Strategies blog:  'According to eMarketer, m-commerce sales in 2011 will nearly double sales from 2010, and then will more than quadruple again by 2015. So what were some of the trends in mobile commerce and alternative payments that emerged in 2011? Let’s take a look...'  Continued.

Trish's Comments: I think that the industry in 2011 can be summed up in one word:  Contradictory.  It seems to me that it is finding multiple opposing solutions to some key challenges, for example:
1)  Google Wallet and NFC payments vs. PayPal and its plans to enable off-line mobile payments that don't depend on NFC adoption.
2)  Banks offering mobile payments that use traditional card networks rails vs. the broader opportunity to enable mobile payments that by-pass these networks.
3)  Square opting to serve only the swipe-card mobile payments segment vs. iZettle total focus on the EMV segment.
4)  Sprint's approach of working with Google Wallet without charging partners or customers (beyond data use) vs. Isis' approach where the other telcos are focusing on defining new revenue models.

And this is just by looking at the US market.  This lack of clear trends also applies to Latin America, Africa and Asia where, extreme market fragmentation makes it very difficult for major trends to form and direct the industry.  In fact, the fear is that, without a leading force it will take a long time for major trends to emerge because winning initiatives may be restricted to one or a few countries that may not allow the critical mass necessary for the technology to take off.  Who could be the regional regulatory body, global macro-corporation or regional entrepreneur to take on this challenge? 

In addition, a number of solutions seem to be half-baked and some others have not even been launched yet.  An example of the former is Google Wallet, which doesn't fully and conveniently integrate offers and doesn't have access to information on Citi's transactions.  PayPal hasn't yet launched its platform.

Obviously, this is typical of a nascent industry and, in fact, is what makes it so exciting and interesting to be part of it.  Nothing is yet written in stone and companies need to place several bets and partner with different players to keep their options open in an ever-changing market.  Fun, fun, fun!

MasterCard, is developing some new exciting concepts that, although are not yet available in the marketplace, give us an idea of how MasterCard sees the future of mobile payments and of the role they want to play within the ecosystem.  Let's look at some of those concepts: 

*  Xbox Kinetic prototype:  The idea is to allow consumers to purchase a product on TV by, for example, waving your hands at an icon in the corner of the screen.  Another example, being able to pull up shopping menus at any time using body language such as putting your hand into your mouth in an 'I'm hungry' gesture.  

Although this is only a prototype and it is clear that agreements with TV manufacturers, broadcasters and retailers are required to launch this service, it is a great example of how easy and seamless technology may allow payments to be in the future.

*  QR codes:  QR Codes have become a societal norm within the last several years. Yet, there is untapped potential in the TV world. For example, imagine watching the Home Shopping Network, or just a random commercial, with a QR code in the corner that allows you to order the product being shown (perhaps at a discount) from your phone. Yet, instead of scanning the QR code and being taken to HSN's or the product's website, there is an app - QkR - that processes the entire transaction through your phone, stores it and saves the receipt. Again, just as with the Kinetic prototype, scaryingly easy to shop.

*  Audio cues:  Another way to seamlessly shop while comfortably resting in your favorite armchair is to have your phone listen to the TV to have it pick out any high-frequency codes that an advertiser has embedded into the product. An example showed at MasterCard Labs was of NFL products during a football game. Of the concepts that MasterCard Labs has developed, this one may be the most far-fetched since broadcasters might need to alter their signal to make it work. Not to mention the change in smartphone audio functionality to register this signal. 

*  Pre-paid wristbands:  VIP guests to the 2011 Isle of Wight Festival, held in June, had the opportunity to pay for their purchases with UK's first ever MasterCard PayPass prepaid contactless wristbands.  The feedback received from the users was extremely positive, to the point that the wristbands were the preferred method of payment.  Respondents to a survey said that this solutions was quicker (96%) and easier to use (98%) than credit or debit cards, while a resounding 100% said they’d want to use the PayPass prepaid wristbands again to pay at other festivals, concerts and sporting events.

In addition to this deployment, MasterCard also put terminals in some public areas for faster card payments and integrated them with the main gate access points, to demonstrate another aspect of its technological innovation: access control.  All together, a success for MasterCard in showcasing the benefits of their technology in a real-world setting.

MasterCard's effort to develop mobile technology is not new but, unfortunately, some of the efforts it has launched in the past have not been as successful as they would have hoped.  Again, let's discuss two of those examples: 

*  Mobile Payments Gateway:  MasterCard's Gateway is a turnkey mobile payment processing platform that allows issuers, acquirers, merchants and mobile network operators to  provide customized mobile solutions in developing payments markets by tapping into the MasterCard Worldwide Network, a globally integrated network. As a result, banked and unbanked mobile consumers gain access to a wide range of MasterCard Mobile payments solutions, which provide greater payment convenience and security over cash - using their mobile phone to make purchases, send and receive money between family and friends, transfer funds between accounts, pay bills, deposit funds such as payroll or social benefits, top up mobile airtime, load value to prepaid accounts, get cash from ATMs, and keep track of their balances and activities with mobile alerts.

MasterCard launched this turnkey solution a few years back but, at the moment, only has one customer live on the platform - in Brazil since 2009, the partnership that includes Itau Unibanco, Redecard and mobile network operator Vivo.  Just recently, a new opportunity has developed in the Indonesian market, although whether or not this will develop into an actual deployment in Indonesia and beyond is still not clear.  

*  MobileSend:  This product is MasterCard's response to PayPal for mobile.  The service is relatively similar to that of PayPal with the solution offering peer-to-peer transfers after registering and entering a MasterCard card number to be associated to the transactions.  The user will create an ID and password to access his account and will only be able to exchange funds with other MobileSend users.

Although the service is fast, secure, relatively inexpensive and available via mobile browser, app or text message, it has not gained widespread popularity, probably, in part, because both users - sender and receiver - need to have a MasterCard credit / debit card.  

Nevertheless, the company has learned from these two initiatives and is sure to continue building upon them.  The hiring of Mung-Ki Woo as Group Executive for Mobile, which took place earlier this year, is a sign that things will continue to move in the right direction for MasterCard in this area.  Woo is helping the company further clarify its mission and vision for the mobile future.  What will the story be 12 months from now?

MasterCard approach to mobile commerce and payments seems to be a bit different from the approach taken by Visa and American Express.  There are fewer partnerships, at least in the US, and for the moment, no relevant acquisitions. 

For starters, there isn't a 'MasterCard Wallet' in the US although the company is involved in two major initiatives:   

• Google Wallet:  They were the first to partner with Google - at the moment, only two cards are accepted in Google Wallet:  Citi MasterCard and Google's prepaid card - and this partnership continues to be the main company focus.  Participating in the testing process and then in the national rollout has allowed them to learn a few things around mobile commerce, NFC and consumer adoption such as the need to have a good  locator service and an audio confirmation of the correct download and deployment of the app.  Small things that greatly contribute to consumer experience and, thus, to adoption.  
  
  Their position as single provider will soon change as Discover, Visa and American Express will also be available in the next release of Google Wallet - planned for later this year.  But this is not an issue for MasterCard, in fact, the company understands and supports this development since they also believe that in order for an e-wallet to become widely adopted, it needs to be convenient and actually improve upon our current physical wallets.  Having several e-wallets would reduce the value to the consumer and limit adoption.

• ISIS:  Isis is a joint venture in the United States of AT&T, Verizon Wireless and T-Mobile USA, the top three telecommunications operators, and the credit card companies Vis, MasterCard, Discover and American Express The approach taken by ISIS is fundamentally different to that of Google:  The carriers that are part of Isis will charge banks / credit cards for the network and cell phone space used for mobile payments.  Not only the corresponding data charges – as Sprint does in the Google Wallet solution – but additional, or alternative, fees.  MasterCard, like the other credit card companies, has opted to back both approaches since, from their perspective, the choice should be left to the consumer and they want to be part of whatever solution their customers favour.
  
  The fact that Isis will not launch its first trial until the first half of 2012 - it will take place in Salk Lake City, Utah, and Austin, Texas - will allow MasterCard to apply the knowledge acquired while working with Google to make this deployment easier and smoother for themselves.

Outside of the US, MasterCard has been involved in a number of initiatives in markets as diverse as Canada, the UK, Turkey and India.  Some of these initiatives have been large-scale trials that may not yet have developed into full-fledge commercial products - for example in Canada or India - while some other - the most notable case being the UK - are now services available at a national level.  Let's look in more detail at a few of these initiatives: 

• United Kingdom - Partnership with Everything Everywhere (a merger of Orange and T-Mobile)  and Barclaycard:  As early as May of this year, consumers across the UK could use the Samsung Tocco ‘Quick Tap’ to 'wave and pay' for purchases of up to £15 with active PayPass payment systems.  The partners chose to use a sim card-based level of security, a different model than the 'secure element' implementation preferred in the US.  It is true that the limit in the amount to be paid (£15 is aprox. $23) and in the choices of phones available - the Samsung Tocco is a fairly simple phone - may be a drawback to some potential users but this is the first step and, Mastercard, is taking a key role in making it happen.  

• India - Partnership with Vodafone and Citibank:  This was the first large-scale trial launched in India.  It started in June 2009, reaching over 3,000 customers and involving the 250 retailers that accepted PayPass for the 6-month duration of the trial.  Over 43,000 transactions were recorded (an average of 14 transactions per user).  Considering that there was a financial incentive to use the mobile payment application over 12 times, it could seem that the main reason for usage was financial benefit rather than convenience or interest for the technology.  However, it is also true that users that participated in the trial and that also had Citi card, steeped up the use of the latter ones with retailers that did not have PayPass.  Possibly proving that, easier methods of payment will be well received in developing markets even though adoption may be slow and need to include education and incentives.
  
  Possibly, this first foray into mobile payments in India gave MasterCard a good platform from where to jump into other opportunities within emerging markets such as the two that are presented below.

• Tanzania, UAE and other countries in Asia, Middle East and Africa - Partnership with Etisalat:  Etisalat, in partnership with MasterCard and Oberthur Technologies, launched the fist mobile payment system in Tanzania back in July with zPesa.  The company plans to roll out different flavors of this system, with the same partners, across 18 countries in Asia, Middle East and Africa, including UAE before the end of the year if government regulatory approval is achieved.  It is still too early to say whether this business will be a success but it clearly highlights MasterCard commitment to the development of mobile payments in developing economies.

• Kenya and across Africa - Partnership with Airtel:  In partnership with Standard Chartered and Airtel - Airtel Wallet and Airtel Mobile Money, Mastercard is launching a service that allows on-line purchases from your mobile phone using a 24-digit number uniquely assigned to a customer for a specific transaction.  The purpose, once again, is to empower the large number of mobile users across Africa to purchase goods more easily.
  

There are also other opportunities that, although have not yet crystallized, could turn out to be great wins for MasterCard including possible deployment of MasterCard Mobile Payment Gateway in Indonesia - the company already has the blessing of the Central Bank but needs to get banks and telcos on board - and testing of in-flight contactless technology with GuestLogix - with cards and NFC technology to achieve real-time online card authorization and reduce fraud. 

Clearly Mastercard is working hard to further promote and leverage PayPass, its contactless payments system, which is already widely used across the world.  It is only reasonable to assume that the company will use this infrastructure to move ahead with NFC as the next wave of contactless payments. 

Next week we will discuss some of the other initiatives where Mastercard is involved, focusing on their R&D activities around the QkR app, motion with Xbox, sound and QRs in ads. 

On the heels of BankSimple and with what seems like an even more ambitious goal, Brett King, author of Banking 2.0 and founder and chairman of this new venture, publicly announced MoveNBank during Sibos Innotrive 2011 conference a couple of weeks ago.

MoveNBank was founded in July 2010, will begin to 'alpha test' its services with a select few  members of the public on October 1st and will proceed with a soft-launch on July 2012.  

What is MoveNBank?  

First of all, we need to clarify that MoveNBank is not a bank itself but rather, like BankSimple, a 'reseller' of banking services or an intermediary that stands between the bank and the consumer.  It attempts to change the experience that users have around banking but without applying for a banking license, although Mr. King has made it clear that they may, at some point, acquire a bank or build their own for purposes of scale.

MoveNBank is: 

1.    Mobile only banking, with no paper or plastic
2.    NFC-enabled app
3.    Incorporates "gamification" in UX
4.    According to (10) Startuply, "reinventing credit scores and more with an open, social transparent, and viral model" (sounds P2P lending-esque)

Points 1 and 2 are related since, in order to go paper-less and plastic-less, we need to have an alternative technology for payments.  NFC is the most obvious choice at this point in time given the number of phones expected to come out in the next few months that will include NFC chips and the current hype around different implementation of mobile wallets in the marketplace - such as Google Wallet or the ISIS project.  These two factors will help accelerate deployment of NFC-enabled POS at stores across the world - although it will probably still take some time for this technology to be truly ubiquitous.

It was really just a matter of time for NFC as a payment method to be offered directly by a bank - or, in this case, by a reseller of banking services.  A mobile wallet, as it is defined today, is meant to simplify and improve your shopping experience.  Mobile banking, as defined by MoveNBank, is meant to integrate spending and saving, improving the overall control of your finances.  Different goals, maybe suitable for different audiences?

The next two elements are particularly innovative:  Credit scores and gamification.

3. Reinventing Credit Scores

MoveNBank uses CRED as its credit score mechanism.  It recognises a person's social reputation along with their financial behaviours.  In other words, as your credit score can be used to recognised how credit worthy you are, your social credibility on Facebook, Twitter, eBay, Amazon and other services can increase trust in dealing with you.

Including a person's on-line presence in the computation of his/her credit score is an extremely innovative concept and one that could indeed help banks get a much better view and understanding of the risk and value a given customer may represent to the institution.

4. Gamification

MoveNBank is not trying to make banking a game but it is using the principles of gamification to engage customers and to help them make the right financial decisions in their everyday interactions.

King gives the following example:  'If you want someone to keep a positive balance in their savings account – then allowing them to see that balance or reminding them that a specific transaction or event will take them into negative territory, makes the spend a conscious decision. Is it gamification? It is when you ‘game’ the messaging, and make it frictionless or even fun. We’re playing with that messaging and engagement layer to influence your financial health positively'.

King goes on to say during his Sibos 2011 presentation:  '...banking is no longer a place you go, but a thing you do'.  It’s necessary for banking to be re-invented to focus upon the 'utility of banking, not the formality of banking'.

So, what are the established banks waiting for?  Why not embrace the new technology and move forward with the customers?  Today, they still 'own' them.  Tomorrow, they may play a secondary role to the experience-centric and technology-savvy new-comers.

In the UK, all three major carriers have launched or are planning to launch their own mobile payments initiatives:

1)    O2 will introduce its own Visa-branded prepaid payment applications on its NFC phones later this year.

2)    Orange UK, part of Everything Everywhere, launched its Quick Tap FNC payment service with UK issuer and acquirer Barclaycard in May of this year.

3)    Vodafone UK is planning to enter the space but has not yet revealed its plans.

At the same time, they also plan a joint venture to provide a "one-stop shop" for mobile advertising, payment, ticketing and other services in the planned NFC mobile wallet they will be launching next year.  To make this a reality, the operators plan to invest together between $16 and $80 million – depending on how well the initiative is received – to develop the technology and market it to retailers.

This UK NFC joint venture (no name or logo has yet been published) has been built in a near exact model as it’s US cousin, Isis:

1)    The three carriers hold an equal state. 

2)    The joint venture will deploy and manage advertising and loyalty programs. 

3)    It will also act as its own trusted service manager, which would give them the necessary control to keep competition – other carriers or other wallet solutions – out of the majority of the UK market since, together, they control around 90% of the UK market.

In the words’ of the partners: 

"This will enable consumers to transfer their entire physical wallet into a new secure, SIM-based wallet regardless of which NFC enabled mobile device, or mobile network they are using," say the partners. "Companies and organisations that provide anything from credit, debit and loyalty cards to membership cards and transport tickets will be able to create secure mobile versions of their products. Consumers will be able to use their mobiles to pay for goods, services and travel using contactless technology (NFC) with one touch of their phone, or online via mobile or PC."

The new business will provide a single contact point for advertisers, media agencies and retailers looking to reach consumers on their mobile phones. The joint venture company (JV) "will enable them to book advertising space and create campaigns as well as provide offers, coupons and loyalty cards which can be stored on the phone and redeemed in shops. For consumers, the JV means that they will be able to receive discounts and offers from brands that are relevant to them and that they want to receive."

Everything Everywhere, Telefónica and Vodafone will also "continue to develop their own competing products and services tailored to their own customers, which will be based on the open platform infrastructure provided by the JV."

Although the partnership will certainly speed up development and adoption, it also raises issues around competition.  Specifically, on September 7th, Three UK asked the European Commission to block the joint venture.  Mr. Lerner, Three UK regulatory affairs director, expressed his concern that, given their size, the partners could impose high transaction fees on consumers and set a difficult precedent in Europe. 

It needs to be noted that Three UK, the fourth largest wireless provider in the UK with 6.9% of the country’s subscribers, was not included in the agreement.  It may have been because its profile differs from that of the main provider:  It is an aggressive, low-cost seller of phone and Internet services and a relatively new competitor in the UK (launched in 2003).

And indeed, this is an important battle both for the future of NFC payments in the UK as well as across Europe.  Wireless carriers are developing similar initiatives in, among other countries, Denmark, Hungary, the Netherlands and Germany – in this case the telcos would by-pass card networks and banks using their own banking or e-money license.  A thumbs-up or thumbs-down decision from the European Commission would be a very strong signal to the providers in each of these countries.