Techcrunch has an interesting article questioning the value proposition of mobile payments, especifically NFC in this case. Read here…
Even in the Indian context, there have been multiple companies trying to push mobile payments over time, and a clear use case has been missing. Cash or swipe cards function fairly well for physical merchants. Some of the more recent attempts are aiming to reduce the cost of POS roll out – a form in which the mobile device may be used as acceptance terminal, rather than as a replacement of swipe card. That seems slightly more interesting – however, the savings on the acquisition terminal is perhaps only a small fraction of the overall cost of acquiring and managing the merchant base. So its not clear if this technology innovation solves the critical path issue.
Other views?
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I do not know why we consider it as replacement of card payments, it can be addition to it. Also in country like India where millions of people do not have CC but have mobile.
In India reaching to remote places is costly affair and reaching there for collecting payments is even more costlier. Most of the money is customer reach cost. We were running a service for villagers that needs to collect money on regular basis. Most of money was gone in paying commissions to middle folks. I was always thinking we need a cheque collection kind of box where people can pay money using their mobile’s NFC. I know it won’t happen for quite long time.
As user whenever I ordered any thing on COD, I always wonder I should keep cash @home. My be this problem will get solved. Use cases are there technology need to mature.
Alok,
Cards are doing two things in the payments business 1) Give identity to the consumer and 2) enable the issuer to authenticate.
In the Indian scenario, everyone from banks to Master/Visa/Amex acknowledge that the growth of payments would be through ‘Card Not Present’ scenario. Imagine what would it take to issue 700 million cards to our population beyond cities and what herculean a task of Financial Education would it require to get people to retain their cards and CVVs.
This is one problem that the Mobile Phone has potentially solved by giving everyone a tool for establishing identity. Authentication is still the question and there are many ways that is trying to be addressed: OTP, PINs, NFC, Voice Biometrics, others..
One of the use cases which is already large and growing is in Financial Inclusion. The MFIs (who still survive) and other service providers in this space are betting on giving a financial identity to millions of users through mobile devices. This would do two things- increase the absolute number of people in the fold of the organized financial system and two, develop opportunities for service providers/merchants/aggregators to push more virtual/physical products in an untapped market as payment collections would be easier through the mobile phones.
We are already experiencing with over 300,000 customers actively transacting and paying for transactions such as Mobile top-ups and DTH Payments. There is another MFI which is talking of loan disbursement and collections to millions of customers across the country through Mobile Banking accounts as otherwise the risk of cash handling is at unmangeable levels.
The challenge in this taking off is two-fold: 1) is RBI going to let non-banks administer Mobile Payments without the need of a banking license, 2) if not, then why are banks luke-warm to promoting this in a big way. The answer is being explored in the middle with a grant of over 130 + Mobile Wallet licenses by RBI in the last year alone.
The scenario where you will be able to walk upto the neighbour hood retailer and top-up your mobile wallet and pay for restaurants, tickets, movies, fuel etc. through the same wallet is fairly pragmatic and realistic. Issues around Usability, Compatibility, Merchant networks and aquirers are being sorted in silos and only a matter of time before a consolidated model starts creating critical mass of users.
Hi Alok,
Have come across a slew of offerings modelled / inspired by Square for mobile based POS devices, which in essence offer card readers attached to mobile phones for card acceptance.
This is one of the dimensions of mobile based acceptance, and would’nt really classify this as a mobile payment though.
These services are catering to new use segments and for the lower end of the card acceptance retail spectrum with low volumes or new to card acceptance…
They would definitely serve in expanding the acceptance footprint.
However a couple of aspects that may be noted :
1. Who Buys?: In several countries in Europe and North America, the terminals are purchased by the merchants or taken on a rental model from transaction processors. The model in India has largely involved banks / processors purchasing the terminals, and in a fraction of the cases being rented out to smaller establishments. Hence this might actually transform the existing model for the lower end and lower volume establishments, buying the devices themselves rather than being purchased by the banks.
2. Servicing Cost : The large upfront cost and the nature of the POS device, requires a specialized maintenance field staff to repari, service the POS machines and also supply paper rolls. If the new and simpler mobile devices were to be adopted, it may actually nullify the need for a field support staff, hence bringing down the costs.
3. Marketing & Business Development : These would be costs involved in merchants being signed up by banks and processors. Potentially if these services were bundled by mobile operators, then they in turn could play the role currently played by the bank’s sales personnel. Hence a further cost save?
It’s not going to be easy, but once the wave starts off…i think it could seriously be an inflection point for acceptance in the Indian market.
welcome your views…
This is a classic case of inertia.
Imagine a world in which CC did not exist and you had an option of either a CC or a Mobile Based payment.
Which would you prefer ?
Shared exactly similar views a year back with Indian context –
http://www.beingpractical.com/2011/07/16/what-problems-are-the-mobile-payment-services-trying-to-solve/