There is no question that mobile payments is an exciting space with considerable scope for disruptive innovation. Still, this is a broad space that includes a number of different technologies. These are all very much in their infancy and we are still waiting for technical standards to emerge. To help us make sense of this space, CNET broke the existing technologies into four categories :
· Peer-to-peer: money transfers between two people. This has considerable potential to capture informal payments that are currently cash-dominated. It could be particularly powerful in facilitating remittances between countries. Migrant workers are continuing to grow as a group, so this is an enormous opportunity that I will cover in more detail in a later post
· Mobile Point-of-Sale: the phone physically carries a NFC or RFID chip that communicates with the terminal to green-light transactions. This requires both phones and terminals to be NFC or RFID enabled so would require considerable hardware updates
· Mobile Commerce: uses the phone as a gateway to online shopping. Instead of buying items from your desktop or laptop computer, users would open an app in which they would complete the transaction. Currently this approach is used online only. However, seeing as no hardware is required, one has to ask if this technology could be applied in the ’bricks & mortar’ world as well
· Mobile Acceptance: enables mobile handsets to accept card payments through a plug-in device that connects to iPhone and Android phones. Should have considerable potential to capture micropayments from new merchants, although it does not replace the card
Although the business is looking for an industry standard, it would be misleading to think of these technologies as competing, as they target different types of payments. It is exactly this point that is likely to determine which technologies will succeed going forward.
Clayton Christensen, in his book the Innovator’s Dilemma, proposed that disruptive technologies are those that deliver value to underserved segments or customer needs. Technologies are allowed to grow in these segments without competition and will eventually replace more mainstream technologies.
Accordingly our hypothesis would be that the future of mobile payments will grow out of segments or technology uses that are currently not served. Two potential such spaces would be micropayments or the unbanked in emerging economies. More on these opportunities in later blogs.
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