TW Reads: Mobile Payments

An excerpt from our reading list on the mobile payment industry.

As we’ve mentioned before, we’ve been involved in the mobile payment industry for quite a while. Since we’re keeping track of the most interesting things happening in the industry, we thought there is no reason why we shouldn’t be sharing some of the most interesting reads or announcements in this field with our readers.

Mobile Payment Today – Mobile wallets: will value actually drive adoption?

Despite the collective efforts of some of the largest companies in the world promoting their supposedly superior products, just 16% of mobile device owners have used their phone to make an in-store payment. That’s not exactly a ringing endorsement.

In light of possible announcement by Apple next Tuesday, it’s prudent to analyze why the collective effort of so many companies across continents and nations left so much to be desired when it comes to building a significant mobile payment solution. In an unusual turn of events, Mobile Payment Today – being so often just a press release portal for a similarly named industry – provides exactly that: a poignant analysis.

Link: Mobile Payments Today

Re/Code – Here’s How Amazon Might Take Over Brick-and-Mortar Retail

Broadly, they said the world’s largest online retailer aims to make it easy for a wider array of brick-and-mortar shops to sell on Amazon while giving Amazon shoppers another way to receive orders on the same day they are purchased.

Nothing has stirred up the mobile payment industry quite as much in the recent weeks as Amazon’s announcement to dive deeper into payments. Not only did they release a device and service that is a direct competitor to Square, Paypal and many others, they’re also attempting to do what they always do: compete through a better price. The device is cheaper, the rates are lower. Especially the last part will make it hard for store owners to resist the Amazon offer.

But there seems to be more than that. Jason Del Rey over at Re/Code has been a keen observer of everything Amazon. It almost feels as if he is for Amazon what Kara Swisher for to Yahoo. Always watching, always acquiring a new source. His analysis concludes that not only is Amazon going after Paypal’s business, it is actually all a ploy to get many of those brick & mortar shops onto their platform, enable them to participate in the glorious experience of ecommerce and enhance Amazon’s ability to make same-day deliveries of every-day products. This, obviously, seems somewhat far-fetched and yet not at all unlikely considering the Bezosnian appetite.

Link: Re/Code

Eater – OpenTable testing mobile payments

Restaurant reservations website OpenTable has officially launched a new payment feature on its mobile app that works at over 45 restaurants in New York City.

While OpenTable isn’t a huge operation in Germany, some restaurants still use it. It feels more like a gimmick here. Mostly because the way restaurants operate here and in the US is so different.

In the US on the other hand, OpenTable is a huge thing and they charge a lot, too. It became so bad that many restaurant owners are comparing it to the Mafia and having to pay protection money to the mafia. Effectively, if you’re not on the platform, people are significantly less likely to visit the restaurant. On the other hand, if you’re using OpenTable, they are suffocating you with the cost of using the service.

In this light, you might not hear that many restaurant owners rejoicing after the announcement that OpenTable is experimenting with payment solutions. Especially if you consider that while there are many, many other services in this field, not many are as likely to succeed in it as OpenTable. If they do, restaurant owners will only have to transfer a bigger cut to the service.

Link: Eater

Facebook readying itself to provide financial services in form of remittance and electronic money

Facebook will soon offer remittance and electronic money services. It’s another piece of the puzzle after the launch of Internet.org and buying Whatsapp.

The authorisation from Ireland’s central bank to become an “e-money” institution would allow Facebook to issue units of stored monetary value that represent a claim against the company. This e-money would be valid throughout Europe via a process known as “passporting”.

This is just another piece of the puzzle that Facebook is executing with determination.

The devil is in the detail on this one, though. Internet.org and buying Whatsapp have been clear plays towards the not-yet-developed world. Facebook can grow in the US and Europe by making ads more expensive per user. That works so far. Especially with organic reach approaching Zero. There is growth in optimization for the next few years. Especially now that Facebook seems to have understood how to work mobile.

But the growth that is needed to get to a distant future, one that might involve having bought Oculus, is only going to materialize by getting all those other internet users onto the platform. While that might not be a literal goal – there is no chance for them getting everybody –, this might not be as far from the vision that Mark Zuckerberg seems to pursue.

A big step towards that goal was the acquisition of Whatsapp and its presence and brand recognizability in said markets. While mobile is on its way to be king in our world, it already is in Africa and many parts of Asia. Feature phones still rule, but smartphones are on the rise. Especially with Huawei & Co. dumping cheap, reliable hardware powered by Android on everybody that holds a Nokia feature phone in their hands.

One, if not the, major application of mobile phones is those markets is dealing with money. It’s a big place and banks aren’t as accessible. Money is being managed, for years now, through services. Sending money (P2P/remittance)? Not a problem. Paying for groceries? Not a problem. Name a scenario that you wish would work here and it’s already an old thing in at least part of Africa.

Screen Shot 2014-04-14 at 15.57.24

That’s why it’s so interesting that Facebook is about to acquire a remittance license in Europe. tl;dr – it makes total sense.

We’ve been part of a project that involved building a payment service into / for Facebook since 2011. For the record, I do not know, if our client is in some way involved what Facebook seems to be doing right now, but I wouldn’t be surprised if they are. That being said, when we started I didn’t know much about how money transfer works. Things changed in the last 3 years.

Europe is a messy, extremely tightly regulated market for financial services and products. At least from the perspective of anybody with a banking license or with the desire to have one. Compared to other markets, it’s still a “if you can make it here, you can make it anywhere”-situation. Additionally, many not-yet-developed countries are using European knowledge to build regulation for themselves.

Another expect is that to provide good remittance services, one has to be present in the market from which the money will flow to somewhere. Since remittance is used predominantly by foreign workers who transfer their money from the place of their work to the place where they and their family live, it makes a lot of sense for Facebook to be present in Europe. Both because European citizens are moving quite often between countries to earn their money as well as foreign workers from Eastern Europe, Africa and Asia are coming here to make a living, often financing the life of their relatives in the places they came from.

As a strategy, it makes all perfect sense. Buy yourself the app that people use to communicate with each other on the devices that they use for communicating and banking, get yourself a “banking license” to one day connect everything inside one company (and possibly one application).

If successful, this will have catastrophic consequences for the open web. The tragic part, for me, is the eloquence and decisiveness of Facebook in the execution of a vision. I can’t help myself, but to admire that.

Week 172

Igor is kicking off the Week Note season with a deep dive into a mobile payment lab that we helped start last year.

Some time in early September, we began a conversation about establishing a Mobile Payment Lab of some sort for a client with whom we had an ongoing relationship for roundabout three years now. In fact, we collaborated on the project with our friends from Edenspiekermann, who have been working for the same client since 2009. Our roles on this project have always been complimentary and I can’t imagine a smoother collaboration process with anybody out there.

Scope of the project

The task was both clear and complex: the goal was to provide an external setup for a strategic approach to finding and prototyping ideas for future features and products. The client is a technology company with a banking license and an established contender in the payment-processing field. They have also invested heavily into the field of mobile payment and been enjoying a good run in the market building mostly white-label solutions for various corporations around the globe with a focus on Europe and Asia.

Product development so far has been approached via market demand (i.e. clients asking for specific features) and a management team that has deep understanding of the field. What had been lacking was a comprehensive roadmap for how to explore future developments without waiting to react to an immediate client request. Basically, the goal was to be able to shape the market instead of only being shaped by it.

Labs are rarely successful and can’t operate as startups

People who know me well also know that I’m not necessarily a believer in the Lab idea. Both internal as well as external Labs usually have one major setup problem and that is lacking the ability to appropriately transform their work back into the larger organization. That doesn’t mean that the work in those labs can not be interesting or innovative. They often are. Even if corporations staff labs with internal people. Given the opportunity to break certain habits and working under different (not necessary more relaxed) conditions, people tend to produce very different results and that’s great. But if those results aren’t in any way usable to their colleagues who are busy churning away at the “normal stuff” which is also known as the thing that currently pays the bills, than all of the work that is being produced in a lab is usually fairly pointless.

Another down side of labs is the fact that they are usually handled as some sort of pet project by well funded members of the management board. That is to say that they are not necessarily strategic and often fairly political. By being used politically – labs require people, people equal money, money equals power – they become even less able to transfer their work into the rest of the company, because the kind of rivalry tends to make people less open about adopting the work of “the other guy”.

At the end of the day, the goal for whatever is created inside of those labs is to become a source of revenue for the whole organization. This is crucial. Otherwise the life expectancy of the new structure is minimal.

  • Generating creative ideas and building presentable and maybe even sharable prototypes can be fun. But more often than not it results in services and products that do not resemble in any way something that can be build and maintained by the company itself. The idea and the prototype are about 10, maybe 20 precent of the work.
  • In most corporations, the approach can rarely resemble the one of startups. I know, this is largely different from the advice that most people in my field will give. The real-politics of a modern day corporation will never allow for the kind of flexibility that the VC funded startup ecosystem can provide. I consider advice that ignores that fact as harmful, because it ignores one core principle of how the funding of startups works. While there are certainly exceptional funds that have a better success rate, usually 8 out of 10 startups fail. Meaning that only 20% of extremely well funded and nurtured ideas generate enough return on invest for the investors. It also helps that VCs don’t actually use their own money for taking larger bets. The same is just not possible for a corporation that attempts to find new sources of revenue. To allow 8 out of 10 ideas to fail, they would have to allocate too many resources and thus potentially harming the overall organization. The only way for corporations to part-take in this process is by creating their own fund and hire good talent that will manage the cash allocated to that fund wisely. This is being done by most blue-chip companies, but differs significantly from the lab structure.

The most important piece of the puzzle for setting up a lab is not how many or what resources will be allocated to it, but how the work will be transferred back into the organization. We have spent a significant amount of time on deliberating how to do this right. While I’d like to share more useful advice, this is as far as non-contextual insight will get you, unfortunately. Those kind of projects seem only on paper or in TED-like talks as something that can be adoptable by reading an article or applying one rigid framework. While learning as much as you can helps, this is all about the individuals involved, with whom they talk, who they go to lunch with, who there allies are and who their opponents. It probably helps more to play chess from time to time too.

Our role

Our role was both a strategic one – in which our knowledge of the client and the market came into play – as well as a product-oriented one. Together with the Edenspiekermann Service Design team, we found a way to work that was both feasible for us as well as the client.

We chose a short iteration cycle. We aimed for 4 weeks between new iterations and ended up on a 5 week cycle. One cycle consist of establishing the scope of inquiry aka defining the work. We should have started with a maximum of two different tasks. Instead we had four. Which was definitely a strain for the whole team, because it put us under more pressure than is good for morale and quality of the output. Mostly, it worked out fine, but we definitely are planing to change that piece of the process in the next round. That being said, pulling some longer evenings in which everyone churns away also brought the team closer together. Which is immensely valuable for Labs in general. While those are, as described, not startups, they do work similarly on an interpersonal relationship level.

While having a mainly strategic position, I oscillated between different roles heavily. At certain points, I felt a bit like a Creative Director, other times I was happy about deep dives into research, connecting the dots between previously read articles, designing print prototypes and having the excuse to buy a Little Printer in the process.

It is important to have clear roles in Labs, but it’s equally important for everybody to be part of everything. Small teams and narrowly defined exploratory missions do have the luxury of actually getting everybody’s input. That’s what they can excel at. We, thankfully, managed quite alright from the start.

At some point, I will have to share a few insights about payment and especially mobile payment. After being involved in this topic for almost three years continually, we accumulated a fair share of experience and good judgement about the industry and opportunities in the field. Both locally – Germany is always a special case for that –, but also internationally. As part of the ongoing project, I have been learning everything there is to learn about iBeacon as well as payment solutions in Africa.

What we read this week (22 November)

Our favorite articles of this week. Have a great weekend.

Articles of the week

  • What Screens Want
    Brilliant web essay by Frank Chimero, and not only because he features James Burke and The West Wing. I bet that this one will come up in a lot of conversations in the next months.
  • Prada Revolutionaries
    “Bright Green has become the left's version of right-wing transhumanism: an excuse to not solve today's problems, because tomorrow's technology will fix them for us.”
  • Tom Armitage » Driftwood
    “Driftwood is a talk I gave at Playark 2013. It was meant to be a talk about leftovers (the theme of the conference being ‘reclaim’), and about Hello Lamp Post. In the writing, it turned into a broader overview of my own work – on six years of projects around cities and play.”
  • Meet The ‘Assassination Market’ Creator Who’s Crowdfunding Murder With Bitcoins – Forbes
    “Assassination Market, a crowdfunding service that lets anyone anonymously contribute bitcoins towards a bounty on the head of any government official–a kind of Kickstarter for political assassinations.”
  • Ross Andersen – Humanity’s deep future
    "When we peer into the fog of the deep future what do we see – human extinction or a future among the stars?"
  • Bitcoin As Protocol | Union Square Ventures
    “There is no other widely used protocol in the world today that accomplishes this: with bitcoin anyone can make a statement (a transaction) and have this be recorded in a globally visible and fixed ledger.”
  • Content economics, part 4: scale | Felix Salmon
    "It’s almost impossible to overstate the importance of the CMS when it comes to the question of who’s going to win the online-publishing wars."
  • InMoov » Project
    "Here is “InMoov”, the first life size humanoid robot you can 3D print and animate. You have a 3D printer, some building skills, This project is for you!!"
  • Apple and Google Maps, and Defaults | Matt Mullenweg
    “If Microsoft did this a decade ago we’d call for the DoJ to reopen their investigation. Apple has the best phone, best tablet, and in many ways the best operating system — we should not give them a pass for this blatantly self-interested and user-hostile stance.”
  • Instagram and Youtube — Benedict Evans
    "WhatsApp and Instagram are not in different categories – they're direct competitors for time and attention." – This spot on.