Thought Leaders in Mobile and Social: Diarmuid Mallon, Head of Product Marketing for Sybase, an SAP Company, on Mobile Banking (Part 4)

Sramana Mitra: It sounds like the operators and the banks have a synergistic situation in most of these regions. Each of them is trying to reach the same customers. In fact, for the cellular operators, if they say that by buying a cellular phone you can also get into the cellular banking system, that’s another value proposition, another case for buying the cell phone beyond being a communication device, right?

Diarmuid Mallon: Absolutely, yes.

SM: On the other hand, for the banks, the cellular providers have the accounts, and that’s the basic thing they need to get to these consumers. It’s not easy to reach these consumers, so reaching them through the cellular operators is definitely a great channel for them. What are the business models between the operators and the banking systems?

DM: It depends on the particular deployment and how it’s configured. Some of the schemes run in a four-party payment model that you see in the credit card space. You have issuers, acquirers, and a concept of interchange. That’s what funds the system. That can work well. There are other models where people take a share. There are lots of different models. There is no one business model that is dominant or necessary or makes the most sense. It needs to reflect the local market and what each person brings to the solution. And there are cases where banks and operators go it alone. It’s a little bit more challenging if you have a closed solution because it’s all about scale.

I think for mobile banking, if you’re focusing on the banking aspect of financial inclusion, then it does make sense, a single bank taking it out. But if you made a single bank and a single operator, that’s when you struggle. But with a single bank, of course, multiple operators is the model it needs to be. If you’re going for payment, experiences show that the networks that are open and interoperable are the ones that grow the fastest. Growth is key to making a mobile payment network work.

SM: What is your assessment of the number of consumers globally who are on these kinds of mobile payment networks today?

DM: We’re still in early days. There are a few exceptions for mobile payments. Clearly, there is to some extent, Japan, Korea, and Austria that have been going for a long time, and that’s well established and well used. There are more exceptions, but by and large, sitting here in London with the Olympics rolling up, the evidence of mobile payments is a bit more distant for me, and the same in the States as well. Google Wallet is there, but it hasn’t really hit Main Street.

SM: We don’t use mobile payments much.

DM: Every time I’m in New York, I see the terminals in Macy’s and Bloomingdale’s, but I’ve not seen anyone use them. I’m sure people are [using them], but it’s not quite hit there. Isis will help ramp things up. In a lot of countries, I think we’re still in the world of trials. It’s just that the trials are getting much, much bigger and have scaled. Trials bring new lessons, and there’s something for us to learn from each one. The challenge is that you’ve got to bring more value than what is already there.

SM: Exactly. If you don’t have a pain, consumers don’t change behavior. I think in the Western world – in London and the U.S. – we don’t have a lot of pain around payments. We have credit cards, banks, all sorts of mechanisms for payments. It’s not a big deal. Whereas people in Bangladesh or Kenya ramped up so fast because there was pain. In Bangladesh, there is a pain. People do not have bank accounts. They’re not part of the banking system. This is bringing them into the banking system, and that has value. It is solving serious problems. That is where the adoption is going to come from.

DM: Yes. To your point, there never will be a pain to solve in these developed economies because there is no pain today. Unless someone suddenly bans cash, credit cards, and checks, then that pain is not going to suddenly appear. I think it’s the other way around. What it has to do is bring benefit. There are two things. You’ve got the challenge of existing behavior, which is ingrained, and you need to create an incentive to change that behavior. But the incentive is not just for the consumer. The incentive has to be for the merchant as well. Just as you said, the consumer has a million ways to pay. The merchant has a million ways to accept payment, all of which they are basically happy with. So, if they were to change their behavior, there would need to be a reason for them to do so.

It’s not just the cost of the new terminals. In theory, they could just be given the terminals. But they still need to train their staff and use the terminals. You see some stores in London where there are contactless payment points. When you try to use them, the staff look at you blankly because they don’t know how to activate them. So, you need to look at making it worthwhile to the merchant. For us, what we see is that beyond the payment is that customer engagement piece that’s missing. You need to look at what value mobile can create. Is it around a new way to do couponing and vouchers?

If you compare an existing coupon that you clip from a newspaper, when you redeem it, the company that issued that voucher has no way of linking the promotion in a magazine to your reading it and redeeming it. All the merchant sees is a pile of coupons once a month sent from that store.

This segment is part 4 in the series : Thought Leaders in Mobile and Social: Diarmuid Mallon, Head of Product Marketing for Sybase, an SAP Company, on Mobile Banking
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