China leading the way in mobile payments after all?

I always enjoy reading about China and payments. This is without doubt the biggest market for electronic payments, and therefor for mobile banking. However, so many things about China are different to what I am use to: culture, business practices, language, macro- and micro-economies. The lessons that I have learned in deployment of mobile banking solutions would probably only have marginal applicability.

Yet, it seems as if China is really moving forward aggressively in creating an ideal environment for mobile banking to thrive. I am basing this on two recent articles that I have read on Finextra:

1. It seems as if a regulatory environment is being established to govern non-financial institution payment service providers (Read here). I think that this is particularly progressive in a number of ways. Not the least being the fact that recognition is given to non-financial institution payment providers. This recognition would enable (providing that they conform to the regulations) institutions, like network operators and regulators, to offer payment services.

2. According to another article, China Unionpay has signed up a group of the country's banks, wireless operators and handset manufacturers to form a mobile payments alliance. It is possible to think of many mobile payment alliances having been established in many countries, but being able to sign an alliance with both banks and operators being a party to such an agreement is relatively unique. (Read here). If this alliance is going to work well, the mobile banking deployments will definitely be stimulated.

Maybe we should take more notice of what is happening in China. Maybe some-one can point me in the direction of an expert that could speak at a next conference and enlighten all of us.

Also read a recent blog that I posted on China.

Some thoughts on SAP's acquisition of Sybase

SAP recently announced that they intend to acquire Sybase for cash. Two aspects of the deal is interesting: The valuation of Sybase (a premium of 56% on the listprice) and the fact that mobility was frequently mentioned in the official SAP press. This news triggered many articles and a lot of analysts had something to say about the deal (Read here, here, here and here). The debate ranges from a database war (which is madness with Sybase's small database marketshare), to in-memory analytics and access to clients.

Yet, the concensus of all the articles that I have read is that SAP wants to use this acquisition as a spingboard into mobility. (In the words of Bill McDermott: "companies around the world will be able to run their business from many devices."). This is an ambitious move and would be difficult to execute on, but if successful, could have a major impact on the direction and influence of SAP. The problem here, is the difference between enterprise software and mobility (that is often/mostly) a personal choice. How a company like SAP will branch both (corporates and individuals) will be very tricky. A vision of being able to manage stock as they move and to be able to enter invoices at the point of service delivery is exciting and could lead to a new ERP world.

With relevance to this blog, what will happen to Sybase's mobile banking? My guess is that it will get lost in the noise. The penetration, success and uniqueness (from a technology perspective) is so low, that I do not believe it was at all visible in the acquisition and that it would not feature on any of the SAP plans. I also do not think that mobile banking will feature in strategic drives or sales incentives. It is my opinion that this is the end of the road for Sybase mobile banking.

The relevance, importance and future of P2P payments

Pretty much any payment if you analyse it in the end is a person to person (P2P) payment. We have grown used to the majority of these payments happening in cash. "Oh, by the way, here is the $10 that I owe you..." This is way that we have paid each other for centuries and we will have difficulty changing. Today, a small percentage of these payments do happen by means of other mechanisms (cheque payments, on-line electronic transfers, etc.). But the majority still is executed by means of cash transactions.

Of course, this is because cash has a number of characteristics that ensures that this work so well:

• Cash is immediate (As soon as I got paid the money, I can use it again).
• Cash is irreversable (If I have the money, nobody can reverse the transaction without my consent and or knowledge)
• Cash transactions are cheap (to the consumer, but not to the eco-system)
• Cash does not require a name (KYC) attached to it.

In a recent study performed by eCom Advisers (Read here), almost half of the respondents in the survey indicated that they would want to have an electronic mechanism to replace cash and checks as a person to person payment mechanism. Why is this the case?

• Cash is pretty inconvenient in many ways
• It is impossible to do P2P payments in realtime and over a distance
• Electronic payments can be more secure, more predictable and actually at a lower cost (for the eco-system) than cash.
  

With the advances in mobile payments, the deployment of suitable infrastructure and (most important) education, it is highly likely that cash will start to be replaced as the P2P payment tool of choice. This may not take too long to happen.

Mobile banking is changing bank customer behaviour

It is now accepted as being a reality for banking: mobile will be a part of the future of how banking will be delivered to consumers. As was the case with ATM's, it is highly likely that consumer's behaviour related to their interaction with banks will change, as mobile banking usage picks up. Something else that we can have fun with speculating...

Based on prelimanry research and other evidence, it does seem as if the growth of mobile banking leads to a reduction in visits by customers to branches and a reduction of calls to contact centres. This is of course good news as this will directly lead to a reduction in cost. Some observations also seem to suggest that consumers do more transactions now. It is as if the ease with which mobile banking allows consumers to do transactions, stimulate them to do more. But what are some of the other changes that we could also expect?

• Consumers will be more aware of their money (or the lack of it). I believe that consumers will become more educated about spending and saving money. People will budget better and become more savvy to manage and use their money.
• More sophisticated mechanisms to stimulate impulse buying will become prevalent. This will change spending patterns and the effectiveness of alternative sales and marketing approaches.
• As mobile banking systems become more mainstream, more advanced applications will be developed (making use of cellular characteristics like location based services for instance). This will lead to opportunities where new social and entertainment behaviour patterns will be triggered.
• Mobile banking will change the competitor profile regarding banks and also non-banks starting to offer financial services. This will mean that customers will start buying their banking products somewhere else (than traditional banks) and even expect it to be bundled with other products.

What do you think?

Implications of the Cybersource acquisition for mobile banking

Visa announce last month that they would be acquiring Cybersource for cash. (Read here). The move to acquire this company is clearly an effort to extend the security of VISA payments. Cybersource provides merchant functionality to almost three hundred thousand companies and owns intellectual property that reduce fraud in card payment transactions in the on-line world. During the briefing session, it was reported that Gerry Sweeney (Visa's head of global e-commerce and authentication) said that mobile is clearly a growing and important channel for them. Why did he say that?

Also in another article, Michael Walsh, president and CEO of CyberSource is quoted as saying: “... the platform is built in such a way that adding new mobile capabilities would be fairly seamless “ (Read here). It seems clear that there has been some discussion about the mobile banking implications of this acquisition. Seeing that it is not spelled out what it means, it offers a great opportunity to speculate. This is a few of the scenarios that I could think of:

• Visa offers a hosted mobile banking solution to issuing banks in a similar way that they offer alert services today.
• Cybersource is in the process of developing a mobile based, secure authorisation mechanism that will allow card not present transactions to be secured by means of a phone. Alternatively, VISA is considering standardising on some dual authorisation mechanism that will be licensed to vendors (Cybersource being the first one).
  
• VISA and Cybersource is working on a "hub" that will sit between mobile and clearing systems. If a bank connects to this "hub" mobile banking transactions will receive priority and value added services (security enhancements)
• Some of the features of new NFC phones will be supported by VISA switches.
  

Any other suggestions?

Death to cash at origin

Paper money cash is such a problem in many ways. It is a very expensive payment tool, with lots of management overhead and distribution cost. It is not at all secure (probably the least secure than any alternative payment tool), it can form the basis for money creation and sits at the heart of many detrimental aspects of any monetary system. It would be best for all if we could eliminate paper money.

In reading a recent article published by Juniper (Read here), I realised that many people (and this differs from country to country) are still being paid in cash. (whether a salary or some kind of grant). The payment process of individuals is the source of a large percentage of cash in circulation. It struck me that this is where the fight against cash should start. All salary and grant pay-outs should be made electronically (and I believe that this should be legislated).

It is relatively easy (and it will become easier) for any individual to open a bank account or get access to an electronic wallet (even in poor countries). Only if cash was electronic in the first place, do we stand a chance of defeating paper money in the interest of all of us. I say: "Kill money before it gets born."