Payments Watch

I have been thinking a lot more about how Mobile Payments (”mpayments”) might gain traction in North America. Let’s look at some of the possibilities:

Merchant Pay: This could be the classic “chicken and the egg” problem where until enough people use mobile devices for payment, the merchants will not invest in the hardware to accept such payments. Yet until merchants accept such payments, people will not look to their cell phones as a means of payment. This exists against the backdrop of the existing convenience of several mature payment methods such as cash, credit cards, branded (e.g. Mastercard) prepaid cards and debit cards. The differentiating benefits I can see for mpayments would be its contactless nature, perhaps speeding up the checkout process, and perhaps some interactive features, especially when the product paid for can be “carried” on the mobile device (e.g. such as a movie ticket). However, I am not yet convinced of an mpayment’s contactless nature as being a differentiating factor when I can buy a coffee at Dunkin Donuts and they simply swipe my credit card, no signature required.

Prepaid: Prepaid cell phones are gaining in popularity, so the prepaid amounts could arguably be used for payments besides the cellular services. I just don’t see how this differs that greatly from purchasing branded prepaid payment cards (e.g. prepaid Mastercard) which unlike a prepaid mobile phone, is already accepted as a payment method today where credit cards are accepted.

Bill Pay: This can easily by done by ATM, internet banking or telephone banking or with the payee directly using the same existing methods as merchant pay. I suppose one could suggest walk-in bill payment services by people without bank accounts might be an entry point for mpayments, but again, why not just purchase a prepaid Mastercard and make the bill payment?

Person to Person: This is an example of where the electronic alternatives to mpayments are less obvious and perhaps where there is a decent entry point. Besides cash or a cheque, how does one transfer money from one person to another when they are physically co-located? In general people don’t accept payment cards, and moving money between two bank accounts at best involves telephone or internet banking - if it is possible at all (you could use PayPal and similar online schemes). It would be useful to transfer funds between individuals in the moment when they are co-located - the electronic equivalent of the simple transfer of cash.

Remittances: This is a form of Person to Person payments, but made remotely over a distance. Since mpayments could conceivably happen between people that are not co-located, the same promising case exists for remittances as person to person.

Perhaps mpayments should be initially targeted to Person to Person and Remittances where the competition or viability of existing payment methods (for example cards) is almost non-existent, or there are clear convenience gains over existing methods (for example, cash or cheques).