Payments International 2015, Day 2: Monetising Mobile and In-app Payments

“It’s obvious from the packed room here at this briefing that people are struggling to find out how to monetise the mobile channel,” said Eric Tak, global head of cards and new business at ING Bank. “It reminds me of the old joke: ‘how do you make a million out of mobile payments?’ Start out with a billion.”

Opening day two of Payments International, Tak suggested that possibly the best answer was to view the mobile channel as a service to tie-in consumer and corporate clients to your bank, or to centralise everything to get the necessary volume and efficiency – as has happened in the Netherlands, with the shared IDEAL e-commerce and billing platform.

Tomasz Smilowicz, global head of mobile solutions at Citi, outlined how his bank doesn’t charge for providing a mobile channel to corporates, thus attracting hundreds of billions of dollars to its mobile platform in countries from Mexico to South Korea. “Initially we worked with Coca-Cola and other large multinational corporations (MNCs) to assist them with collections and in the supply chain,” he said, thereby eliminating expensive cash and slower processing methodologies.

This approach can undoubtedly improve the efficiency of treasuries, but essentially still uses the mobile channel as a trade authorisation platform with some add-on peer-to-peer (P2P) functionality. Although Smilowicz did later explain that Citi has developed both a specific mobile app for mid-level financial professionals who travel a lot, such as treasurers and a specific tablet app for senior level equivalents in the c-suite, such as chief financial officers (CFOs) to further improve service. “It’s useful for my Coke clients, as they travel 220 days a year,” he added.

Makoto Shibata, head of the global innovation and e-business team at Bank of Tokyo-Mitsubishi in Japan, was more interested in the field of in-app payments. He cited examples such as Line Pay in Japan; Kakao Pay in Korea and WeChat in China – a competitor to Alibaba, which have 400m, 180m and 500m users respectively across Asia.

“They are messenger services, like WhatsApp, where you can make in-app payments, as is common in the gaming arena,” said Shibata, interviewed by gtnews after the briefing. “My bank doesn’t provide the service, but we are looking at them closely to learn lessons and decide whether we should co-operate with them or compete.”

Teething Troubles

The issue of peer-to-peer (P2P) payments was also much discussed on day two of the trade show. John Maynard, head of development at the UK’s Pay-m shared bank-owned mobile and proximity payments platform, pointed out that Pay-m now has 2.1m registered users a year after its launch and 42,000 UK small-to-medium sized enterprises (SMEs) use it.

The system runs off the back of the VocaLink powered Faster Payment Service (FPS) ACH infrastructure in the UK, promising to finally use this pluming backbone to offer additional payment services to consumers and businesses. Yet as illustrated by the figures, it is mostly sole traders and very small firms that have so far adopted this consumer-focused offering.

“No bank I know of is allowing their large corporate clients to make payments on Pay-m yet,” said Maynard. Therein lies the problem – how to get corporate users onto mobile platforms, especially when corporates are typically the last in the technology development and adoption ‘line’ – following early consumer adopters and retail bank customers. Only once these users’ needs have been served, do corporate bank clients typically get a customised mobile business service.

Wired Outlines Disintermediation Threat

Shibata’s question of whether to co-operate or compete was a key theme during the second day of the show. The topic was addressed directly by Ben Hammersley, editor-at-large at
magazine, who declared: “The supposition that everything will be different when new challenger firms – seeking to disrupt the payments and FS space – are regulated is a suicide note.”

Hammersley went on to claim that the online low-cost TransferWise money transfer business proved the stupidity of banks in failing to respond to the disintermediation threat they face from new tech-led mobile and online, social media and other in-app alternative payment service providers (PSPs). A UK regulator in the audience questioned him on this point, stating “actually that is a misconception, transfers are regulated too”. But as he responded, the concern is about the global scene – not merley what the UK thinks.

“I get my Bitcoins from Hong Kong, so I don’t care about what a little island off Europe says,” Hammersley added, demonstrating a pugnacious technology-led mindset that does not abide by traditional ways of conducting payments, banking or business. “To Venmo
[i.e. make a P2P payment on your mobile]
has now become a verb in the US,” he added, before citing Facebook payments and Chinese mobile manufacturer Xiaomi as potential future disruptors. “Crucially, all these firms have device intimacy and are close to the customer.”

Hammersley also explained the concept of Moore’s law to his audience of treasurers, bankers and technologists. Named after an observation by Intel co-founder Gordon Moore, this states that computing power will double every year (previously every 18 months). He also cited Metcalfe’s law whereby the inventor of Ethernet cabling, Robert Metcalfe, stated that “the power of networks is equal to the number of nodes squared”, meaning that social networks are proliferating as fast as the power of your smartphone.

The mobile penetration law, which Hammersely claimed is also an exponential growth multiplier, would mean that by 2020 there will be a phone for every individual on the planet (although refleting the fact that some will own two or more). “There are lots of unbanked people out there globally who can now make payments due to their phone or social media,” he added.

The revolution is here apparently and it just might be televised on YouTube.


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