Mobile Wallet Going Nowhere — Oh Really?
In 1894 The Times of London predicted that at the then current growth rate of horse-drawn urban transportation, the streets of London would be nine feet high in manure by 1950. Flash forward to 2001: a U.S. business weekly’s editor writes that decades may pass before mankind finds a use for the fiber optic networks — representing a $6 trillion investment globally — that lay idle in the wake of the telecom bust. These crystal ball-gazers could not foresee, respectively, the eventual impact of the internal combustion engine and the mobile data boom.
The problem with predictions, of course, is that they’re based on what we already know. The future seems to have little respect for predictive analytics-based forecasting drawn from available data. All it takes to make fools of analysts and futurists is some wild-eyed inventor or disruptive phenomenon appearing out of the blue.
Recently Lightspeed issued a gloom and doom market assessment on mobile banking and mobile wallet capabilities. Based on analysis showing that consumers basically “don’t give a damn” about banking/buying stuff with their mobile devices, Lightspeed concludes that banks and telecom operators hyping mobile financial services are smoking something, and that the few instances where mobile banking is a hit — e.g., Kenya’s M-Pesa — are anomalous. Ergo, they conclude, mobile banking/wallet is a pipe dream and will likely never take off with the public or become a major revenue driver.
Is that so? Certainly there are obstacles in mobile wallets’ path, starting with disagreements over near field communication (NFC), the front runner technology of several ideas vying to be the gold standard supporting mobile wallet. Or Lightspeed’s downbeat assessment may be correct for the moment, but wrong or only partly right for the long term. Here’s an analogy.
Back in the dawn of e-mail, a multitude of companies offered proprietary systems: GTE Telenet Telemail (later Sprintmail), MCI Mail, Wang, IBM, The Source, Compuserve — and on and on, dozens of them. Even the U.S. Postal Service had an email product, which for reasons known only to them could be used for the hilarious purpose of converting e-mail to snail mail, which was then stamped, posted and delivered by the men and women in blue-striped shorts.
There were three problems with all these services. First, none interconnected, thus it was impossible for an MCI mail customer to email a Sprintmail or Wangmail customer. Second, although each service claimed “half a million users” (I still think they were all the same people, trying to figure out how to send emails to each other), in reality e-mail wasn’t all that popular. Third, for all the above reasons nobody could make any money off e-mail.
I recall one pundit at the time sitting in my Sprint cubicle, holding his head in his hands and muttering, “E-mail — what app or function can we tie to this to make it easier to use, and beyond that, how can we make it popular?” A common sentiment.
In desperation, the 20 or so e-mail providers banded together to tackle connectivity, lack of which was obviously a major drawback. The best minds in the business, a veritable geekosphere, assembled in Silicon Valley one weekend to begin discussions on developing application program interfaces (APIs) that would make e-mail between systems seamless, simple and easy. Months later there emerged the X.400 standard, an API providing the first e-mail system interconnectivity. And it worked! Well, all except the “simple and easy” part. E-mail addresses looked like code. Joe Average Consumer could never be expected to memorize and use an e-mail hanger that ran off the screen with numbers and symbols.
And there things languished for half a decade until — boom — along came the WWW and common e-mail addressing standards. Suddenly e-mail use exploded.
Three observations about e-mail in the post-WWW. First, all systems interconnect. Second, everybody uses it — if you have a stat on user numbers feel free to drop it in here. Third, to this day, nobody has ever earned a dime off an e-mail service.
I wonder if mobile banking/wallet will follow a similar path. Some day a new tech may come along that’s so simple and user-friendly that it makes the current debate over NFC look like a Rube Goldberg convention. Suddenly everybody will use their mobile devices for quick, safe, reliable financial transactions. And, if the e-mail model holds up, mobile banking/wallet will be offered free of charge by banks and telecom operators — no one will ever make money on it. Instead, perhaps the ability to bank and buy by phone will become the kind of service that companies use to get customers in the door, or as a loyalty builder to keep them on-board and happy.
Although any such game-changing technology may be God knows how many months or years in the future, the timing is already perfect. Look at the recent stink over one bank’s effort to charge a monthly fee for debit card use. Consider the rising dissatisfaction among merchants over high charges associated with card purchases. Both buyers are sellers are asking the same question: By what right does a bank or any other entity stand between me and my money?
We may not be far from the day when people look at a credit or debit card and smell a horse. That’s not a prediction, just a wild guess.
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