Innovating in the Light of Mobile Payments

What does 'pay by phone' mean now?

Phones are not for talking anymore; we proved that with music.     They will soon be the tool for conducting business and the use case typically offered is making payments by tapping your phone.   The credit card solved the cash problem over 60 years ago when the idea of extending credit and paying at multiple locations were merged.  And yes, this business was likely drawn on a napkin at dinner.   But it is likely that making payments per se isn't likely to drive adoption since the card is good enough – I have to carry a wallet and that piece of plastic isn't a burden; and with the penetration of  NFC-equipped phones  at sub-20% in 2012 we're still looking for the killer app.     In terms of payment, mobile will become useful when time and motion are at a premium – boarding a train for instance because my phone is often more accessible than my wallet or when the experience changes.  

So what is the added benefit of using a device instead of a card?

It seems that most of the talk and activity is around promotions and offers – something a plastic card simply can't do.   All the major players we're talking to are searching for solutions in that area: MasterCard has its Marketplace; Visa has perks, and American Express just announced a $100m fund for start-ups.    The most recent briefing from trendwatching is "Dealer-Chic: Why consumer deals are becoming a way of life, if not a source of pride."   The obvious benefit of promotions is the financial savings – the not so obvious is that this is now a social event as much as a financial one.     Using deals delivered in a cool way through technology is becoming an emotional activity/reward that is shared.  While only 1% of coupons are delivered online, a full 10% of the redemptions are from those coupons – this is a major shift worth capitalizing on. 

So the questions we should consider are: how do coupons/promotions get matched to consumers based on location, context, and life-time value (loyalty)?  How do we make this more of a social event?