Mobile Money Virtual World Calls for Virtual Money
The following is by G. A . “Andy” Marken, President of Marken Communications Inc. He has kindly given us permission to republish his thought-provoking article. As with everything that we publish at AlienBabelTech, the opinions expressed are solely those of the individual writer and do not necessarily reflect the views and the opinions of the rest of the ABT staff. –Mark Poppin, ABT Senior Editor
“What’s he doing? Go back there man! He wants to kill me so bad he can taste it! Huh? ATTICA! ATTICA! ATTICA! ATTICA ATTICA! ATTICA! ATTICA! ATTICA! ATTICA! ATTICA! “– Sonny, “Dog Day Afternoon,” Warner Bros (1975)
What’s the biggest challenge, stress facing national, state, regional, local governments? What stresses you, your family?
It’s money…dollars, pounds, yen, euro, rupee, peso, rand, won….you name it.
Everyone struggles with their annual budget, but it seems like no one stays within it. Just look at the state of the global economy.
Thank gawd for credit cards! They’re sorta’ like virtual money.
With nearly everyone, everywhere having a mobile device; heck, we might as go all the way. It would eco-friendly. It’s becoming logical.
In 20 or 30 years, people will deal in whatever we call digital money then and will say, “Can you believe it they actually used germ-ridden coins and paper in exchange for products, services? How quaint!”
The IMF (International Monetary Fund) recently reported that only about two billion+ people worldwide have bank accounts. However, there are approximately four billion cell phones (mobile phones of all types).
In developing countries and cash- based societies in South Asia, Latin America, India, Africa, they may be financially strapped, but mobile communications is everywhere.
They may not have phone lines to their homes; many don’t even have what you would consider a home. But without the wired infrastructure, they’ve been able to leapfrog your old landline and use m-commerce from the outset.
Africa, the second largest continent on the planet, is home to more than one billion people.
India is home to more than 600 million people (90 percent of the transactions are in cash, compared to 14 percent in the U.S.) so using super-cheap cell phones and m-commerce was a snap.
Figure 2 – Cash Anywhere – Services such as Obopay have become well-accepted in highly populated, lower-income countries such as the African continent, India and Southeast Asia to transfer funds almost anywhere without the need for paper cash. The mobile phone service is also popular because banks are few and far between. Mobile payments are growing slowly in industrial countries because of the strong banking infrastructure and rush for every player to be involved…somehow. Source – Obopay
These people quickly found it easier to pay – or send money to someone – with a cellphone than it is to give them a cow, chicken, pig or vegetables as payment.
And you thought you had it tough carrying around that bulky billfold!
Of course, m-payment has an ugly side. It’s a great way to hide drug trade, money laundering and terrorism financing activities
As Sheldon warned, “I wouldn’t like to kill you. I will if I have to.’
But mobile money has grown rapidly in poorer countries and the potential in industrialized countries is even more promising:
- The mobile transaction market is so huge it offers room for multiple players. Yearly worldwide electronic transactions total $7-$10 TRILLION
- Competitors are generally local to each country or region, leaving plenty of open territory for mobile payment service and technology companies. Companies that win in their markets will be those that understand customer needs.
- PayPal in the U.S., which has traditionally catered to merchant accounts, most likely will adopt a similar mobile strategy. (Both Obopay and PayPal are service providers–not technology companies like Fundamo in South Africa that provides software solutions for service companies.)
- “The competition is cash”–not the other players in this market space
- In five to ten years, mobile payments will achieve high adoption among consumers in developing and developed countries.
- Brazil, Russia, China and Mexico offer growth opportunities for players that understand these markets
- According to Portio Research, mobile commerce payments are estimated to climb to $86.6 billion in 2011.
- Nielsen predicts 27% of all U.S. payments will still be cash by 2012.
Figure 3 – Phone Wish List – Smartphone users are hungry for apps that let them do more, play more; and putting all of their financial activity seems like the next giant step for them. Source – Sony Ericsson
The key is to find a balance between the speed/ease of m-payments and the need to protect accounts against abuse.
Of course, rather than plain old cell phones, device manufacturers and service providers want a “better” solution. To get things rolling a single technical standard called Near Field Communication (NFC) was developed.
Snap-in chips for current phones exist today. Apple, HTC, Samsung and the rest will be introducing NFC-enabled phones this year.
Figure 4 – Enabled Phones – NFC- (Near Field Contact) enabled phones will hit the market this year and will be in widespread use by 2015. The most important hurdle will be to get companion devices into retail establishments. Source – HIS iSuppli
While Africa, Southeast Asia and Latin America may be ahead in the use of m-payments; North America and Western Europe will account for 50 percent of the spending, surpassing the Asian market.
Today, the average Western European and American credit cardholders carry 3.5 credit cards, according to the Federal Reserve Bank. People use those chunks of plastic to pay not just large-ticket items, but household goods, utilities, insurance premiums, student loans, you name it.
Folks use ‘em so much, they wear out the magnetic strip.
Sheldon saw what was being done and commented, “You handled yourself real well, Sonny. But you handled it.”
European and U.S. carriers are aggressively investing to enable folks to pay for stuff simply by waving their mobile device across a reader or “send” the payment info.
In the Americas, it looks like a five-way race with everyone wanting to ensure he/she isn’t left behind. There are banks and credit card co-ops (Visa, MasterCard), online merchants (Amazon, eBay, Google), carriers — Verizon, AT&T, Sprint, T-Mobile, handset builders (Nokia, HTC, Samsung, Apple Motorola) and Facebook.
Figure 5 – Apps Appearing – Banks, credit card companies and other financial institutions are already making iOS and Android apps available to customers to speed transactions, lower their transaction costs and improve customer retention. The use of mobile device transactions also provides the service providers with a goldmine of information about the individual and his/her transactions.
Analysts anticipate the smartphone will do everything, serving as their digital wallet and more…and do it safely, securely.
US Mobile Commerce by 2016
Figure 6 – Big Exchange – While mobile commerce is only in its infancy, it has already produced some impressive numbers in terms of number of activated apps and individual usage. As enabled mobile phones and retail devices become more common, the smartphone transaction will become routine, rather than the exception. Source – Forrester Research
When you combine m-payment with geo location technology that already exists, you have a helluva’ marketing opportunity for organizations.
Sheldon explained, “I’d like to work with you on this, not against you.”
It also creates a great opportunity for hactivists and cybercriminals
The answer?
Another standard you won’t see but will depend on — Payment Card Industry Data Security Standard (PCI DSS),
PCI DSS had better work!
It’s designed to protect–not only databases, but also file shares and sites that house spreadsheets and documents. It’s needed to manage authorization, access control and auditing of all unstructured and semi-structured data stores.
Or…all the stuff the bad guys/gals want!
Any hint that Google, Apple, service providers, banks, whoever didn’t provide adequate protection of your data means they lose…big time:
- Loss of income from fraudulent transaction
- Cost to reissue cards/certificates
- Costs of investigation and possible litigation
- Possible fines imposed by credit service provider
- Loss of reputation, customer confidence and business
- Possible loss of ability to process charges
So…who you gonna’ trust?
Figure 7 – Service Trust – The challenge for hardware/software/service providers will be to gain the trust of users that they will provide the best level of customer service, handle the transactions seamlessly and protect the individual’s personal/private information. Source – Retrevo
All of the folks – banks, device/software providers, carriers — have some parts of the whole. No one has it all.
That means they’ll have to develop coopative (cooperative, competitive).relationships to get their share of your transaction and the information…ah, the information.
If you use currency for all your transactions you sorta’ fly below “their” radar. Manufacturers, retailers, service providers, banks, etc. don’t know what you’re doing, when you do it, where you do it.
Use plastic and they can do a decent job of tracking your activity. It takes them time, effort, cooperation; but they can figure it out.
The growth of m-commerce will provide:
- feedback could be (will be) instantaneous, richer, more detailed
- a new level of location-sensitive features can be deployed
- manufacturers, retailers can share your profile and purchasing history information so items can be recommended based on your buying patterns
All of the potential players have a different perspective, different skills, different set of competitive advantages , different track record/image.
No one wants to miss out on the huge revenue pie. No one wants to pay the other guy transmission, access, system, processing fees.
So if money is going to be accumulated, traded and transferred online, you might as well use one that exists only online and has real-world value…say Bitcoin.
Gotta’ be worth as much as your country’s national debt.
Sonny looked and said, “Forget it. It don’t matter.”
# # #
by: G.A. “Andy” Marken
President
Marken Communications Inc.
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