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What Happened toMicropayments and WhatHappens Next?
Dion F. LisleSenior Vice PresidentCitibank Global Consumer GroupGrowth Ventures and [email protected]
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F ull Disclosure
I work in Growth Ventures andInnovation
This is NOT an operating unitI worked for Obopay a mobilepayments startupI have worked in technology as a non-technologist for 20 years and the past10 in startups.
I am NOT a 20 year banker I love gadgets
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W hat is a Micro Payment
Micropayments are means for transferring very small amounts of money, in situations where collectingsuch small amounts of money with theusual payment systems is impractical,or very expensive, in terms of the
amount of money being collected.
Source: Wikipedia (so you know its true)
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Micropayments 1. 0B eenz
B orn: 1998Sold to Carlson Marketing in 200 1 for ?B urned about $1 00 million
In F airness was sold off
F loozB orn: F ebruary 1999Died: August 200 1B urned about $ 4 0 million (real money, not F looz)
DigicashB orn 199 4 ishDied: November 1998B urned who knows how much money
The Common Denominator they all tried to create a new currency
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Micropayments 2 .0Peppercoin
B orn: 200 1Died: April 2007B urned about $1 4 million
YagaB orn:Died: January 2006 (oddly enough acquired by B itpass)B urned about $ 20 million
B itpassB orn: 2002Died: January 2007B urned about $1 5 million
The Common Denominator They all tried to aggregate payments or content
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Gartner Hype Cycle 200 5
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W hat is the Problem ?
As with all great technologies lookingfor a problem to solve, Micropaymentsgets bogged down at the beginningW hat is the problem thatMicropayments Solves ?
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It Depends on Perspective
O n-LineMerchants
VendingMachine
ContentProvider
FoodMerchant
Charity
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Success: Ringtones
Math Word Problem2 ,27 9,000 Downloads
$ 3 Price Per Download
$6 ,83 7 ,000 Gross Revenue$2 ,7 3 4 ,800 Share for the Phone company ( 4 0% )
$4 ,102 ,200 for T-Pain and Zomba Records
Note: the Album Epiphany sold about 700 ,000 copies andthe song was digitally downloaded 1. 6 million times
T-Pain (featuring Yung Joc)
B uy U a Drank (Shawty Snappin)
Konvict/Nappy B oy/Jive - Zomba
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Success: iTunes
This has been covered adnauseam but I want to emphasize
the following:Closed Loop
The content Aggregator is Apple
The payment Aggregator is ApplePricing is controlled by AppleThe user experience is Apple
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Success: Transit CardsOyster - London10 million cards issued 5 million inuse
The Tube has nearly 4 million dailyriders
Octopus Hong Kong Almost $1 0 million per day intransactions20% of revenues are now comingfrom Non-Transit Octopus purchases
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The F uture of Micropayments
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Micro of the F uture
I predict:It will initially involve Credit Cards
It will move to Debit CardsIt will involve Mobile PhonesIt will start with a closed loop
system Ala iTunes
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Mobile is Micro
The best method of making a micropayment is a mobile phone
It is ubiquitous
It is always on(unless the battery dies)
It is interactive
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W hat is a Mobile Payment
Moving money from one entity toanother using the Mobile Phone asthe interface
P 2 P Paypal, ObopayMerchant Paypal, Obopay (soon),
Apple (Patent applied)Not to be confused with MobileB anking check balance, A 2 Atransfer
F irethorn(Qualcomm), M F oundry
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Mobile Payments Ecosystem
CardCardIssuer Issuer
HandsetHandset
Maker Maker
MobileMobileCarrier Carrier
SoftwareSoftwareDeveloper Developer
ChipsetChipset
Maker Maker
PaymentPaymentNetworksNetworks
CardCardAcquirer Acquirer
Processor Processor CardCard
AssociationsAssociations
SIMSIMCardCard
Consumer Consumer
MerchantMerchant
MobileMobileApplicationsApplications
P O SP O SVendor Vendor
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Enabling TechnologiesNF C R F ID Contactless
The ability to swipe a card or phone at POSfor a payment
Mobile P 2 PThe ability to pay an individual with your mobile phone
Mobile Merchant PaymentsThe ability beyond N F C to pay merchants for goods or services
Mobile W allet An account on a mobile phone allowing youto choose among various paymentinstruments
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NF C is Coming Sooooooon After hearing about N F C (R F ID) for the past 3 years, where is it?W hy the delays?
Heavy lifting of infrastructureMobile phones need to changeMerchant terminals need to change
B ack end processing needs to change
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NF C Technology TimelinePhone Chipsets
SIM CardsW ireless
InfrastructureHandsetsCash Register
ReadersT imeline
12 to 18Months 18 Months2 4 Months 1 2 Months
Players
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NF C B usiness PlayersOnce the technology is decided, there arenumerous mouths to feed.Carriers is this a value added service or simply data trafficMerchants do they get incentives to convert,or is there incremental revenue to offset costsHandset Makers W ho pays for the cost of the chips to make handsets N F C ready
In the US the handsets are built to carrier specifications
Associations Is this a net gain or lossB anks W hat is their motivation
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NF C B rand Confusion
Match the NFC Programs to their O wners
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Mobile P 2 P A new space being trialed by many North American banks including Citibank.Paypal as the leader in P 2 P has an edge in
accounts, but has so far lagged on MobileP 2 P.Obopay is the leader of the pureplay mobileP 2 P companiesSpace is being encroached by mobilebanking companies such as F irethorn(Qualcomm) and M F oundry.
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Hurdles to Mobile P 2 P
Authentication are you authorized justbecause you have the phone?Ease of use across banks and carriers
Can a Citibank customer using Verizon sendmoney to a W achovia customer usingSprint?
DemographicsMobile P 2 P has shown strong acceptanceamong Underbanked and very youngB anks target B anked and Middle-Aged.
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Cross Matrix
BREWJ2M
ESMS WAP
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A Very Powerful Combination
Ubiquitous
Interactive
W idely Accepted Always On
Available Today
Ubiquitous
Interactive
W idely Accepted Always On (almost)
Available Today
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Digital W allet
How to manage your mobilemicropayments?Digital or e- W allets have a badreputation from 1999. (long story)B ut they could be resurrected with theMobile Phone becoming the center of
our daily money managementW hose Digital W allet remains to beseen.
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W HY ?Or How do I use this
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TAXI !
The best use case for MobileMicropayments
Verifone installed in NYC TaxisImagine instead of a card, you call thedriver with the payment informationand he smss you a receipt.Hurdles Taxi Drivers, Cash Incomeand others
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Vending Machine
A true Micropayment applicationthat eliminates the need for coins.Requires further infrastructureupgrades as the VendingMachines need to be changedoutDelivers convenience for consumersReduces cost of coin handlingfor vendors
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Content Purchase
NF C W ill allow users to wave their phone at a poster and purchaseassociated contentImagine a concert poster that allowsyou to buy tickets to the concert or anMP3 download from the artist.
B uy a t-shirt from the concert you justsaw.
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Parking Meters sans CoinsVerrus Mobile Payment of B C Canadahas recently introduced a method topay for parking using your mobilephone.
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Line B uster
You pull up to Starbucks and usingyour mobile phone you order and payfor your Grande, Extra Hot, DoubleShot, Non- F at Latte.This requires the interactivity of amobile phone
Delivers convenience to the consumer and possibly incremental sales to themerchant
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Pizza Delivery
Driver pulls up with your two largecheese pizzas for $18 plus tipYou send a mobile payment to thedriver and the application leaves aspace for a tipIncreases security for Delivery Driver
Increases audit trail for Pizza Parlor Delivers convenience for theconsumer
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Success Looks Like:
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Success Looks Like: Japan
O saifu-Keitai
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5 Takeaways
Micropayments are morphing toMobile paymentsClosed Systems are the best place tostartIgnore technology and focus on whatpeople do with their wallet everyday
Reality takes time to catch up topredictionsLook around see where you wouldlike to use your phone instead of cash
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Reference List
AB I Research Great content on R F IDContactless Payments
www.abiresearch.com
Glenbrooks Payment Newswww.paymentsnews.com/F ederal Reserve B ank of Philadelphia
Micropayments: The F inal F rontier by JamesC McGrath June 2006
The Register UK Mobile Newshttp://www.theregister.co.uk/comms/mobile/