Chapter 5

Chapter 5 | Mobile Commerce Conundrums
Part of the reason it is so much fun to talk about innovation in payments is that until about 7 or 8 years ago, there wasn’t much to talk about. This isn’t to say that there wasn’t any innovation, it was just Innovation in Payments in the Good Old Daysspaced out over about 60 years … and most of it involved slight modifications to the plastic form factor itself (evolving it from paper to plastic to mag stripe to chip and PIN to contactless) or stuff that happened besides the scene (all the IT-related things that took the time to complete a transaction from a few minutes to a couple of seconds).

But, things really started to change in the early to mid-2000s when the form factor that everyone started getting excited about was the smart mobile device coupled with the cloud-enabled apps that made it possible to lots of innovation to be pushed down to these very powerful IP-enabled devices that consumers carried around with them.

So, why has it taken about a decade for us to get the point where mobile payments and commerce is just, and I mean just, starting to feel real?

Well, that’s what ‘ll address in this chapter. We’ll take two sides of the mobile commerce coin: why the interest and what’s holding it back.

The Mobile Commerce Frenzy
Naturally, what’s driving the vast majority of mobile commerce innovation is much of what we’ve talked about in prior chapters – the massive proliferation of smart mobile devices. New estimates of worldwide smartphone penetration were published and the most recent stats (August 2013) show that by the end of 2013, there will be approximately 1.4 billion smartphones in the world, or 1 smartphone for every fifth person. In the US, more than half of the population owns a smartphone.

Naturally, the more people there are with smartphones, the more attractive mobile and other connected devices are to payments entrepreneurs who want to reach this innovation-savvy audience with a commerce-specific application. Obviously, what attracts these entrepreneurs is the opportunity to efficiently leverage these powerful computing platforms to accelerate and monetize their commerce innovations, often creating new business models in the process. Data has become a very important currency in supporting these new business models. The ability to mash-up transaction-related data, behavior and demographic data with location-based data has given birth to a variety of new schemes designed to influence purchasing behavior and to link transaction fees to those actions. The payment transaction itself then becomes the “proof” that the commerce loop was actually closed. We’ll profile how some of these new business model innovations are taking shape in more depth in later chapters.

Apple’s introduction of Passbook is just one example of how developers are flocking to its iOS platform in an effort to advance their commerce ambitions. Passbook is the container that organizes everything that has a bar code attached to it – tickets, coupons, boarding passes, Apple Passbookpayments apps like the Starbucks app, loyalty cards and is it fourth most popular app. The Passbook API allows anyone to Passbook-enable their commerce artifact. Already, some 24 enterprises, ranging from Walmart to Dunkin Donuts to Starbucks to Sephora to American Airlines have jumped on board. In fact, American Airlines says that it gets some 140,000 downloads of boarding passes into the Passbook app each week which has led to an additional 1 million downloads of its app overall. Passbook will certainly continue to stimulate even more developer interest and in so doing, further advances Apple as both a formidable and viable mobile commerce platform.

VC’s also find mobile commerce attractive and are providing a lot of “fuel” for these developers and entrepreneurs to creatively transform payments and commerce. It was reported that in 2012, there was more than $1 billion invested by venture capital firms in a variety of payments innovation – a large majority of it related to mobile commerce innovation and nearly four times what was invested in 2010. This investment is exclusive of the equity stakes that incumbent players have made in mobile commerce start-ups. In 2013, over $867 million has been invested to date by VCs in mobile-commerce-related ventures.

So, with this backdrop of interest, ingenuity and investment, why haven’t things moved faster? Why isn’t it possible to pay using a mobile phone at just about all physical merchants today and how far away are we from the day when mobile as a preferred and dominant payment form factor will ignite?

The honest answer to how long is pretty long and longer than you might think. Having mobile phones become as ubiquitous as plastic cards at the physical point of sale will take time, any way you look at it. The speed at which mobile develops momentum, however, will be related to how the two big mobile commerce conundrums are resolved, conundrums that, at least to this point, have kept mobile commerce from getting any real traction anywhere in the world. Those conundrums are the (1) technology impasse/lack of a technology standard for transacting using mobile devices at the physical point of sale and the (2) lack of a clear value proposition for consumers and merchants to use mobile and/or support mobile payments and commerce. At the core of both is that, for the moment, there isn’t anything so broken in payments to compel merchants to invest in something new at the physical point of sale and for consumers to dump their plastic cards for a mobile alternative, so it merchants and consumers need some other reason to switch to mobile.

Let’s address each of these in turn now.

The Mobile Commerce Technology Impasse

Mobile commerce (or any innovation in payments, for that matter) can’t get off the ground unless merchants make an investment in changing their point of sale technology to enable those transactions at their physical or online storefronts. And since 95% of sales still happen in a physical storefront, the mobile commerce efforts are focused on igniting mobile commerce there. And, that is a really big deal – and so far merchants have stood their ground.

Why the resistance? A few reasons. First, point of sale systems touch just about every aspect of the merchant’s business. Making any change at all means changing – or at least adapting – these changes to its entire business in one way or another. Everything from retraining its highly transient and unmotivated cashiers, to changing business processes to accommodate new technology options, to integrating with all of the front and back end systems linked to these systems such as loyalty, inventory, pricing, and sales/promotions have to be planned and budgeted for. And, perhaps most risky of all, merchants have to weigh the risks of making an investment in a change that could potentially deliver something to the consumer that doesn’t work as well as the plastic card they are used to using presently.

Those decisions become much more problematic for retailers if there isn’t any clear direction on what technology standard will create the same acceptance ubiquity as the mag stripe that’s now on the back of the plastic cards consumers use today. Say what you will about the lowly mag stripe but it enables payment everywhere in the US and still in lots of places all around the world. This standard is also enabling a variety of other innovations from clever entrepreneurs that are using cloud-based applications to link rewards and other incentives to a card swipe. Since merchants typically need 18 to 24 months to implement any change at the point of sale, making a decision today to move forward on a mobile commerce direction means banking on a technology that will still be relevant in two years’ time. At the moment, the jury is still way out on what specific solution that is likely to be, although we are now getting some clues about what it likely won’t be.

NFC – Not for Mobile Commerce?

Turn the clock back just five years.

There wasn’t an analyst, investor or innovator who wasn’t convinced that NFC was the mobile commerce go-to. Many a payments business plan was built with that assumption as reality. The prevailing wisdom that circulated then is that NFC was the best option for mobile commerce, and that what would ignite it, at least here in the US, would be the EMV mandate that would force terminal refresh replacements that would also include NFC capabilities. As a result, even to this day, many analysts have gone on record predicting that in the next 4 or so years, nearly all terminals in the US will be NFC-enabled, cementing NFC as the technology that will power payment using mobile devices at the physical point of sale in the US and worldwide.

Well, it’s not all that clear. NFC has struggled to ignite anywhere in the world and in the US the schemes that use NFC as its enabling technology have floundered. Google Wallet has shuttered its NFC point of sale ambitions, ISIS continues to struggle to get traction outside of transit in its two pilot states, and MasterCard (MasterPass) and Visa ( have shifted focus away from acceptance at the physical point of sale to populating digital wallets. The business case for merchants hasn’t been made and consumers don’t seem to view tapping a phone in the few stores with NFC-enabled terminals as any great advantage over swiping their plastic cards. They haven’t bought in either, literally, since doing so means buying new phones with chips.

Is it possible that the EMV mandate make a difference? That’s not so clear either. The EMV mandate deadline in the US seems less certain now than it was before Judge Leon ruled on the merchant’s lawsuit against the Fed, over the Fed’s Durbin regulations, in August of 2013. That ruling put a number of things on the table, including a requirement for there to be four separate options for debit transaction routing. If upheld, this new routing requirement will impose sweeping changes in debit transaction processing in the US. As of this writing, the Federal Reserve has said it will file an appeal of Judge Leon’s ruling but it will take some time for the appeal to be heard, and any final decision (assuming that whatever verdict is rendered will also be appealed to the Supremes) to be known. In the meantime, it seems logical to assume that the EMV mandate deadline will have to be extended (just as it has been in just about every country that has taken on EMV) in order to accommodate this uncertainty and avoid burdening processors and issuers with so many big changes back to back.

All that said, even in advance of the Judge’s ruling, merchants began to question the merits of EMV migration. For instance, large merchants, like Wendy’s, have gone on record saying that the ROI for making the upgrade to EMV in an effort to avoid the liability shift had a 60 year payback. They believed that given the math, they would happily accept the risk. Others now question whether EMV solves the right problem. Fraud at the physical point of sale is quite low in the US, and the “weak link” argument that EMV supporters make further argues against EMV. Evidence points to the “weak link” as online transacting, which EMV solutions do nothing to solve MCX Sales Volumein a world where plastic cards are being replaced by digitized transactions. In most places that EMV has been implemented, online fraud has risen dramatically as the fraudsters move their trade from physical point of sale to online. This concern over EMV as a solution rings even more true as cloud-based solutions emerge for transacting at the physical point of sale. And, finally, MCX, the coalition of some of the largest merchants in the US with designs on launching a mobile only payments network, have opted to launch with a cloud-based solution that will work on all existing devices. MCX does not seem to be counting on new upgraded EMV/NFC terminals to host NFC payment capabilities (at least to start) or accommodate EMV payments. Their collective reluctance to embrace solutions tied to new point of sale hardware could throw sand into the wheels of the EMV rollout in the US which would only further delay any broad-based NFC deployment.

Could an EMV mandate, though, even delayed, create an environment for the ignition of NFC-enabled schemes? Maybe, but it far from guarantees it. Merchants may buy EMV/NFC terminals as part of a refresh cycle but have to actually spend time and money enabling the NFC and EMV spec at the terminal. Without consumer handsets with chips and a value proposition and business case that suits them, it is unlikely. Keep in mind that part of the merchants’ resistance to NFC is that will lock them into the mobile technology of choice of the payments networks – and introduces a few new mouths to feed at least in the case of NFC – the mobile operator and TSM. That isn’t something that, at least the big merchants with the power to push back, seem all that interested in doing.

There are other relevant points worth making related to the relationship between EMV and NFC. While it is true that Canada and Europe are EMV-enabled countries, those terminals are not NFC-enabled and would have to be upgraded; something that seems unlikely for merchants who may have just installed new EMV terminals and even less likely for merchants in areas of the world impacted severely by the current financial crisis, e.g. Europe. In countries such as France where mobile NFC/contactless investments have been made to subsidize merchant terminals and consumers have been given NFC EMV Adoption Rates by Regionenabled handsets, mobile payments success has been fleeting and further investments in NFC mobile schemes appear uncertain, as of this writing, given the current economic conditions in those countries.

The UK has also made significant investments in enabling contactless merchant terminalization to enable contactless cards to work at merchants. That uses a different spec than mobile NFC and it remains to be seen what the merchant’s appetite is to move to NFC in a country that too, continues to suffer from a lackluster economy and a consumer skepticism over NFC technology used to power payments.

Japan and South Korea are often cited as the world leaders in the adoption of NFC technologies with FeliCia and Docomo. In Japan, the use of NFC is ubiquitous as millions of people already use their mobile handsets to access and pay for transportation systems and make payments at the points of sale using those devices at those merchants that are in those subway stations. Deployment was made much easier given the structure of Japan’s ecosystem. There was a dominant mobile operator that could dictate the operating system, contactless standard, and app for the handset, a population of commuters who often didn’t have computers at home, and a people and merchants who actually didn’t use cards that much. DoCoMo was able to more easily assemble the pieces much more quickly than others with similar ambitions. Nevertheless, outside of transit and transit hubs, NFC mobile payments are scarce and active users remain at only 20% to 25% of those with NFC handsets. There is another variable at play here too. Nearly three and a half million customers of NTT DoCoMo have left it for the Apple iPhone. Since Apple does not support NFC, those users are not able to use NFC technology enabled payments and commerce applications.

Hong Kong’s Octopus is another example of a contactless success solution, Launched in 1997, this solution began as a way to pay for and access its six public transportation systems. Within three months, three million Octopus cards were activated. Three years later, in 2000, transport focused businesses began to accept Octopus. Today, it is reported that 95% of people in Hong Kong use Octopus cards to Hong Kong Mobile Paymentstravel, shop and dine. But, this success is card-based and not a mobile NFC solution which wasn’t launched in Hong Kong until July 2013.

This isn’t to say that there aren’t some NFC successes. There are, but they are still somewhat scarce and those markets have very specific characteristics.

Take Poland where MasterCard has rolled out an NFC-enabled mobile payments solution. As a country, Poland, is heavily cash based, with plastic cards a recent introduction. Its lack of cards in general and enabling card infrastructure made it an ideal environment to introduce a mobile-centric digital payments solution, nationwide, using NFC. Merchants didn’t have to remove and replace equipment and consumers didn’t have to unlearn one set of behaviors and learn another. Consumers were also more willing to pay with a mobile phone than consumers in other countries – in fact, back in 2011, 51% of the Poles surveyed said they would use a mobile device to make payments compared to just 25% of consumers in the UK/Ireland. The switch from cash to digital payments is in early days, for sure, but is being enabled by existing devices, consumer’s mobile phones, and the full NFC support from the Polish MNO market.

So, where does this leave us? Well, in the US, it seems that we are easily five to even ten years away from having enough people with enough NFC-enabled phones for merchants to start to care – and most of the rest of the world is starting from a much less advantaged position. Today, there are approximately 300 million NFC phones, tablets and eReaders in circulation, representing a tiny percentage of all smartphones. And, today, only 2% of all merchant terminal locations in the US accept NFC (or 150,000 merchants out of 9 million) – and that number will have to increase a lot for consumers and merchants to really care. Worldwide, MasterCard reports that only 700,000 merchants worldwide accept NFC, which is a very tiny fraction of all merchants.

A final word about NFC. As discussed in our previous chapter, it is important to remember that NFC came to life as a way for mobile operators to remain relevant in a world in which commerce was happening all around them and on top of their data “pipes.” NFC was touted as a secure way to facilitate payment via the mobile device but since it was tied to the carrier’s SIM card (which they controlled) it also came with a lot of strings attached. Access to its NFC secure element was possible but limited. Then there was the issue of customer ownership. Mobile carriers viewed NFC and the SIM card tie-in as a way to insert themselves into the customer data flow, as well. A top five merchant even characterized NFC as a tollbooth that assessed a hefty premium to cross and a requirement to share customer data. For them, and for a lot of others, NFC became a non-starter for payments and is likely to remain that way. And, the longer it takes NFC to gain traction, the less likely it will and the more likely cloud-based solutions which offer merchants and consumers more flexibility will emerge as dominant.

Belly up to the Barcode
All of the uncertainty and complexity over NFC has spawned a number of innovations based on the digital equivalent of the mag stripe – and the (some say) lowly bar code. 2D and 3D bar codes have been, at least so far, the technology standard that has helped to ignite and scale a number of successful mobile commerce schemes – the most famous and most successful of which is Starbucks. Mobile commerce schemes based on bar code technology can scale for two reasons: they, in theory, enable anyone with any smart phone to download a commerce app that is powered by a bar code and for any merchant with a scanner to process that transaction.

This mobile payments technology was made famous in January of 2011 when Starbucks trialed its first Starbucks Mobile appmobile payments app, and now drives 10% of its volume and 4.5 million payments a week. Enabling this solution was an inexpensive scanner and its existing closed-loop stored value platform that was already integrated into all of the Starbucks POS systems. Similarly, Dunkin Donuts just celebrated the first year of its mobile commerce app, which it launched in August of 2012. More than 3 million customers have downloaded its app.

Following their lead were a number of others who took the bar code concept and raised it to another level. LevelUp uses a QR Code and smartphone “scanner” to trigger a payment transaction wrapped around a mobile loyalty scheme as either a branded or a white label application. As discussed in Chapter 4, LevelUp announced a partnership with pcAmerica in July of 2013 to integrate the LevelUp mobile payment and loyalty program into POS software, making it easier for it to be accepted by more than 50,000 restaurants, liquor stores and convenience stores in the US. Paydiant is another white label solution that powers a number of merchant digital wallets and uses QR codes to initiate payment. And as stated earlier, Apple’s Passbook has perhaps done the most to give barcodes and commerce a whole new lease on life. As described earlier, this container aggregates anything with a bar code and can be enabled by geo-location technology to push the appropriate bar coded app to the users lock screen when the smartphone user is within striking distance of that location. The commerce opportunities that Passbook will unleash is yet to be seen.

The bar code has its critics who cite a lack of security and slow processing times. But it has made payments and commerce technology much easier for developers and merchants to implement and to test and learn from in their storefronts. For whatever its weaknesses, the bar code allows mobile payments to quickly become a reality. Since these applications are cloud-based, there are many ways to make transactions secure using one time account codes, tokenization, and other technologies.

Look Ma, No Hands!
There are also several schemes that don’t require anything more than the possession of a smartphone to trigger a payment transaction at the point of sale. The PaywithSquare wallet application made geo-fencing a household word by simply sending a message via its app to the merchant POS system that a PaywithSquare customer had entered the store. PaywithSquare customers are asked to upload a photo to their account when they establish one that is used for this purpose. At checkout, authentication happens when the customer says that she wants use PaywithSquare to make her purchase. The cashier is able to associate that person with her face on the PaywithSquare checkout screen. The charge is then applied to the card that the customer registers to her PaywithSquare account.

PayPal is doing the something similar with its PayPal Here solution in addition to other things that use the smart mobile phone not as a physical form factor, but as an enabler for payment. Its “empty hands” application establishes an account and a PIN that allows payment at a merchant to happen by typing in the mobile phone number and PIN once the application has been downloaded by the consumer. It has also rolled out solutions that enable purchase online via PayPal with pick up in store. All of these technologies enable the PayPal digital wallet for payment.

Enter the Bluetooth Payments Fairy

Many experts believe that solutions that utilize Bluetooth Low Energy (BLE) will win the day. Bluetooth offers a similar function to NFC but doesn’t require the surface contact that NFC does – which means it doesn’t require new hardware to operate. Utilizing this technology to enable payment and other commerce related activities would then mean that retailers could skip costly hardware upgrades. It’s iBeaconsrumored that Apple’s iOS7 (scheduled for a September 2013 release) will take BLE to a different level via something called iBeacons. iBeacons are able to turn a mobile device (iPad or phone) into both a sensor and a signal – meaning that these devices can both send and receive BLE signals. A phone running this new operating system can then receive location-specific messages from other iBeacons and iBeacons can actually become part of a network of sensors and signals based on micro-location. iBeacon is rumored to be able to take Passbook to a new level, meaning that a consumer could be offered a notice from a retailer when she enters the store and then could, emphasis on could, enable checkout via the phone (and Apple’s iTunes account) as the customer with her mobile device approaches a point of sale terminal.

The bottom line is that it will be a while before a technology standard is settled that will drive a consistent, secure and fast mobile payments and commerce experience at the physical point of sale. No one really knows when it will happen or what it will be. We’ll go out on a limb and state that we don’t believe that it will be NFC, in spite of the hype and investments made in that technology to date. There are too many moving parts to sort, not to mention the issues over customer ownership and ecosystem control that those with the power to say no, haven’t seemed willing to embrace.

In the interim, there are solutions that leverage mobile devices and existing hardware and form factors. Mobile point of sale (mPOS) solutions use iPads and mobile phones to enable card acceptance and are increasingly moving upstream to larger merchants who see mPOS solutions as a way to cost effectively capture customer information and move checkout to anywhere the customer happens to be in the store. And, a new mobile payments platform called Loop, which will launch later in 2013, has adapted the magnetic stripe technology used at existing points of sale today to mobile devices, in effect separating mag stripe transmission from payment data storage via an application that the consumer downloads and a small device that the consumer attaches to her mobile phone.

Where’s the (Value Proposition) Beef?
So, let’s say that the mobile commerce technology puzzle gets sorted. For innovation to happen, there also has to be a value proposition for consumers and merchants. That’s perhaps the more difficult conundrum to solve.

For the longest time, the prevailing wisdom for moving away from mag stripe cards to something else was “tapping is better than swiping.” Consumers were left to wonder why they were being asked to tap, which really didn’t take that much less time, when they still spent the same amount of time in line waiting for their order or to sign for their purchase? That was at least the experience when applied to contactless cards and at the start, to NFC and mobile payments. Consumers weren’t motivated to buy a new phone or load a wallet or seek out merchants with NFC capabilities since there wasn’t any greater value perceived in tapping a mobile device with very limited acceptance versus swiping a plastic card that has ubiquitous acceptance.

Starbucks and its mobile payment app changed all of that. It added value to consumers by making its very popular stored value product digital and easier to use. Balances were always visible and it was easy to top up. Rewards were easy to track. Payment was actually an “add on” to these more valuable consumer utilities. The value to Starbucks is that it has stimulated demand for its stored value product which is very profitable for them

Consumers also need to be convinced that using their mobile devices to pay is secure. Today, most consumers have doubts. Most surveys suggest that despite consumers’ familiarity with mobile and online payments, most don’t feel comfortable using their mobile phone to pay at a physical store. They seem quite comfortable using their Starbucks app because it is linked to a stored value card product with a limited amount stored on it and is used to make low value purchases. Consumers think that it is Companies Considering Mobile Paymentstoo easy for someone to take their phone and then have access to sensitive bank account and identity information – in spite of the fact that many people use passwords to lock their screen ( ̴44% do), apps like Starbucks are also behind a password screen, and credit cards registered to digital wallet accounts protect consumers from fraud the same way they are protected online and or if their card is lost or stolen.

Moving on to the merchant side, merchants aren’t all that sure that they want yet another payment form factor that locks them into the incumbent networks for payment. Part of the impetus for the Merchant Consumer Exchange (MCX) is an interest in devising a scheme that lowers the cost of acceptance for merchants using mobile as the exclusive delivery vehicle. MCX is still new, so it remains to be seen how and when and if this scheme ignites and/or whether its sole purpose in life is to collectively organize merchants to negotiate with networks and other members of the ecosystem. But, merchants are keenly aware that all of the mobile commerce schemes that have emerged so far are tied to digital wallets or accounts that have an existing payment network branded card registered to them, which keeps the cost of acceptance higher than they would like to see it since most consumers register credit and not debit cards to those wallets and those transactions are processed using higher card not present rates.

Merchants also remain a bit unclear about the ROI on mobile commerce. The sales pitches of the mobile commerce facilitators are all based around the promise of getting incremental customers or sales. And many new mobile commerce business models monetize some aspect of that incrementally as a way of making the point relevant. But, it simply can’t be the case that all merchants everywhere will get incremental sales and customers since at some point, there won’t be enough consumers to deliver that promise to every merchant. So, making an investment in new technologies without a more tangible ROI associated with it is unlikely, at least until things on this front sort themselves out a bit more.

And, finally, there’s the confusion over digital wallets. We’ve devoted an entire chapter to wallets but the lure of the wallet is control of the customer and her payment preferences. The analogy is controlling someone’s physical wallet – and which cards are placed in it and which one is the one easiest to reach. In a digital world, the battle lines are now being drawn over branding: whose brand is on the wallet and where and how in the wallet other branded cards appear. One of the biggest fears that issuers and networks have about digital wallets is that their brands will become so invisible that it won’t much matter to consumers if the wallet “owner” creates an incentive for those consumers to flip to another payment brand or method.

Are We There Yet?

When people ask how long it will take for mobile commerce to ignite, what they are really asking is Mobile Payment Transactionwhen 50% or more of our spending is made via the mobile phone. Our answer six months ago would have been whatever estimates you’ve seen, it will take longer. Our answer today, is probably a bit faster than that but still certainly not within the five, and maybe even, ten years.

Here’s why on both counts.

As we have just said, changing anything in payments means getting the complicated ecosystem called payments to change at about the same time. It’s taken about 17 years for the web to account for 5% of retail commerce and about 25 years after the intro of debit card in the US for it to become 50% of consumer spending. Prepaid products were introduced to great fanfare around 2000 and today are a miniscule share of payments. As we’ve stated earlier in this chapter, every prediction of NFC penetration has proved way too optimistic and now appears to be nearly irrelevant for payments.

Mobile commerce will take some time to reach critical mass for all of the reasons we’ve just gone through:

  •  There’s no agreement on technology standard.
  •  There’s no persuasive business model
  •  There’s a real need to persuade merchants to make costly changes
  •  There’s a real need to pull consumers along
  •  And, then there’s regulation related to privacy and security which could slow things down considerably in the US (and other parts of the world)
  • And most importantly it simply takes a long, long time to make the changes at enough merchant points of sale to enable consumers to use mobile to pay very much.

Like so many people, we are totally bullish that mobile will become the main way that people pay but it is hard to imagine that happening in less than ten years from now. But there are a few things that could accelerate that.

Number one and perhaps most important, is that merchants are very motivated today to get behind mobile commerce but not for the reasons you may think. Merchants view mobile as a way for them to have a relationship with their customers and for them to actually influence how they buy and not just how they pay. When mobile was presented as just a substitute form factor, it was a non-starter. When it can now be used as an enabler for improving the way in which consumers and merchants engage around the buying experience, they are much more motivated and much more interested in making investments in mobile that can deliver that payoff.

Number two is the “Black Swan” scenario of payments. Just as the camera phone killed off the digital camera, so too could a breakthrough in mobile commerce innovation marginalize the existing mobile commerce schemes. Apple could be that Black Swan, and its innovations around Passbook, the developer community that it has stimulated, its BLE technology innovations, its adoption of mobile phones and iPads as POS solutions, and 525 million iTunes account certainly position it as a formidable contender in payments and commerce. If they were to enable mobile payments, it wouldn’t take long for everyone to accelerate their own mobile commerce efforts and for merchants to clamor to support Apple’s chosen technology and method of payment in their storefronts.

Number three, but perhaps less likely, is that the “perfect storm” of payments happens and mobile commerce just ignites on its own. This would be as a result of merchants accelerating the adoption of mobile commerce technologies and agreeing to a technology standard, smart phone penetration rapidly increasing around the world because the competition between iPhone, Android, and Windows makers lowers prices and makes smartphones available to everyone in the world, the mobile payment systems get traction and the industry consolidates around a few viable solutions. That would require that a “killer” mobile commerce app motivates consumers to want to use their mobiles for commerce – much like Uber has motivated over a million of people to download its app and use it to reliably get taxi service instead of flagging down one in the street in 35 cities and 14 countries. This scenario is possible and perhaps growing more plausible now that merchants seem to have focused on the importance of mobile commerce to their revenue and profits and smartphones, at least in developed economies, have become more diffuse. But that will still take time, since even there is interest, there are still a number of moving parts needed for the perfect storm to happen all at the same time without swamping the ecosystem in the process.

But, there are actually places where mobile commerce is igniting. Mobile phones as acceptance devices have delivered a very solid value proposition to consumers and merchants and didn’t have a chicken and egg problem to overcome. Merchants could easily accept electronic payments and improve cash flow and consumers could pay merchants in the way that they were most accustomed and comfortable – with their existing plastic cards. There are nearly one hundred mPOS solutions and tens of millions of dongle devices in market. In some cases, mPOS solutions have truly transformed industries. For example, ROAM, thru its partnership with Visalsys a leading direct sales enterprise, has brought mPOS solutions to the $132 billion global direct sales industry – increasing the level of professionalism in the industry and average order values in the process. QSR industry players are also using these solutions for line-busting and improving the number of customers served in a day, and revenue generated, as well.

Mobile devices are also stimulating ecommerce sales. Nearly 10% of ecommerce volume comes from mobile devices – phones and tablets – and conversions via tablets and phones are actually as much as three times higher than other channels.

There is one certainty about Mobile Commerce Ecosystemsall of this: everyone across the payments and mobile commerce ecosystem is going after the big brass ring that we call mobile commerce – the seven layer ecosystem of ecosystems that we described in Chapter 3 and now more recently popularized by this infographic.

As exciting the potential, if merchants don’t see enough demand from consumers for these solutions why bother … and if consumers don’t see enough value from using mobile to enable commerce why bother.

Let’s turn now to chapter 6 and talk about just how merchants think mobile commerce can transform their business.