Co-operation or Exclusivity

Two totally different initiatives in the US this quarter related to mobile banking is of special interest. Two companies have launched (or rather announced) two initiatives that is diametrically apposed in terms of the underlying strategy.

Firethorn announced an agreement with Cingular where the Firethorn Java application will ship with every Cingular mobile phone. Revenue generated via mobile banking and payment transactions will be shared with Cingular and in turn, Cingular will effectively block (or at least make it difficult) for other suppliers downloading their own proprietary Java applications onto Cingular handsets. Firethorn is confident that they will conclude similar agreements with other mobile operators soon. This is a totally closed and proprietary approach. Will it work?

Obopay is a service provided to any person with a mobile phone. A subscriber to Obopay is able to download a Java application to any mobile phone. This enables a subscriber to transfer money from any Obopay customer to another, do some rudimentary payment and enquiry services and withdraw cash or pay (using the obopay pre-paid (debit) card) at ATM's or POS's. The importance of this approach is that it is totally "open" in the sense that it is suppose to run on any mobile operator and work on any ATM. This is of course the most logical way given what happened in the past with the Internet economy... but is it the logical way in payments and banking?

It would be interesting to be able to roll forward in time to understand which of the two approaches win, as it will tell us a lot about the power balance in mobile banking. Consumers are of course very important. It is their decisions and preferences that have catapulted small companies into the limelight in the Internet economy. But, then, the Internet is much more open than is the case with mobile (at least at this stage). Mobile operators have much more control over what happens on their handsets and their network. As a matter of fact, Cingular have indicated that they do not see their network as an "open network".

So what will happen? I believe that the role of banks, their ability to take their own decisions and stay in touch with their own clients will play a mega-role in which model wins. Not only banks per se, but also other organisations and bodies in the banking domain. It would be interesting to track what VISA, Mastercard and clearing switches (like Swift) do, as these organisations will ultimately influence who will win.