Talkin’ ‘bout M-generation


The emerging era of mobile payments will eventually offer ubiquity, security and a seamless user experience to billions. But for now the reality remains a fragmented market of non-standardized and often difficult-to-use solutions.

One size fits some

With certain mobile payment applications limited to literally single streets in single cities in the United States, it is difficult to exaggerate the fragmentation of today’s m-commerce market. On the one hand, merchants suffer from ‘acceptance fatigue’, due to the increasing number of promising startups offering ‘the latest winning sales channel’, new business models and fancy but untried technology. Still, retailers find it difficult to turn down any new means of payment if there is a chance that doing so will result in the loss of even a single customer. They are also encouraged to say ‘yes’ to new services that integrate payment with marketing and offer loyalty and couponing schemes that demand no upfront investment and bear only moderate commissions.

On the other hand, customers are likewise experiencing ‘gadget fatigue’, becoming lost in an overwhelming number of applications they have to download, register, activate and manage separately: NFC wallets, remote cloud payment, online checkout, remittance or loyalty services, not to mention the merchant applications of their favorite retailers.

The mobile payment industry has too often promised its clientele immediate success. Yet due to the masses of new technologies with limited usability and the fragmented nature of the market, 80-90% of applications that are activated remain unused. And according to current international experience, only those applications that are used at least once a week tend to remain in use.

Just think of all the fancy apps that you have downloaded, tried, and, in the absence of regular use, have deleted or left to molder at the bottom of your applications list. It’s no different from those web pages you used to register for, only to later forget not only your login details but also the very reason you may have registered in the first place.

Why should anyone change their habits and invest time and effort trying to understand the new wave of payment technologies? We need to provide clear and tangible benefits, lower costs, better user experiences, and other real advantages if we are going to change this behavior. Only after we have made the rationale for adoption incontestable and offered a sense of passion and impulse, as well as a degree of trendiness, will we see wide acceptance.

The absence of uniform security standards presents yet another problem, as providers trumpet the security of their customers’ data without any external verification. Servers holding data on hundreds of millions of cards are regularly hacked, causing fear and outrage but no material change in customers’ behavior. The perceived trustworthiness of safe and secure solutions is threatened by the failure of a single unprotected application. While immaculate, fraud-free operation rarely makes headlines, abuses and leaking of card credentials and other sensitive information always will.

Cui bono?

The industry is floundering in a Scylla and Charybdis choice between the monopolies’ disinterest and the lack of new business models. Only clearly aligned business interests could enforce cooperative business behavior. As long as legacy players insist on maintaining their existing but ailing revenue structures and new entrants are unable to break through due to market fragmentation, new business model will not be allowed to solidify.

SIM card manufacturers try to engineer customer lock-in by offering bundled services that prohibit third parties from providing independent over-the-air card management services. In the meantime, operators and handset manufacturers are reluctant to abandon their exclusive access to certain functionalities, aiming at expropriating their customers, although with only limited success. Each stakeholder attempts to become indispensable by gravitating towards the epicenter of the ecosystem.

In a global world, only players with global aspirations and a new attitude can be genuine agents of change. A free flow of innovative ideas and a critical mass of customer demand, coupled with the devoted ambitions of some blue chip companies and private equity funds, can build up a robust, new value chain.


Dr. János Kóka, former Minister of Economy of Hungary and CEO of Cellum Global

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