Paul Ruppert writes Mobile Payments: Top 10 Issues between Banks and Mobile Operators, a good summary of where mobile payments space stands today (end of 2007).

Before I start, let me clarify that when I talk about mobile payments, I am not talking about mobile banking. Mobile banking is a much “easier” area to deal with, mainly because there are fewer players to deal with: 1) the particular bank, 2) the end-user, 3) the service/software provider. And there are 1) no network carriers, 2) no credit card companies, 3) no merchants and no POS to deal with.

The mobile transaction (which includes payment) space is such a hard space to crack — too much is at stake; millions of subscribers, millions of transactions, and lots of revenue. It is a closed system and no one likes to share, not the network operators, credit card companies, the banks (note: the banks are the ones who are more open minded — they know convenience is the winner recipe).

Paul writes:

“Neither banks, nor operators will be able to do this independently. They need each other and are like mating porcupines, or crashing tectonic plates in approaching this market opportunity. Don’t get caught in between.”

A very true statement — it is an ecosystem. The big brothers (network operators, credit card companies, etc) need the little brothers to realize the opportunity. And vice-versa. Unfortunately, the little brothers are getting caught in between; many have put mobile transactions in the back-burner and moved to other areas, while the other small or medium size players continue to press on, and continue to take money from VCs (2nd, 3rd rounds) and continue the dilution game to the point of no return.

The big brothers continue to slow innovation and opportunities.

The Technology Gap

The technology gap is what is delaying the opportunity. But the technology gap exists because the handsets with the right technology for mobile transactions are not being ordered (by the network operators)… I am hoping the Google effect continues to make an impact on operators and handset manufacturers…

For mobile payments to be successful, it has to be plain-stupid-simple to use, by everyone, and everywhere.

SMS is not the ultimate answer. But SMS is the intermediary solution while the technology gap is addressed.

The right answer for physical mobile transactions and in particular payments, is proximity, best implemented via Near Field Communication (NFC) radio tags.

(As a side note, visual tags, for example, 2D barcodes, also serve as great interaction triggers for mobile applications, but more on the static side of mobile transactions, and not as effective for payments. Recently CTIA announced its RFI for Cameraphone Barcode Scanning in the U.S. in an attempt to lead the standardization of visual tags formats).

The technology gap is also related to lack of standardization when it comes to “integration” with transactional systems, billing and other.

So in the meantime (I am talking about the U.S.) we have to wait. And continue to see trials, and trials after trials. And even thought we have beaten that horse to death, we are going to continue to see more trials. I think we already have proven the value proposition.

Then we will go over the fragmentation issue of course w.r.t. platforms, APIs, and so on; as expected.

Why is NFC so hot when there are no phones out there?

There is a recent thread at the ForumOxford on the topic of Why is NFC so hot when there are no phones out there?.

It is a good discussion. Some of the folks claim NFC is pure hype. Others understand the potential of NFC and the current roadblocks. Below is my response to the thread:

Bluetooth had a lot of hype back in 1998. And it is pervasive today all across.

NFC has a lot hype today, and has great potential, assuming handsets come out with NFC support.

I haven’t given up on NFC yet; it is just on the backburner.

Some applications that leverage NFC, such as payments, are hard to deploy (not hard to implement), because of dependencies on other parts, for example information on other parts of the supply-chain (as someone else mentioned on this thread), or just because of dependencies on entities who don’t want to give control, for example, in the US, network operators are not ordering the handsets w/ NFC, because they want control, to decide when, and own the subscriber (and where payment data should reside). Credit cards company also want control. I know this because I went through all of that…

But there are so many other applications beyond payment for NFC… The potential of Touch is huge, on the applications themselves, of the user experience, and I hope this group helps educate the rest of the world.

ceo