The Future of Mobile Payments
entrepreneurcountry speaks to mobile services expert and entrepreneur Roy Vella
The mobile payments revolution has begun. Cheques are declining in usage, most of our banking activity has moved online and digital players such as Square, Apple’s Passbook and Google Wallet are all vying for the number one spot in mobile payments and transactions.
Now that mobile payments have been cited as the ‘next great frontier’ for smart phones, it has never been a more exciting time to start casting predictions on what the future holds and how the consumer buying experience will change as a result.
Rising above the rumours is Roy Vella (pictured), mobile services expert, entrepreneur and the ex-head of mobile payments at PayPal. Describing himself as a ‘strong customer experience advocate with a passion for growing businesses in the mobile and web technology industries’ I spoke to Roy to hear his predictions for the mobile payments space and what he believes key players need to take into account in order to succeed.
Roy begins our interview by mentioning his time at PayPal. “Before the whole mobile thing became big we realised at PayPal that online payments were in the billions” he says. “But the problem we had was Visa and MasterCard didn’t care about PayPal because the real world of payments was worth trillions.
"PayPal is a small part of a small pond and I was like ‘look, we want to be a small part of a large pond and have a bigger space so we have to get PayPal unplugged, offline and into the real world if we want Visa and MasterCard to care.’ I wanted PayPal to be a payments player and to be at the point of sale in real world payments, not just digital and online payments.
“The reality is that the world of payments came to us through the rise of smart phones and mobile – it digitised the real world. With the birth of the iPhone we all started to carry around pocket computers instead of phones.”
Two big mobile payment players taking advantage of the huge pool of consumers now handling smart phones were Google Wallet and ISIS. What did Roy make of both players?
“Google has money to burn and for them it is all about data, payments are a side note” Roy says. “They are not looking at the payment industry and thinking ‘there is so much money to be made there.’ Google make plenty of money just through the traditional advertising that they do.
“All they really want is to extend that advertising and put their adverts in front of the consumer whenever and wherever they are. They want to use location and demographic specific information and thus create advertising that is highly targeted. That means getting integrated into people’s devices and getting involved in a commerce chain.
“Google Wallet also bet big on NFC and that was probably a mistake. NFC is a brilliant technical solution searching for a problem. Buyers mostly think ‘I guess it’s cool that I only need to come close to the terminal but it’s not that different really.’
“The problem with NFC is its fast but not fast enough, TFL evaluated it and its milliseconds, not the microseconds they need so that you don’t run into the person in front of you! There are merchants it makes sense for, like EAT and Prêt a Manger who hit the lunchtime highs with long queues, but even there few people are using it.
“ISIS has the same challenges, originally a solution looking for a problem that is now primed to be a marketing platform instead. If you recall the announcement of ISIS they claimed to replace Visa and MasterCard but when they did the economic analysis they quickly had a change of heart!”
Being able to spot faults within current offerings has positioned Roy as an expert in high demand amongst mobile services providers and start-ups. One of Roy’s current commitments is acting as board advisor for MyOrder, a mobile commerce platform that allows you to pre-order and pay for food or drinks without having to wait for someone to take your order. The Dutch start-up has been purchased by Rabobank and foresees global expansion. What advice did Roy have for other mobile service start-ups?
“I tell the entrepreneurs that I speak to that they need to find their eBay. What I mean by that is PayPal wouldn’t have survived without eBay – PayPal existed because you had a situation where someone just won an exciting auction then all of a sudden they had to use these old, slow checking systems that relied on the post. PayPal changed all that.
“So you had people who want to be paid and people who want to pay immediately. Normally, sellers won’t sign up if there are no buyers and buyers won’t sign up if there are no merchants. In terms of mobile wallets, there is no reason for me to sign up to a new wallet if I can’t use it anywhere and vice versa. Merchants won’t integrate with a new way to pay if there are no buyers.
“To be successful in mobile payments you need two key things – density and frequency. Density in terms of merchants and consumers being in the same place at the same time and frequency because if it’s a one-off transaction buyers won’t sign up to anything, but if its repeatedly then it’s worth the extra effort. With both, you can change behaviour.
“So, it’s about finding environments where those elements exist. A campus is a great example and so is transport. The reason new payment types fail and don’t gain the adoption expected is because they take a shotgun approach. For instance, they scatter NFC readers sparsely in London and then merchants complain that they only get a few transactions. What’s missing? Density and frequency. It’s the same with the buyers; people with contactless Barclaycards can’t find enough places to use them.
“In fact, that’s the secret of Square. They are aware of density and frequency and they’re targeting the two places where you consistently spend the most time - your office and your home."
What else could limit the advance of mobile payment technology and more importantly, the amount of people who get on board and use the system on their smart phones?
“Trust, culture and behaviour are all key factors too,” says Roy. “People are still frightened of their device breaking or the battery dying as all our activities are integrated into our phones.
“Smart phones are now the digital hubs for our daily lives and we are addicted. We have become highly information-sensitive creatures and we want our information fast. All mobile payment system providers trying to break through need to take all these factors into account.”