Mobile Payments Ignite New Competitive Free-for-All

Mobile technology advances are dramatically increasing the intensity of competition broadly online and offline. The technological convenience of using a smart phone, tablet etc. rather than a card or cash to pay for goods and services, wherever one may be, is igniting a competitive free-for-all.

• That's because the technological shift to devices rather than cards creates a huge potential competitive opportunity for most everyone in the competitive ecosystem to potentially disintermediate other industries -- i.e. Wrest control of the customer relationship, customers' private information, interests and metadata, and also the bundling of marketing coupons and promotions, in markets with transactions in the trillions of dollars annually.

Activists and regulators who fear a potential new communications "opoly" lurking around every corner -- in need of preemptive government intervention to protect consumers from the convenience, savings and benefits of a highly-competitive marketplace -- need to take a breath, enjoy, and get out of the way of this amazing technological convergence and innovation over mobile payments.

As I described in my forward-looking competition presentation: "The Metamorphosis of Communications Competition Driven By Broadband, Internet, and Cloud Computing Technologies," technology innovations are driving a huge increase in competition as everyone is getting into everyone else's business. The consumer is the big beneficiary of this technology-driven new competition. And mobile payment technology is but one of many big technology shifts in communications and technology that will further increase competition going forward.

The Competitive Clash of Multiple Industry Titans

As the Wall Street Journal recently spotlighted, "The [mobile payment] race pits the retailers against banks, credit-card networks, telecommunications firms and technology companies."

1. Retailers: The latest news is that Walmart, Target, and other big-box stores, and drugstores, vending companies and fast-food restaurants, are working together to develop a merchant-friendly mobile payments system. Per the WSJ, this loose consortium represents upwards of $1.38 trillion in revenue. The very existence of this unusual sector-uniting alliance of competing merchants heralds how potentially disruptive mobile payments could be long term and how much merchants want to ensure that mobile payment technology and standards don't disintermediate them from their customers, leaving them with the cost of bricks and mortar, and without the mobile/online upside of getting customers to spend fully with them at their expensive-to-maintain locations.
2. Google Wallet-Motorola-MasterCard-Sprint: Per Gigaom: "Google Wallet has secured some very important partnerships, locking up deals with the four main payment networks - Visa, MasterCard, American Express and Discover and hardware manufacturers HTC, LG, Motorola Mobility, RIM, Samsung Mobile and Sony." Unfortunately Google Wallet also stumbled badly in its rush to be first to market with near field technology (NFC = two-inch communication range technology). Security firms discovered two easy ways to break into Google Wallet that allowed a hacker to steal the user's money in the Google Wallet, prompting Google to suspend use of prepaid cards on Google Wallet "to prevent painfully easy attack" until it could be fixed. Google now says these vulnerabilities have been fixed, but the question remains why did they rush to market without adequate security vetting to protect users funds entrusted to Google?
3. AT&T-Verizon-T-Mobile: Reportedly, the Isis Mobile Wallet from three of the four largest wireless providers Verizon, AT&T, and T-Mobile will work with Chase Bank, Capitol One and Barclays, and will enable credit, debit and prepaid cards to be loaded into the Isis mobile wallet. These financial institutions have card relationships with 100m American consumers.
4. Apple: Apple may prove to be the big sleeper mobile payments competitor here, that media coverage to date may be missing. Reports indicate Apple, the $500b technology manufacturing leader, is poised to integrate near-field-communications (NFC) into future iPhones and iPads. This is significant because most people do not realize Apple starts with 225 million credit card numbers from its iTunes service. Moreover, most would be surprised to learn that Apple's 358 retail stores have an average-revenue-per-store that is larger than every retailer other than Walmart.
5. Ebay-Paypal: Reportedly, Paypal, the dominant online payment provider, has plans to offer an in-store mobile payment system that will work differently than others; it will work by a user keying in a phone number and a PIN to make a payment.
6. Microsoft-Nokia: Microsoft, the leader in personal and office software is reportedly working with Nokia to incorporate a mobile payments capability into its smart phone software to enable purchases with a swipe of the device.
7. Amazon: Amazon began offering a Mobile Payments Service in 2009, which included APIs for developers to allow users to use Amazon's "1 Click" checkout, which enables users to purchase Amazon goods from their mobile device using their credit card stored at Amazon.

In sum, competition over mobile payments is increasing, providing strong evidence that near field communications, broadband, Internet and cloud computing technologies are igniting a competitive free for all. This is just one of many areas where technology is increasing communications competition to the great benefit of the consumer.