An emerging sector in the market recently has been the rise of mobile payments – P2P transactions predominantly using cell phones. The current interface is making payments using SMS – sending a transaction over a text message, pinging the server/bank, then going back to the other user. This is not too complex of a transaction and has began to gain some acceptance among users, but how far can this go – and what can we really do with mobile payments.
PayPal was the first large e-commerce platform to launch their mobile payments. Currently, with their protocol, you can send payments to anyone in the world using SMS. Obviously, it is necessary for you to have a PayPal account with a stored balance, but the concept is definitely very cool. Like any other market, however, early adopters can only take it so far. It needs a much stronger backing than simple P2P transactions and here’s what I think they can do.
- Create a barcode system similar to RFID tagging – where people can see products around the stores and purchase them individually – this can also be true with advertisements and such. Since PP and other payment platforms have address verification pre-payment – this is easily a possibility
- The cell phone wallet system will work well with verification from credit card systems. Currently with PP mobile you can add a funding source as a credit card – but for users that don’t have a PP account – you should be able to sign up using your phone as well – a functionality that may not gain large acceptance but convenient
- Create a recurring payment model for adding minutes on your cell phone or adding a limited number of text messages – good for US phone companies? – not at all but can be huge internationally when people have to refill their sim cards
PayPal is not the only player in the market right now and will not be in the near future. This market has a lot of possibility but the key question is how to really make money off of something like this. Service based charges? Per use based charge? I don’t think anyone really has the answer yet.
PayPal is obviously not the only player in this market. In fact, it hasn’t been companies in the US that have been challenging paypal, but rather small start-ups in countries like China and India. “Ji Grahak” is an Indian based phone company where you can download the software and begin to make payments over the phone. Here are some pro’s and cons of a competitor like this though:
- Higher market potential – India and China have phone capabilities where you buy the sim card and then the handset separately (a significantly better model than the US one I might add). Therefore, refilling your sim card using online payments only makes sense
- The number of handsets in these countries are significantly larger – your growth potential based on the number of people using cell phones is significantly higher than in the U.S
- The golden rule for any web-based payment company is FRAUD. This is the number one concern and to make it so simple to send money – people will find out ways to hack into other people’s cell phones. Once you lose the trust of the users in a business dealing with your money – it’s very difficult to get it back
Well – I think there is a high upside to this market but we may not see immediate usage. Like any other technology the world around it has to develop before it reaches ubiquity. Nonetheless – the convenience of being able to transfer money at dinner when you owe someone is incredible. We’ll have to see what happens in the future.
Just my $.02