Chapter 2

Chapter Two: The Mobile Commerce Vision


The Commerce Conversion

Mary walks into her favorite store on her way home from the office. Upon entering the store [she checks in with her mobile phone by tapping a welcome sign with a sensor at the front of the store, the interactive display greets her by name and shows products on sale that may suit her, with barcodes she can scan…] she’s then greeted by name by the shopkeeper and asked how she liked her purchases from two weeks ago. She’s also notified that more of her favorite items just arrived and the shopkeeper set aside some of the items just in case she wants them, which she does. After looking around the store for a bit, Mary decides what she wants. When buying the items, the shopkeeper asks if she wants her items delivered and if she wants them charged to her account on file. Without producing a wallet or ID to pay for the items, Mary leaves the store with her two shopping bags in tow and heads home.

Annie is out to lunch with her friend she hasn’t seen in a while. She admires her friend’s handbag, which is the latest style in the hottest color. Pleased at her newfound role as fashionista, her friend suggests that Annie take a photo of the bag so that she can buy it online. Doing so triggers a listing of the places in the area with the handbag in stock. Annie pays for her purchase online, and is presented with a QR code that will allow her to pick it up in the store on her way back to the office.

Ahmad is a temporary worker in Qatar while his family remains back home on the Ivory Coast. He’s paidweekly by the government of Qatar via a payment made to his prepaid debit account accessible via his mobile wallet account, and via a card that can access cash via ATMs anywhere. Each week, Ahmad uses his phone to send money directly to his various creditors back home so that his wife does not have to worry with paying bills, and then loads his wife’s prepaid account so that she can buy groceries and other essentials. On weekends, to pass the time, Ahmad sells his wood carvings to tourists in the area, using his mobile phone to accept cards from admiring tourists. His NFC/EMV-enabled swipe device means that he can accept any kind of payment from any tourist anywhere in the world. Ahmad’s merchant account is actually a prepaid product that is linked to his primary mobile account with all of those proceeds automatically directed to his savings account back home or on the prepaid debit account tied to his mobile wallet and banking account.

Jack is the owner of a growing small business in Plano, Texas focused on home remodeling and repair. What started out as an emergency roof repair has become a more complex remodeling project for his newest customer. Within minutes of reviewing options and pricing with his client, Jack was able to generate an estimate, secure instant financing for the job, schedule the work, order the necessary materials, take a 50% deposit from the client and generate an e-receipt all from his tablet device – before leaving the client’s home.

Chan is a young entrepreneur who manages his entire import/export business in Henan from his smartphone. He updates his commerce catalogue using his storefront app’s admin console, which in turn updates his website in real time. Orders for new inventory from his suppliers are done via a P2P money transfer settled in the local currency of his supplier, accompanied by an invoice that synchs with his accounting package. Order fulfillment happens the same way. When he meets potential customers, all he has to do is pop open his storefront app and scroll thru his inventory. His storefront is his phone and with him all of the time – available to anyone anywhere in the world.

Maggie and her daughter are out for a Saturday shopping excursion in San Francisco. As she arrives downtown, she uses her mobile wallet app to instantly find deals around her location from participating merchants. All offers are aggregated and organized by her favorites; offers for the store she enters are moved to the front of the list. Upon entering the store, she can view offers available for that store with a single touch. At checkout, she authenticates to her wallet account with her PIN to create a one-time-token that can be scanned or tapped at the POS terminal which tells the store who she is, and has a payment account ready to go. She is then presented with the total amount and details of the transaction back to her wallet app via notification that also shows a discount based on her loyalty card stored on her wallet account. She is also presented with an instant offer of store credit, an incentive she should take that option, to save 20% on her next purchase there. She chooses that option and completes the transaction with the default card she selected in her mobile wallet. The transaction is processed without Maggie ever touching the POS device or presenting a card. An e-receipt captures her transaction and updates her personal money management app reminding her how expensive her daughter really is.

Jason and his teenage friends are avid baseball players. The live and breathe the sport. That’s why when presented with an offer to join a Facebook-only affinity group for baseball fanatics they signed on in a heartbeat. Each day they are presented with offers for special events, tickets and experiences right on their news feeds, which push messages right to their mobile phones. Anything that they see they like, they can buy right then and there on the fan page of the participating merchant and then arrange to pick up in the store. Local merchants fulfill the orders and manage and track inventory via tablets and apps that connect commerce on Facebook to their merchant accounts, inventory and accounting systems. Since Jason and his friends don’t yet have credit cards, they use prepaid cards that are funded by their parents. An SMS message is sent to Jason’s parents each time he makes a purchase – giving them the power to veto and reverse any purchase that doesn’t pass muster or add more money to the account if funds are low.

William, his wife, and 4-year-old son, Andrew have a Saturday morning routine: breakfast in front of the flat screen watching the latest animated game show. There’s something for the whole family to enjoy. William and Andrew are able to interact with the show via the mobile device and rack up points, buy virtual items that become part of the show and compare their scores with other kids in Andrew’s kindergarten class. Throughout the show, Mom is able to point her phone at products she sees on screen and scan the barcodes to get information on pricing, size and availability and to order anything she likes with just one click. Receipts are emailed to her directly and funds are debited from the card she has registered in her digital wallet.

All eight experiences rely, in one form or another, on a mobile device to enable the commerce experience – and to do so seamlessly across physical and virtual channels. Common to all these vignettes is the ability and use of the mobile device to help both consumers and businesses enhance the commerce experience. These scenarios aren’t all that far-fetched either. In some form or fashion, there is technology that either exists in market today, is being developed and tested presently or is being developed to be tested in the next 12 months.

Looking Back: The Mobile Commerce Conversation a Decade Ago

Even more remarkable is that just a few years ago, these scenarios would have been considered “fantasy” and completely improbable. If you told anyone that the phone was simply going to be used as an enabling device that interacted with the point of sale to authenticate a transaction, or would rely on the “lowly bar” or QR code to facilitate payment, they would have laughed you out of the room. Think back to the discussion of mobile commerce just five or six years ago – never mind the turn of the 21st century. The topic of conversation then was NFC. The lens of mobile payments innovation then was shaped by what everyone everywhere held up as the paragon of mobile innovation: Japan’s DoCoMo. And DoCoMo was all NFC all of the time.

The trade press back then was flooded with images of 4 million Japanese (and that was in the first year alone) carrying mobile devices with chips that were used in subways, in convenience stores and just about everywhere to transact. It didn’t take long for those scenes of happy young and old consumers using phones instead of cash or cards to dance thru the heads of just about every payments executive on the planet. Japan and DoCoMo became the alleged proof of concept for how mobile payments would be done for the rest of the world. And, as a result, there emerged a cottage industry of conference organizers and consultants focused on helping payments executives everywhere else emulate that vision.

And, that was, in fact, the vision that was pursued just about everywhere by just about everyone just about ever since. Schemes like Orange popped up in France and Octopus in Hong Kong. Carriers like Orange and mobile phone manufacturers like Nokia literally bet the mobile payments farm on the notionthat NFC enabled payments would transform their business and along the way, transfer a little bit of the power (and revenues) of the payments networks to the carrier. In the U.S., it was like the Gold Rush all over again – as hundreds of millions of dollars were poured into ventures such as Bling Nation, MocaPay and Vivotech who were busy emulating the DoCoMo NFC vision. Just about every bank and payments network on the planet had multiple NFC initiatives underway. New players like ISIS, the joint venture of three carriers, a mobile operator and a payment network, Google and Microsoft jumped into the NFC waters as well with massive investments and grand ambitions to transform the payments landscape using chip-enabled handsets.

There was only one problem.

Dreaming the Impossible Mobile Commerce Dream

Japan and DoCoMo was an almost impossible scheme to emulate outside of Japan. Most players overlooked the degree to which DoCoMo controlled its entire ecosystem – from the operator to the bank to the handset manufacturer – it was all under DoCoMo’s control. DoCoMo was able to solve the chicken and egg problem that NFC as a mobile commerce solution had in spades by making sure that each and every subscriber had a phone that could be used at a merchant point of sale terminal.

Merchants had little pause to install that which would enable those transactions. That vertical integration was simply not available (or even possible) anywhere else.

DoCoMo also solved another important problem – it actually added value to the person who used it. Japan was not a big card market but it was a huge commuter market and a huge cash market. Most every single Japanese person used the Japanese train to commute to work, often spending two hours on the trains getting into the city. Having a phone with a chip that made it easy to buy train passes AND goodies at the train station while waiting for the next train to arrive was a really convenient thing. It helped people and it helped merchants. But, it also replaced cash – not cards, a much easier transition to make since using cash was much less convenient to carry and took more time at the point of sale. It also made it more plausible that consumers would spend more money while hanging around the commuter terminal. In fact, NFC built around a “closed loop” environment such as transit is actually one of the only real examples of NFC mobile payments success anywhere in the world.

Outside of Japan, it was far harder to figure out how to make mobile payments valuable to consumers and all but impossible to get merchants to spend money installing new equipment for an unproven technology.

Consumers had other options to pay, namely plastic cards (credit or debit), and ecosystems were not so neatly or conveniently integrated. Banks had to work with carriers, who had to work with handset manufacturers, who had to ultimately persuade merchants that consumers would ditch their existing phones to buy new (more expensive) ones with chips.

It was a hard sell.

There were limited examples of uptake in some parts of Europe, namely London, with the Oyster Card – in much the same way that DoCoMo started – a commuter application but on a card and not a phone. DoCoMo adoption and ignition was largely elusive just about everywhere else in the world. Tapping instead of swiping added little value to consumers or merchants and the struggle to organize the ecosystem was seen as too burdensome to overcome and therefore, pursue.

Inspiration in the Clouds

At the same time, an entirely new set of innovators was inspired by the opportunities they discovered at the intersection of mobile, the cloud and the rich data sets that are the byproducts of the payments transaction. These innovators were inspired by the power of the miniature computing devices that would just a decade later be in the hands of just about every human being on the planet and would provide access to the internet. They also had another important observation: point of sale devices were also connected to the internet. Their vision was to revolutionize payments and commerce at the point of sale, but not by using the phone as a substitute for a card product but an enabler of the entire commerce experience in one form or fashion. Payments, therefore, were thought of as a means to an end that could be implemented with existing phones and POS systems.

So innovations began to emerge based on bar codes that leveraged smartphones and scanners at merchant locations to enable transactions. Some solutions even mashed up bar-code enabled payment transactions with loyalty schemes – offering cash discounts on subsequent purchases at those merchants to build affinity to that merchant. Some innovated using QR codes to redeem offers that triggered statement credits when presented at the merchant, while others linked registered card accounts to apps enabled by mobile to pay once service was delivered. In all cases, consumers could use their existing smartphones to access the apps that enabled these transactions and merchants could leverage existing point of sale equipment (e.g. scanners or mobile devices) or purchase low cost readers to initiate transactions.

A subset of these innovators also recognized that mobile devices could become point of sale devices themselves and extend the electronic commerce experience to a whole new category of merchant. Casual sellers, mobile field service personnel, school fundraisers, dog walkers and even the Girl Scouts could all transform the way in which their commerce experiences were conducted. Along the way, two new vocabulary words were introduced – dongles and swipe devices. These devices plugged into a mobile phone’s headset jack and turned it into an electronic payments acceptance device attached to a merchant account. ROAM was among the first to bring a secure dongle device to the market, riding on top of a platform that it also innovated that made it possible for any app developer to have her application propagated and optimized across each and every mobile operating system and handset. Other applications of dongles or mobile point of sale use even extended to the traditional retail environment. Sales associates, armed with mobile devices, could intercept customers in store and complete the check-out experience outside of the traditional in-lane experience. The goal in this use case was to combine service with efficiency and improve customer satisfaction.

The Road to Riches

All of these innovators managed to move their innovation along and gain traction more quickly for two reasons: they actually reduced the points of friction in the ecosystem, and innovated on top of the existing payments infrastructure. Most of this innovation relied on registering existing card accounts to apps that flowed thru the payments infrastructure just as any other eCommerce transaction would. They also leveraged devices that both consumers and merchants already had. All that was required of consumers was to download an app to a smartphone, and of merchants, to do a small amount of rejiggering at the point of sale.

These innovators also rode the wave of smartphone adoption that simply made it a lot more attractive for consumers to even consider trying out a new payments experience. The iPhone and Android canvas just made the process of using apps – even multiple apps for multiple merchants – quick, frictionless and even fun. These innovators also embraced the possibilities of cloud computing and the opportunities that the combination of the cloud plus data could deliver. They could collect detailed data on consumers and process it with sophisticated applications that lived on a server in the cloud and could communicate with mobile devices that connected to the cloud through a browser.

These innovators were also aided by two other things that made the development process more interesting. First was the improvement in the mobile devices themselves. These devices got good enough that they would actually do QR or bar codes that merchant scanner could read reliably – something that was not possible a few years ago. This technology development made it possible for alternatives to NFC to flourish at the point of sale. Second was the advent of GPS and the ability to use it to pinpoint consumer’s whereabouts. That also opened the door for a new crop of innovation that could influence foot traffic into local merchants by serving offers and other promotional schemes to consumers in the area of their establishments.


The Future is Now

So, back to the future that was described at the beginning of this chapter.

Mary’s experience is not that different from what Square is promoting today with its Pay by Square registered card model, powered by its IP enabled merchant Square Register solution and geo-fencing capabilities that make it possible for merchants to anticipate her arrival, and pull up her preferences and past purchase history.

Annie’s experience is a lot like what PayPal is pursuing, using apps like Milo and Red Laser to scan product information to access inventory and then trigger payment via a registered PayPal account.

Ahmad’s weekend selling experience can be powered today by ROAM and a ROAM Pay wallet that enables both personal and merchant mobile account capabilities.

As a small business, Jack is in the sweet spot of many a payments provider. PayPal, Intuit, Square and Sage (powered by ROAM) are all knitting together capabilities that leverage the core electronic payments acceptance via mobile to services that add value to small businesses and their customers.

Similarly, Chan’s experience is a core use case for global players who also seek to innovate in a B2B environment not dominated by card acceptance. ROAM’s mobile platform could power today the always-on mobile storefront, with functionality on top of that provided by any player who has a small global entrepreneur in her sights.

William and his family’s experience is available today in a more limited fashion using QR codes to purchase from the TV screen on primarily home shopping channels. Similarly, digital in-game purchases are available today on social networks and most gaming platforms.

Maggie’s experience is perhaps the most visionary and in many ways, the mobile commerce holy grail. It is what many characterize as the most frictionless commerce experience of all: mobile commerce without really having the mobile as an active actor in the process. It’s simple and elegant on the surface, but extraordinarily complex and bedeviling under the surface. It is the ultimate commerce/payments/loyalty experience where the most important outcome is a better merchant and customer experience. In that example, bank brands, carrier brands, wallet brands and technology brands all take a back seat to the provider who enables it all. That’s exactly why there is so much passion around the mobile commerce space. Not surprisingly, there is lots of competition for who that provider will be, who will own the “wallet” that aggregates payments, offers and other information. Many are vying for the number one spot.

From Payments to Commerce

What’s clear across all of these examples is that the discussion of mobile can no longer be limited just to payments – the actual act of making a payment at the point of sale. That is, in fact, how the whole mobile conversation began nearly a decade ago. Then, the future of mobile was more about handsets with chips that would emulate card transactions at the point of sale. Technologists were giddy at the prospect of phones that could literally replace leather wallets.

But what was really missing then was the big game changer: the opportunity to use mobile devices to transform how businesses and consumers would interact with each other and add value to the relationships that they have formed (or would like to).

What merchants want most of all is to recapture the personal relationship that’s always been at the core of the retail experience. What consumers want is that – plus a fast, reliable and secure solution to enable that personal experience. Merchants, therefore, must be able to anticipate what their customers want, letting them know when it’s available for them to buy and providing them with information about the product as they’re making their buying decision. It also means creating a relationship with a consumer that’s far more personal than an email announcement of a sale or deal. It means implementing a solution that is as easy and fast as today’s card experience but with many more features and benefits that are just there ready for consumers to access when they’re ready to do so.

There are hundreds and hundreds of companies circling around this multitrillion-dollar environment, hoping to enable just that.