I have a growing conviction that m-payments stand to be as big a deal for the internet industry in the second decade of the 21st century as advertising was in the first decade.
Google chairman Eric Schmidt recently opined that electronic payments stand to be a US$3trn industry worldwide in the coming years. In recent weeks, Google kicked off its NFC odyssey in New York. At the same time, Samsung and Visa kick started their NFC payments ecosystem for London ahead of the 2012 Olympics.
If you think about payments as a whole think of it in these three ways – online payments, traditional offline payments in shops via cash, and electronic payments via cards in shops.
Think forward two to three years from now and the landscape may have changed to swift online payments for discretionary items, like newspaper and magazine articles and song downloads; contactless payments via near field communications (NFC)-powered smartphones or contactless debit and credit cards; and some of us will still prefer to pay by cold, hard cash for some items.
When I spoke to Schmidt about this last week, he compared it with the growth of Android, which is now at 500,000 activations a day and growing. “The thing about Android was there were not a lot of capital costs. But with NFC, you need to put a special chip in the phones and, of course, point-of-sale terminals have to get upgraded. The sooner we can convince retailers that the loss rates are lower and then it’s just a matter of how long.
“How fast will it occur? In a year, I think, you’ll begin to notice it, when you start seeing people using it in different places then you know it’s going to take off. But then again, we as an industry have been talking about cloud computing for 20 years and only now the infrastructure stuff is possible. So it’s speculative. If the payment thing works, that side of the retail business is a trillion dollars. How much of that will Google get? Well, we’re not going to take three-quarters.”
Apple and m-payments
Another tech giant eyeing this space is Apple, which with its iOS operating system and various App Stores deserves credit for showing the world how easy and simple payments for items like apps or magazines should be, rather than the onerous check-out model that has existed since the late 1990s.
Apple is rumoured to be including NFC chipsets in its forthcoming iPhone 5, which is expected out in July.
The simplistic form of payment created by Apple for the iOS ecosystem has expanded into personal computing in terms of the new Mac App Store.
A spoke recently to John Collison, one of the Collison brothers, whose new payments company Stripe is rumoured to have attracted investment by Silicon Valley’s top investor Peter Thiel and Elon Musk. Collison also believes a more simplistic way of accepting payments online or via should emerge.
“Everyone makes money from advertising on the internet and you see products, services and software and it feels a bit daft that advertising is the only way to monetise. It’s like a world where there were only free sheet newspapers and no paid versions. That is because it is so hard to accept payment from the internet,” he told me.
A revolution is ripe and Twitter co-founder Jack Dorsey’s other company, Square, which has just raised US$100m in venture capital, is also positioned for success in person-to-person payments via mobile devices.
Square’s principal product is a small, square device that can be attached to any iPhone, iPad or Android device via the headphone jack and allows people to swipe their credit cards, choose the amount to be given to the recipients and then sign their names for confirmation. The technology can also be used for sending wireless payments via text message or email, as a free app for iOS or Android devices.
New research out this morning from Juniper Research has determined that the total value of mobile payments for digital and physical goods, money transfers and NFC transactions will reach US$670bn by 2015, up from US$240bn this year. These forecasts represent the gross merchandise value of all purchases or the value of money being transferred.
The report predicts all segments will exhibit two to three times growth over the next five years. This growth will be driven by the rapid adoption of mobile ticketing, NFC contactless payments, physical goods purchases and money transfers, as people in both developed and developing countries use their devices for everyday transactions. Some 20 countries are expected to launch NFC services in the next 18 months, resulting in transactions approaching US$50bn worldwide by 2014. Meanwhile, the need for financial access in developing countries is such that active mobile money users will double by 2013 and drive transaction values accordingly.
Senior analyst David Snow explained: “Our analysis shows that emerging segments such as physical goods payments, NFC and money transfers will fuel market growth by a factor of 2.7 times by 2015. Digital goods is the largest segment and, although forecast to more than double, it is not growing as quickly as some of the newer segments.”
Other key messages from the report include:
- The top 3 regions for mobile payments (Far East and China, Western Europe and North America) will represent 75pc of the global mobile payment gross transaction value by 2015.
- Digital goods payments will account for nearly 40pc of the market in 2015.
My attention this morning was arrested by the US$670bn figure for mobile payments and I wondered if it was too high. I then remembered Schmidt’s US$3trn prediction and thought to myself that he’s clearly thinking across the entire payments model with mobile being the notable portion of the overall market.
Think about payments you can make directly: mobile-to-store, mobile-to-mobile, mobile-to-TV, TV-to-web, heck even TV-to-TV!
There is every reason to believe monetisation beyond mere ads could be the cyber world’s next big revolution, evolution even.