Thirty years ago the rivalry between Apple and Microsoft foretold today’s technology battles. Turnkey technology with sleek designs controlled by one large provider versus a versatile operating system that is open to manufacturers of all types of platforms in the marketplace marks the nature of the battle.
One of Steve Jobs’ guiding principles, which played a major role in the original computer wars and impacts the best technologies in the marketplace today, was that the consumer does not know what he or she wants until you show it to them. Now that the competition for mobile payment networks is underway, the large companies backing the emerging options would be wise to factor this maxim in order to avoid the deleterious war that could lie ahead in this burgeoning industry that marked the age of computers from the start.
Thus far technology companies have dominated the early marketplace for mobile payment networks with only a couple of players including wireless providers, but the race is now on since the large retailers have begun to enter the fray.
On August 13, fourteen large retailers declared their entry into the market when Merchant Customer Exchange or MCX announced its formation and its plans to build a mobile payments application that smartphone users will be able to use for convenient transactions in retail establishments (see: Big Retailers Join Forces to Develop Mobile Wallet). According to the Wall Street Journal, “the technology relies on applications that a customer can download onto a smartphone and then make purchases in a store by tapping the phone against a reader placed by the cash register.”
Though consumer payment trends will certainly inform the development of these applications, they will be far more successful if they are purely intuitive as Jobs had preached and do not get bogged down by the competing interests of the bedfellows that have formed the latest entry into this race (MCX), or those groups competing against one another for the best application.
Based on the Journal story and other news coverage, here is a rundown of the statistics proving the need for these applications and the players who will be competing aggressively for the privilege to manage hundreds of billions of dollars in transactions annually. It should be interesting to see who ultimately delivers the best application to the marketplace to which consumers naturally adapt their daily behaviors.
× Mobile-payment transactions are estimated to reach $600 billion worldwide by 2016, up from $172 billion this year.
× In March, 87% of Americans had a mobile phone, nearly half of which are smartphones, cellphones with computer applications and Internet access.
× Among people with a mobile phone and bank account, 11% used mobile payments in the previous year.
× A survey of 2,000 consumers found that 60% of respondents were concerned that mobile payments could jeopardize their financial or personal security.
The Lay of the Land
× By setting up their own system, the merchants in MCX are counting on leveraging existing relationships with customers to get them accustomed to paying with a phone.
× Google and telecom providers know far less about shoppers’ buying habits than the merchants do, according to MCX.
× Companies comprising MCX have combined annual sales of about $1 trillion and serve nearly every smartphone user in the U.S.
× MCX plans to develop targeted offers and promotions for consumers that will be available through smartphones.
|Made for Android phones in 2011
|Exclusive to Starbucks stores, timing TBD
|Trials start this summer in Salt Lake and Austin|
|Merchant Customer Exchange||Wal-Mart
Royal Dutch Shell
Alon Brands (gasoline marketer)
HY-Vee (grocery chain)
HMSHost unit of Autogrill
|New product, no launch date announced