Google has just announced the official launch of the Google Walletwhich will allow users who have NFC-enabled phones to pay for products with just a tap against a compatible card reader.
While limited in a number ways, Google just has made a stellar contribution to one of the industries-to-watch: mobile commerce.
In fact, one of the most intriguing points regarding newly projected 6 billion connections that will exist globally by the end of 2011could actually be in the sheer force of what those connections will soon represent in financial transaction power. Thus, the real news regarding the advent in the Google Wallet is not just in the wallet itself, but as the latest development indicative of the titanic mobile payment phenomenon which is to come.
Commerce is rapidly deepening its convergence with mobility; creating an exciting new terrain of m-commerce where the stakes are high, the impact limitless. And it's a sure bet that once these developments are fully implemented, our transaction behavior will never look the same again.
First, for those not familiar, m-commerce is best defined as the buying and selling of products and services via mobile phones; and Alon Kronenberg of IBM Global Business Services says that exploration and commerce testing via mobile devices actually began globally as early as 10 years ago. He confirms that it will be disruptive yet take place incrementally. These increments, according to MobilePaymentsToday.comtake such forms as mobile point-of-sale ("tap and go" made possible my near-field communication chips which device makers are rushing to place into future models), text-to-purchase, in-application billing (currently available today) and mobile "wallets" such as the Starbucks' offering which garnered $3 million in sales just in its first two months. M-commerce also includes capability of merchants to use mobile devices to accept credit card payments through new hardware created from such tech start-ups as Square which recently hit Best Buy shelves.
However, one might find all such activity and prognosis a bit curious given the fact that most business in the US seem to lack definitive mobile strategies. In fact only 14% of businesses in the US even have a fully-functioning mobile transaction site, according to Chief Marketer magazine. But in this instance it is actually consumer behavior, with the aid of tech engineers, that leading the mobile commerce charge creating a true power shift whose pace it seems is forcing industry to catch up. In fact, according to a whitepaper from computer technology giant Oracle earlier this year:
"Consumers are learning about products online, receiving incentives online, paying for the goods online and then picking up the goods or services at the physical retail location," explains Philip Philliou a partner at Philliou Partners a New York-based consulting firms specializing in payments. "So it only makes sense that mobility and mobile payments would only increase such activities currently."
But imagine soon being able to move from the aforementioned activity to complete and utter elimination of carrying cash, credit/debit cards, coupons and transit passes, all thanks to your mobile device.
This is, actually, the ultimate concept behind the term mobile wallet. Indeed a Google spokesperson told CNBC.com, "We're excited about ushering in the next generation of mobile payments, where people can pay and save — faster and easier — with a tap of the phone." Meanwhile, ISIS, a mobile wallet venture between AT&T , T-Mobile and Verizon is reported to be entering the testing phase, reinforcing the fact that well-positioned companies are going after an extremely robust business opportunity which is projected to reach up to $31 billion by 2016 according to analyst firm Forrester Research.
Given such developments from carriers and tech companies alike, some futurists have said that banks could actually find themselves on the near-obsolete end of the scale just as the music industry has given the advent of technology in its industry. But other experts feel it will just be a matter of banks providing new value solutions in order to remain relevant. For instance, US Bank has developed a location-based "concierge" that would enable product-specific coupons to be pushed to consumers via their mobile devices while they were browsing in the same aisle categories in retail outlets. "The original concept behind the mobile concierge was really not a wallet for payments at all," explains Dominic Venturo, Chief Innovation Officer US Bank Payment Systems. "It was a retailer-centric solution that would enable, for example, a retailer to make it easier for a customer to create shopping lists, identify offers (coupons, for example) related to their purchasing needs and prior purchase history, and redeem those offers. This work is still in the proof of concept phase."
But while the US may be in the testing out-meets-gearing up phase, the developing countries are actually demonstrating the fastest implementation and adoption.
Mobile payments have not yet taken off in US market as payments are already highly efficient and relatively inexpensive," reasons Philliou. But in Africa, for example, mobile payments are solving for a broken payments infrastructure." And perhaps improving lives while doing so. The United Nation's World Food Program provides an interesting example in which it drew from actress Drew Barrymore's foundation to create a payment system where each time a villager wants to draw clean water, they send a money transfer via mobile phone which then credits a fob that enables her to open a solar-powered tap. The program is a reported success in the region on many levels.
Brazil, while exhibiting different completely different cultural uses from Africa, is being watched closely among m-commerce leaders. "Brazil is indeed a dynamic space for mobile finance, too," explains Andre Xavier, a partner at The Boston Consulting Group in Sao Paulo. "What is very prevalent is the use of cellphone coverage to extend the reach of traditional card (credit and debit) acquiring networks to far-flung areas of the country (or stores with a non-permanent nature, ie a food and beverage stand near a beach)." Xavier continues, "The 'killer app' here would be adoption of a mobile payments scheme by a large city's public transportation authority; there are many rumors that could happen soon."
The amount of data captured from such activity whether abroad or here is what is considered to be quite attractive by m-commerce analysts and even said to be the "new oil." It is perhaps the data which will truly create competitive leverage for businesses: who is buying what, when, where, why and how. However, the question will be which party will actually own the data within the ecosystem that represents the transaction process? "What we do know," explains Venturo, " is that retailers have demonstrated for years that purchase data can be a very powerful marketing tool. Customers who participate in loyalty programs and receive offers that are highly relevant to them find real value in the relationship. In these situations, the consumer has explicitly agreed to share purchase data as part of being a member of the loyalty program. What that tells us is where there is a level of trust and loyalty between the parties, then the mobile device might be another way to enable that information sharing to occur, at the customer’s discretion and in accordance with current and future legal and regulatory requirements."
Indeed, in addition to data ownership concerns and functionality issues, regulations could affect the next steps m-commerce revolution pace as well. "As the underlying payment mechanism in mobile payments is governed by a well-defined laws and regulations it is highly doubtful that regulators will have much to weigh in on," explains Phillou. "That said, it is still early on. Customer authentication, Know Your Customer (KYC) rules, anti money laundering, fee disclosures, risk management, and collection practices are just a few of the things that the mobile payments companies need to be mindful of regarding this new terrain."
What is certain is that the next 1-5 years will be transformation for the payments industry in the U.S. and abroad. As new entrants and established financial transaction players gear up for a race to the top, the winners will be those who see end users as more than just numbers and statistics. Given the intimate nature of mobile coupled with the fact that consumers have created a power shift, a new paradigm is being built. Companies that seek not just to build a better commerce mousetrap; but rather focus selling added value, truly understanding human/cultural behavior and exceeding at engagement will become the business leaders in this space and change how we live our lives for decades to come.
Lauren DeLisa Coleman is a digital business strategy and communications consultant, analyst, journalist and speaker specializing in the convergence of Gen X, Y with digital media, particularly mobile technology. She has coined this unique convergent skill set and expertise in the term socio-economic digitalist* . Among some of the most prominent females in the space, she was recently cited as one of the "Top 50 Fabulous Black Women" by BlackBusinessWomenOnline.com . As a consultant, Coleman works with various companies providing strategy, analysis, education, thought-leadership and cultural intelligence as it pertains to the emerging technology arena. Click here to learn more.