Mobile Money: The Next Frontier - Why Mobile Will Kill Cash

First it was the telephone voice call. Then it was messaging. Then it was the clock, alarm and calendaring functions offered by rival pocket device called the PDA. Then came the camera, then the music player. Our internet access and gaming followed and today even PC makers say that mobile will cannibalize their business. As I have been lecturing since 2000 and written in my books since 2002, mobile is at the center of convergence. And I have been monitoring that convergence battle, in my workshops I now offer the formula:

Mobile + X = Mobile.

So, mobile plus camera is no longer cameraphone, its just a mobile. And 90% of all cameras in use on the planet are now on mobile phones. A mobile plus MP3 player is no longer a musicphone, it is just a mobile. And most people who listen to portable music today do so not on an iPod, they do so on a mobile. Any mobile, not just a SonyEricsson Walkman or Nokia N-Series. Doesn't need to be a premium smartphone like an iPhone or Android. Almost any mid-price mobile 'dumbphone' will come with media player today. Same with telling time, more people use their mobile phones to tell time than a wristwatch. Same for gaming, for internet services, for video recording, etc etc etc.  Whatever mobile wants, mobile gets.

I have been monitoring this trend by mobile gobbling up rival industries for more than a decade now. Today nobody doubts the trends and the tech pundits have started to talk of a "post-PC" era. Welcome to the bandwagon, is what I say. This is what I wrote about it: "the mobile phone will eventually replace the PC as the dominant way to access the internet." The point is, I wrote that nine years ago in my second book M-Profits released in September of 2002. Back in 2002 there was no iPhone, outside of Japan and South Korea there was no 3G, nobody talked about how big your phone screen was - most phones in 2002 did not have color screens! The cameraphone had been introduced only a year before in Japan, most people dismissed my argument back then that soon cameraphones would rule the world. And those who have been long-time readers on this blog will remember how I was crucified here on this blog for suggesting in 2006 that musicphones would outsell the iPod.

But it is true, that mobile plus anything equals mobile. I was the first to start to count the worldwide production of computers, when smartphones are counted as computers. When I wrote that, it was still a radical idea to many (read the comments section). Today it is accepted by all PC makers that smartphones are indeed computers and will replace the PC as the dominant way to access the internet. Haha.. Sounds like me nine years ago? But who else has yet given an annual count of market shares of computer makers when smartphones are included? I am doing it here on this blog every year. Where are the others? Why is the rest of the industry so slow to get the full picture?

MOBILE, MONEY AND ME

So, each of my books has updated my latest thinking on digital convergence and by 2004 I started to track the convergence of something else. Mobile and.. money. I had written about mobile payments and mobile banking from my first book, but I didn't make the argument that mobile would cannibalize money until in my third book, 3G Marketing. When I saw what was happening with early mobile payments in the Philippines, the early mobile wallet in Japan, and in particular out of South Korea, the innovation of credit cards on mobile phones, I was convinced. So in 2004 I wrote of the future of mobile showing the South Korean example: "your mobile phone is also a Visa card." By 2007 in my fifth book, Digital Korea, the convergence of money and mobile has a whole chapter devoted to it. And as I have been teaching in my mobile service creation workshops since 2001, out of the six (originally five) M's that form the basis of any commercially successful mobile service (Movement, Moment, Me, Multi-user, Money and Machines) - the only necessary component is the Money dimension.

So by 2010 I was teaching of my theory of Grand Convergence as explained in my tenth book The Insider's Guide to Mobile. Standard convergence we have heard about from most tech futurists for a decade is the convergence of telecoms with internet with media. In my theory of Grand Convergence, I have identified 13 global industries that will all converge in the digital space from such areas as the clock-makers and map-making to yes, banking and credit cards. Like I now say in my seminars and workshops, this is the biggest battle ever. This is for all the marbles. This is the biggest race humankind has ever witnessed. This is like taking the Olympics, Wimbledon, the Superbowl, Soccer/football World Cup, Formula One, the World Series of Baseball, the NHL Stanley Cup, and any and all other sports you may watch from rugby to cricket to Nascar to golf to xtreme sports to sports fishing - and adding all that together for the supersports superprize.

Then add the Oscar, the Grammy, the Emmy etc. And then add the Pulitzer and then add the Nobel Prize. That is the kind of contest we are now witnessing. If you think it is amazing that recently bankrupt-ready loss-making Apple has turned around and become the most valuable corporation in business, making the biggest profits in the world. That is peanuts. If you admire Carlos Slim for taking the title from Bill Gates as the wealthiest person on the planet, that is nothing compared to Grand Convergence. This is the global contest for being the winner of the biggest race ever. The value of only those 13 industries I counted inside the Grand Convergence (excluding all other industries that are or might be also partially impacted by mobile, like retail, travel, automobiles, government etc) the value of those 13 industries when added together was.. 5 Trillion dollars (5,000 Billion dollars) last year. There is no industry on the planet today that is so big.

That is ten times bigger than global broadcasting industries (TV and radio combined, and to be clear, that includes all pay-TV revenues including cable and satellite TV). That is 20 times bigger than the global internet and related industries today. This is the battle for all the marbles. Who 'wins' in the Grand Convergence race will be a brand that is not just in every pocket, it will know everything about us about what we consume, how we move daily, what we read or watch for news and entertainment, and it will be the keeper of all our money and related instruments from loyalty cards to frequent flier miles to the virtual profits we made in Farmville or World of Warcraft.

Understand what I mean. A telecoms equipment maker named Nokia took on the four giant camera brands, Minolta, Nikon, Konica and Canon, and in five years grew to be a bigger cameramaker than all four combined. Today Konica and Minolta have quit the camera business altogether. A PC maker named Apple took on the world's bestselling portable musicplayer maker, Sony, and soon the iPod was outselling the Walkman in all its forms from C-Cassette players to CD players to minidisk players. And an internet company called Google is now providing the bestselling operating system for the bestselling type of computer, the smartphone, with about half of the smartphone market share. The computer OS market was utterly dominated by Microsoft for two decades, yet the new OS challenger did not come from other PC industry makers, it came from an internet company.

That is what we see in the theory of Grand Convergence. If Apple can make musicplayers, if Nokia can manufacture cameras and Google can produce computer operating operating systems, in the Grand Convergence we may also see a mobile phone made by Citibank (Nokia the phone maker already has a service called Nokia Money that has been launched in India for example) and we may see a smartphone from Visa (Google's second biggest priority, said Chairman Eric Schmidt in Harvard Business Review earlier this year - is mobile money!).

MO MONEY: THE ORIGINS

So, what is mobile money then? It was invented in Finland but not by the 'usual suspects'. The world's first use of a mobile service to make a payment was... a Coca Cola vending machine, which accepted payment in the form of a premium SMS message. Two such Coke vending machines were installed in Finland, one near the Nokia offices in Espoo and the other at the Helsinki airport. Today SMS payment for vending machines exist in most countries but thats where it all started for mobile money. Soon there were many other obvious uses of mobile payments from parking to movie tickets to the lottery and public transport fees.

From payments we got to coupons and discounts and loyalty cards. The first actual cash-replacement or one could say 'real' or 'complete' mobile money was Smart Money by the Philippines mobile operator Smart in 2001, based on SMS. Mobile banking services appeared, e-commerce sites started to offer m-shopping services, and credit cards started to get onto mobile phones, led by Visa in South Korea.

Then all tech enthusiasts started to buzz about the next big thing in mobile money, when we replace the things in our wallets - the cash, the credit cards, the banking cards, the loyalty cards - and our photographs - and other things from our pocket like our keys - with the 'mobile wallet'. The first full mobile wallet service was launched by NTT DoCoMo of Japan with their Osaifu Keitai (often also known by the payment mechanism called FeliCa, a relative of SuiCa also from Japan. FeliCa is that famous 'tap on the terminal with your phone' to access the Tokyo subway train system that many regularly feature on high tech news shows about Japan).

Yes, your access passes and security ID cards at the office - are now part of your mobile phone. And Japan (and South Korea) were the first countries where the locks at your home could be operated by mobile phone (something now lockmakers in the West, from Assa-Abloy to Yale, are mimicking).

And that evolved into the most advanced converged mobile money service of today, the iConsierge by yes, NTT DoCoMo. The 'intelligent' mobile wallet which is like the convergence of your personal secretary with your wallet. Now your mobile phone knows how you spend your money, and starts to anticipate your needs - giving you a warning when your train will be arriving, so when do you start to leave the office to catch your train on time, etc. The Japanese users of the iConsierge say it is the most useful mobile service they have ever seen, and love it and say it seems like the phone is reading their minds and making their lives better.

THEN LETS SURVEY THE WORLD

Meanwhile in Africa four years ago the local Vodafone affiliate, Safaricom, launched its mobile payment money solution. It was called M-Pesa and it was built around basic SMS text messages, initially just to allow money to be transferred from one phone to another. And while many other countries in the Emerging World also had SMS based mobile payments from the Philippines to South Africa to Mexico and Brazil - M-Pesa took off like a rocket. There are many economic, competitive and cultural issues which helped boost the adoption of M-Pesa but soon it had the most astonishing stats in the whole Emerging World and in some ways, lead even the most advanced countries of the Industrialized World. How big are the numbers today? This spring we learned that today 30% of the total national GDP of Kenya transits mobile phones (not just M-Pesa, there are also a rival mobile payments systems on the competitor networks, Zain and Airtel). The M-Pesa creators won the Economist award for innovation, including my dear friend Susie Lonie, a long-time veteran in mobile commerce and mobile payments.

So then in Estonia there was a crime wave hitting parking meters, with all kinds of robbery and scams relating to parking payments. The Estonian government was having none of that. Since all Estonians already had mobile phones, and Estonia had had mobile payments for parking for most of the past decade, they simply decided to eliminate the use of cash to pay for parking.

This is a massive milestone. For the first time in the history of cash, a whole industry (while yes, parking is a TINY industry) in a whole country, decided to eliminate the acceptance of cash as valid payment. To paraphrase Winston Churchill after El Alamein, this is not the end. This is not even the beginning of the end. But this is the end of the beginning. And yes, coins have had a run of 2,700 years as payment instruments. Its been a long run. But now, the beginning of coins as payments has come to an end, and at some point we can anticipate to see the start of the ending of coins (and then all cash, coins will end first, before banknotes but both cash types will end, killed by mobile).

So lets shift continents and go to South Korea. The world's most advanced mobile money solution is now the standard technical solution for South Korean phones. There is one SIM card for all financial instruments. Your bank will authorize its services on your SIM card onto your mobile phone. Your credit card company will authorise any of its service if you qualify, on the same SIM card. All banks and all 5 credit card companies of South Korea have collaborated with all three network operators and the related banking and telecoms regulators and all of it works beautifully. If you swap phones, you'll need to swap your SIM card to have your network connection - your mobile wallet comes conveniently along to whichever phone you use today.

So in South Korea, if you call up Visa to apply for a Visa credit card, and you are approved, the operator will then ask you a puzzling question: "Do you want plastic with your credit?" A weird question. What do they mean? They mean, do you, dear new customer, want us, Visa, to send you the old-fashioned plastic credit card, free of charge, to your home address. It would be needed if you travel to some less-advanced countries where they still use the old-fashioned plastic credit cards like Germany, Britain, the USA, Australia, France etc, haha... Yes. In South Korea today, it is now so normal to get your credit cards enabled instantly onto your phone, that the thought of bothering with the mailing of a plastic credit card to your home address is more of a nuisance than a convenience. Obviously all institutions that accept credit card payments in South Korea, are now mobile enabled so you don't need plastic cards inside South Korea at all.

So then lets go to Sweden. Remember Estonia? In Sweden last year they had a series of robberies where bus drivers were robbed at gun-point or knife-point for the little bit of spare cash they carry to be able to give change when people pay for bus tickets. Sweden being near Estonia, the Swedish government learned from the Estonian parking solution, and decided that they would eliminate cash from bus payments. Yes. Just like Estonia, in Sweden everybody has a mobile phone and for a decade you've been able to pay public transport tickets by mobile. So the government eliminated cash from bus payments and the crime related to driver robberies vanished overnight.

And now, a second industry (bigger than parking, public transport) in a second country (Sweden is bigger than Estonia), has eliminated cash altogether as a legally accepted payment instrument. This is not yet a big trend but something is happening.

So lets go to Holland. The Netherlands. The local retailers' association is lobbying the government to pass a law, that Dutch merchants don't need to accept payments by cash at all. It is very expensive to handle cash. All Dutch people have mobile phones and plenty of other payment mechanisms exist as well. So the merchants want to eliminate cash. Hmmm... I do see signs of a trend here now.

Lets go back to Sweden. This is the shocker. Last summer the Swedish Parliament became the first government authority to start the deliberations of when - not if - when they will end the manufacturing of cash. That decision has not yet been made (as a Finn I can make fun of our former masters and kings, our neighbors the Swedes) as the Swedes do take their time in making any decisions, wanting to achieve consensus..  But yes, they have started that process and they will come to a decision soon. And they are not the only country who has started to discuss the end of cash.

That will be the next big milestone. That would be Churchill's 'the beginning of the end' moment, when the first goverment sets a date to end the manufacturing of cash (and shortly thereafter, to start to withdraw cash from circulation). The British government is among many who are starting now to consider these kinds of decisions. If I had to guess, I'd say the front-runner is Estonia, but many African countries would also be in that running to do it first.

FINNAIR AND PROFITS

I have honestly hundreds of examples more. But let me take one dramatic example from Finland about the real potential of mobile money. Finnair the national airline invented mobile check-in (was built by my dear friend Heikki Karimo) way back exactly ten years ago, launched in September of 2001. There are tons of benefits of a full mobile airline ticketing solution, the first comprehensive solution was launched by Norwegian, the airline from Norway, which did the ticket sales by mobile, the check-in by mobile, the boarding pass by mobile and the loyalty frequent flier miles by mobile. And yes yes yes, the alerts about delayed flights and so forth, kind of obvious stuff. This kind of solution will reduce costs of manpower to process passengers at the very expensive airport check-in counters. So it brings savings. And it allows seats for any flight to be sold up to a later moment in time (the sales window remains open longer, nearer to the time the flight is set to take off).

Understand how important this last item is for any airline. This means more opportunity to sell last-minute tickets, which do not have discounts, so they are very profitable. If a rival airline has a cancellation, for example, then it is absolutely vital to keep your ticket sales open as long as possible to try to catch as many of those passengers onto your flight to the same destination still today, rather than those passengers going to go to a hotel for tomorrow's flight on their original airline etc.. Hugely profitable sales but impossble to handle in large volume if you only have one sales counter with one sales representative usually sitting there at the airport, totally bored all day.. But mobile sales allows capturing large volumes of such customers, dealing with those sales automatically by machine!

Saves money and increases sales? Wow? What technology can do that? But wait, the customers - the customers love mobile check-in as well, they hate standing in lines. Now they can do their check-in even in the taxi on the way to the airport, etc..

Saves money, increases sales AND makes customers more satisfied? Mobile is magical! Or like I have been teaching for years now, Mobile is the 'magical money-making machine.'

But wait. Now lets go back to Finnair. This is the diabolical bit. Today Finnair has more than half of its passengers using mobile check-in. So Finnair has on any typical flight, the mobile phone numbers to over half of the passengers flying on that given flight. And.... this is so cool... they can upsell essentially every available seat on every flight that is still unsold, in... business class. Think about it. Finnair now knows, after ticket sales have closed for that specific flight, Finnair knows how many passengers in economy class and how many in business class, perhaps 90 minutes before that flight is going to take off. The passengers are all now going through the airport, through security, or sitting at a lounge or doing some tax-free shopping etc. Since Finnair have on most flights well more than half of all passengers checking in with mobile, they can now send the one-time special offer - yes, to upgrade to business class.

So they start with the Platinum level customers, offer them a strongly discounted one-time upgrade from economy to business class. Pay by mobile/credit card or by frequent flier miles. Then if there are still seats left, go to Gold level customers, offer them a well discounted one-time upgrade. Then if seats still left, go to Silver level customers, offer them a modestly discounted upgrade. And if there still are seats left, go to the rest of economy class and offer a mildly discounted upgrade.

With a little bit of fine-tuning, soon Finnair knows exactly the price points, per flight destination, per direction of the route (going or coming), per time of day of the flight on frequently flown flights, per day of week, and per customer status in Finnair frequent fliers (or other One World customers) and soon knows exactly what price to offer each upgrade to always sell out Business Class !!

How much profit is in Business Class? The same passenger is already booked for this very flight. They already paid some economy-class fare. The passenger is being processed through security and passport control at the airport. Their luggage is already being loaded onto the plane. This Finnair flight 'Souls On Board' is closed. No more new passengers can be taken onto this flight, even if there are empty seats. That very same number of passengers will fly on that plane tonight. So essentially all 'seat sales' are now closed using traditional means such as online sales, ticketing agent sales and airport ticket sales. But if Finnair can convince some of these very customers, flying on this very flight, already booked into economy class seats, to pay a little extra, to move up from economy to the more comfortable seats - those seats will fly on that plane anyway. The only marginal costs to Finnair are the food and alcohol, and even as we Finns are known for being heavy drinkers, they can't drink enough alcohol in business class to make this proposition not profitable.

Not just making every Finnair premium frequent flier passenger happy just to be offered a discounted upgrade from time to time (obviously Finnair would prefer to sell the business class seats at full price before the ticket sales have closed) - some will take the offer and Finnair gets better profits on that very flight. Its a classic Win-Win situation.

This is just one example of how mobile money is starting to change our world. Imagine similar solutions to sell premium cabins on a cruise ship or premium seats at a football game or room upgrades to the hotel, or some unsold seats close to the stage at the opera or rock concert, etc etc etc.

MOBILE WILL KILL CASH

So we have had coins for 2,700 years. We've had paper money for abut 150 years. We've had cheques, credit cards, banking cards, debit cards, Paypal and virtual currencies online, and now contactless payments systems like Octopus here in Hong Kong and Oyster in Britain. All of the innovations were hailed as possible killers of cash, and none of them were able to kill cash. Now we have started to see the first evidence of the very first whole industries that have stopped accepting cash (parking and public transportation) with more to come. We've had nations start to discuss the end of the very manufacturing of coins. And with that, when will the banking and financial world 'wake up' to mobile money?

That happened this May. May of 2011 is when the first major global financial brand made that call. Visa said not only that the Visa Card of the future was a Visa Mobile card (specific that it was a mobile phone based Visa card, not for example contactless or other 'portable' payment method). And Visa said also, in an official Visa corporate video, that the future of payments is mobile (again, specific that this is mobile phone based money).

The future of payments is mobile? Yes. The dam has now broken. The very first global financial industry brand has become so convinced of mobile cannibalization, that they now are willing to commit in public. The future of payments is mobile, so says Visa. No longer some obscure tech mobilista named Tomi Ahonen writing in some mobile business book. No. Now Visa the global credit card giant says so. And would you know it? This year has seen major brand after major brand embrace mobile money in some way or another from classic banks like HSBC, Standard Chartered, Citibank, etc to credit cards like Mastercard and Visa, to non financial brands like telecoms operators (Vodafone, Zain, Airtel, Telefonica etc) to handset makers like Nokia and Google and on and on and on.

Money makes the world go round. Mobile has emerged as the new money. Its use is still limited to random countries in significant volume, such as a couple of very advanced digital nations like Japan and South Korea, and some early adopter nations among Emerging World countries like the Philippines and Kenya and South Africa. But then their neighbors start to emulate and the concepts spread.

EMERGING WORLD WILL LEAD THE WAY

In the 'West' we have tons of options. We have strong banking institutions, we have banking accounts, credit cards, other payment options, and with broad adoption of the internet, there are online payment systems like Paypal. In the Emerging World often there are few options. Banks are rare, have branches only in major cities, and to get a banking account you have to jump through all sorts of hoops, proof of identity, proof of address, proof of employment, plus the paperwork to sign tons of documents etc. Imagine that in a nation where the average salary is 1 dollar a day and much of the population is illiterate.

I spoke with Jari Tammisto the founder of MoMo (Mobile Monday) just last week and we talked about the problems specific to women and money in the Emerging World. They are often second-class citizens. If married, their husbands can easily beat the women and steal their money. The women are often illiterate at a far higher rate than men. They will try to hide the cash, which if its paper money, can be eaten by rats or burn in fires or become rotten due to mold. They may find unscrupulous individuals taking advantage of their situation. So imagine, the woman walks to the next town to pay the teacher so her child can go to school. Tomorrow the child comes back home from school saying the school fee is not paid. The woman has to walk there with the child today - and because she is illiterate and had no receipt from yesterday, she has to pay again today, the same amount - which the teacher (often a man) would keep as his bonus..

Contrast that with mobile. A payment by mobile will produce a record, and even if the woman is illiterate, the mobile payment system can have a spoken version, informing her of her balance, what was paid to whom, etc - a kind of 'verbal' receipt of payment.

This kind of petty corruptions is very common. In Afghanistan the policemen thought they had received a salary increase when their paycheck went from being paid by cash, to being paid by mobile. They were in fact paid exactly the same amount, but their bosses had been taking a cut out of their paychecks every week, so the policemen thought their salary was less than it was. They loved being paid by mobile..

Just this past week we heard from Kenya that Mastercard had joined with Airtel and Standard Chartered bank to create the world's first virtual credit card via SMS on mobile. If you want to make a Mastercard payment, you send your payment in the correct amount to their service (from your mobile wallet account) and you will receive a 16 digit Mastercard number, with a one-time authorization code, via SMS. You enter those, the 16 digit number and the unique authorization code, and the merchant will have their Mastercard payment just as if you used a plastic Mastercard. Wow. Magical. And now we can bring credit card payment services to the billions who will never qualify for a 'real' credit card but may want to make purchases using Mastercard merchants (in particular online).

The payments made by mobile produce a far higher 'velocity' to the movement of money. Higher velocity translates to higher economic activity. The wealth of the nation improves if the money is not 'delayed' unnecessarily. So yes, to pay your electricity bill or the cable TV bill etc, rather than having to walk or bicycle to town to make the payment in cash (and risk being robbed along the way) and stand a long time in line to make the payment, why not pay by mobile. In India for example the utilities like gas and electricity and water, will give an actual discount if you pay by mobile, because handling digital money is far less costly to the utilities than collecting the cash.

Which bring us back to the Industrialized World. Remember Coke? They invented mobile payments with the first SMS enabled Coke vending machine twelve years ago? Guess what? Coca Cola spoke this May at the MMA Asia Forum and said that they are still rolling out SMS enabled Coke machines around the world. They had launched SMS vending with Coke machines in Spain the year before - and guess what. The exact same phenomenon as all around the world with vending machines - if you enable SMS payments, you get more business out of the exact same vending machine. How much better? In Spain in 2010, Coca Cola found 14% better sales on average out of their vending machines after SMS payments were enabled - not to mention lesser costs of collecting the coins (the machines accept both, so they still have to send someone to collect the coins but this is done less frequently, saving Coke in labor costs)

IMAGINE PERFECT MONEY

This year I've been invited to speak about mobile money at very many events from the Digital Money Forum in London to Halcom Platimo event in Belgrade to the Bank of America event in Taipei to the International Payments Summit in London etc etc etc. Even the recent 'Think Mobile' events with Google here in Asia such as today in Hong Kong, have had a strong mobile money theme even where my main topic was mobile marketing.

And in my presentations now about mobile money, I have been building this theme of 'Imagine Perfect Money'

Imagine if money had a screen. Imagine if money remembered. Imagine if money grew on trees. Imagine if money floated around. Imagine if mobile could do math. Imagine user-generated money. Imagine if money could talk...

For every item (and I have many more, haha) I have an actual, commercially launched mobile money product or service. And yes, mobile money has every single benefit that any other payment method has. So all the security elements that we have for example on credit cards (Chip and PIN for example) we can do, except that on mobile, we can have FAR MORE powerful security, like in South Korea and Japan, they have phones that read fingerprints or eye retina scans etc. So yes, mobile can replicate all benefits of any existing monetary instrument except, that only mobile has a built-in payment mechanism !

Remember the abused woman in the above? Mobile money is the only payment method which has an inbuilt ability to generate the proof, the receipt or the evidence of payment. Its like having a cash-register, or a credit card reading device, embedded upon our phone. You say Paypal can do that. Sure, but Paypal needs a computer! (or a smartphone or featurephone with HTML browser or a WAP-enabled basic internet phone) And it needs a live internet connection... And most of all anyone who wants to move money via Paypal needs a Paypal account. Try to get a Paypal account in Nigeria for example.. (it is not even possible) Only 10% of internet users have a Paypal account. But every mobile phone on the planet can send or receive mobile money (if enabled by the operator/carrier, and they are all in the process of doing so by now)
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TOMI THAT IS SINGLE POINT OF FAILURE

And one comment on the danger of all items on one point of failure. Haha. Sounds dangerous, yes, what if I leave my home, lock the door, then arrive at my car, drop the phone, break it, and am locked outside of my home, not in my car, and my only phone is now broken, I cannot call anyone to get me money or open locks or get me to work or anything..

Sure. One answer is that increasingly we will carry two phones. But yes, more relevantly, compared to ANY other financial instrument, mobile is the most resilient. If you did break your phone, all you do, is take the SIM card out of the phone, borrow a random passer-by's phone (using your SIM card, you cannot cause costs to their phone) and you can immediately use most services. If it happens that this stranger's phone does not have the technology for you to open your car or home locks, then at least you can call your office or neighbor or relative to come help you.

If your car electronic locks system decides to lock you out, you have no remedy, you cannot replace it with the neighbor's car keys.

What of your credit cards or banking accounts. Same story. If you broke your phone, then just take ANY other phone, and insert your SIM card, and you can instantly recover use of your mobile banking or credit cards. If your SIM card is also lost (you dropped your phone into the sea for example, accidentially while boating or something) then how long would it take for you to get a new American Express or Visa Card? 24 hours? 48 hours? Often far longer. But modern advanced mobile wallet solutions are so intelligent, all you do, is borrow your boating friend's phone - and his or her SIM card - and call up your bank and say, you want the banking services now enabled onto this SIM card temporarily, until you have a new phone and SIM card. They ask you the security questions (mothers' maiden name, etc) and your mobile wallet can instantly be restored. The more practical solution is, that for example a parent has a phone lost, comes home, borrows the child's phone and SIM card, and does the above authorization, and now all mobile wallet functions are enabled.

What happens if you lose your wallet? You lose everything (haha, in most countries). What happens if you lose your Oyster or Octopus card? All the money that was stored onto the payment card will be lost. You have no recourse. Even if your phone is stolen, all you need to do, is borrow anybody's phone, call your operator and report it stolen, and they can instantly block any abuses, including your mobile wallet uses..

Mobile is simply the best possible way to do payments and money. It has every benefit of any other technology ever, and adds tons that only mobile can do (like the camera - mobile can take pictures of what is sold or bought, mobile can take pictures of QR codes and get instant access to websites without any typing etc)

There are many countries where today you can live for a week without touching cash and making all payments with mobile, from South Korea and Japan to the Philippines, Kenya and South Africa. When you go visit one of those countries and ask the normal people do they feel insecure about their mobile wallets - none do. Only us tech geeks fear about the single point of failure problems. Even where such problems might exist theoretically, mobile allows the fastest remedy to any problem. It is the inevitable direction for money (and our keys etc).

The value of mobile money is not in attempting to collect a tiny 'commission' in moving small amounts of money from one pocket to another. Even banks feel that in most cases handling cash is no longer profitable, they have other ways to make profits (loans, investments, credit cards etc). But think of that Finnair example that I showed in the above. The real power out of mobile money comes in the premium services we can deliver. Remember iConsierge out of Japan. Once when our phone becomes our keys, or loyalty cards, our salary, our taxes, our mortgage, our grocery paymenets, etc, then the mobile will also learn what we do with our money - and like the best and most discrete secretary any boss ever had, our mobile phone can start to help us not just in managing our money - but in managing our lives. Tomi, your nephew's birthday is coming in two weeks, would you like me (the iConsierge) to find some recommendations of gifts to consider...

Most cannot imagine life without SMS or mobile voice calls today. Most who have smartphones cannot imagine life without search and the internet on the phone today. Soon we cannot imagine life without mobile money.

TWO PERSONAL PLUGS

First, let me mention briefly the upcoming Forum Oxford Conference on 28 October, at beautiful Oxford University. Ajit Jaokar and I will return to chair it as usual, and our theme this year is guess what? Mobile money! Yes, if this topic is of interest to you, please make that reservation on your calendar and come join us. As this is an University-arranged event, its also far cheaper than most traditional telecoms/banking conferences but our speakers are truly cutting edge thought-leaders of this space. Just take a look at the event page for Forum Oxford Conference. And if you are coming to the Conference, please also consider taking my course about Mobile as the 7th Mass Medium - will be plenty of mobile money and mobile advertising and mobile media etc. Two days just before the Conference, at Oxford University, with my partners Alan Moore and David Cushman also lecturing. This is the most useful short course you can find on mobile services, media, customers, advertising, and money. See more here Tomi Ahonen Oxford Course Mobile as 7th Mass Medium.

I want to use this occasion to announce my 12th book, it is another collection of 50 case studies in my Pearls series of ebooks. Tomi Ahonen Pearls Vol 3: Mobile Money will be relased formally tomorrow on this blogsite with links to info and ordering pages etc. Like my previous Pearls ebooks (Vol 1 on Mobile Advertising, and Vol 2 on Mobile Social Networking) this ebook is 171 pages in length and is formated for your small screen, so you can store it onto your iPhone or Android or Blackberry or read it on your Kindle or iPad etc. Please see Tomi Ahonen Pearls Vol 3: Mobile Money for more.

Comments

[virgil]

So Tomi, what you are saying is that if I know your mother's maiden name and your place of birth, I can call your bank and steal all your mobile money, using any phone (even an untraceable prepay SIM that I bought from an automatic vending machine located in the train station).
Cool!!! :P

[Tomi T Ahonen]

Haha good one virgil

Thats what you can do with ANY payment method if you know what their security system asks for and you know the answers. If you steal your colleagues PIN code and grab their bank card while they go to the toilet, you can go empty their bank account too.

I would guess that the various banks would perhaps have a few more security checks haha.. In any case mobile can always be made most secure, and in most cases, more secure than anything else..

But thanks for playing

Tomi Ahonen :-)

[Jukka]

Mobile money can replace plastic cards, no doubt about that. Banks and visa/mastercard will surely resist that no matter what, becausr the piece of plastic in you wallet carries brand logos in front of you eyes all the time, something that mobile does not do. But it can happen.

But cash will never disappear. i used to be a credit card man, never carried cadh with me, always paid with a card. But a friend of mine opened my eyes. If you do a short leirure trip, a pile of cash is your travel budget. Easy to understand and hard to overspend. If I want to pay something "off the record" cash is the only way. It leaves no money trail. If I want to bargain, credit card makes it difficult. Put a couple of euro notes on the table and a deal s yours. And the action at cash register is soooooo slow with those machines. On busy periods, for example during breaks of a football or a hockey game, shopkeepers lose sales because of slow automated payments. Cash is quick.

If cadh does disappear, unfortunately it hurts the consumer. Credit card companies are greedy already today and cut a fat slice out from shopkeepers' profit margins if someone uses a credit card as a payment method. Mobile money will make it even worse.

[Tomi T Ahonen]

Jukka, never say never. Did you read the blog? The Swedish Parliament has already started the deliberations of not 'if' they should end cash, but 'when'. The UK is following suit, and in the Netherlands the retailers are begging to have it too. Many African countries also already considering. Cash will go before you have retired, Jukka, in some early countries they will stop making coins before I retire and stop making banknotes before I die haha..

It will happen. Why would Visa dare to say future of payments is mobile? I am not inventing nonsense here. Just be prepared Jukka, the more you are prepared for this future, the more you can take advantage of it as it happens.

Tomi Ahonen :-)

[peter]

@tomi, paper money had been used 1000 years ago for 200 years in China till it was aborted due to hyper inflation. I am thinking mobile gold would truely be the next big thing.

[E.Casais]

Tomi had already published a very interesting post on "the end of cash" last year. I had already pointed out a few issues:

a) Cash had already started to disappear (to the point of being forbidden) for a major kind of economic activities: paying taxes. The evolution is accelerating, but is nothing new.

b) As long as there is no simple, direct way to transfer money between individuals (without a hassle of account debits/credits, authorization codes, and so on), cash will live on. Think about buskers, restaurants waitresses, or simply donations among relatives.

c) The State loves everything that has a central point of control. If it wants to turn your life into hell, just disable the SIM. No money whatsoever afterwards. If you think this is an exaggerated concern, then read about the abuses in asset forfeiture in the name of fighting terrorism/drug trafficking/whatever. Cashless mobile money is a dream come true for authoritarian States (and for democratic regimes that are alas becoming increasingly arbitrary).

d) The State does not have to insure cash. Turn all cash into electronic bank accounts (which, whether it is a credit card company, a bank, or an operator mobile money ultimately is) and the State has that many more financial assets to insure. The current crisis will make it loath to add to its risk burden, and if it does not insure those accounts, people might keep a preference for cash (after all, they do not lose it if the correspondent financial institute goes bust).

[Henri]

Tomi, your post is so true!

It is quite sad that this small northern country of ours decided to skip the opportunity to be the leading forerunner on mobile payments. I personally worked with (and for) mobile pay, or mPay as we called it, since the beginning of last decade. We shared the information and our experiences in order to gain more active users as much as we could. We even encouraged our competitors to move for it, despite the fact that they stated earlier that they don't believe in cell phone as the "wallet".

The biggest obstacle was, by far, the telecom operators. Their policies from ancient times gave them a legitimate change to charge ridiculous amounts of money, and they refused to see the power of potential volume. Another, but smaller part preventing the wider use were played by the banks & credit card companies.

Eventually, in 2009 one telecom operator decided to step up and we were able to launch more diverse and cheap mPay-application with a signifanct help from another Häme-located company. By that time I moved on, but felt relatively satisfied when I saw & heard the new, my manuscripted system taken over.

And this year, just two weeks ago, I heard that Finnish Visa-representative is about to roll out their mobile platform.

Slowly but surely we're getting there!

[michael]

It won't. This would mean that you would have to have a mobile phone in order to have access to money.

Many african countries considering doing away with physical money!!! Yeah right, the markets of Africa spring to my mind, the goat herders walking with NFC mobile phones also spring to my mind. The poor african family paying the doctor by connecting their NFC mobile phones also spring to my mind. Families connecting their NFC enabled phones while paying for church services every sunday!

There is more to life than Google Wallet commercials!

[Logseman]

Dear Mr. Ahonen.

I would like to ask for permission to translate this blog post to Spanish and reproduce it in my blog: http://soloespolitica.com/blog

Of course, we would credit you appropiately and link to this post.

Thanks in Advance,

Administrator of Sólo Es Política

[Paul]

Governments choosing to make less work for themselves is not quite the same as a product winning customers in a free market.

I like the idea of mobile payment for p2p transfers and micro-payments, but I also like having a couple of credit cards at home in a drawer, in case I lose my wallet. Not to mention that plastic doesn't need batteries, can get dropped in a puddle and still work.... You've probably heard all the reasons people like plastic.

Sure, CC companies will love to offer more sophisticated authentication tools, carriers would love to pump more revenue through customer accounts, and merchants will love to simplify their checkouts. But I still like robustness and redundancy, and I guess I'll have to pick somewhere other than Sweden to visit as a tourist.

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[darwinphish]

Tomi: The Finnair example is definitely a mobile success story, but I do not see the connection to mobile money/payment. The key to the system is quick communications with customers. It does not require nor even need a mobile payment system in order to work. Sure, it would be easier if you could accept the offer and pay all at once, but not so much that Finnair would not happily accept other forms of payment.

Also, I do not think mobile money will completely kill cash, just as cheques, credit cards, debit cards, etc have failed to do so. Yes, they have all made us less reliant on cash, but we all still use it. Using the Finnair example, its not like many people pay for their flights with cash right now. Mobile money will more likely have the biggest impact on all non-cash transactions.

Finally, there is a big difference between domination and complete replacement. Mobile dominates portable music and cameras, but people still buy iPods and Nikons.

[Joey1058]

There is definitely going to be an industry shake out in the future. Living in the US, I'm currently going with PayPal, only because I have an account with them. When third party carriers like TracFone (my carrier) start offering NFC smartphones, then I'll know the end of paper currency is near. At that point, coinage will revert to gold stampings being issued by banks and companies like Franklin Mint. The criminals will easily accept gold and silver coinage. Perhaps the better way to say it is that government issued paper currency will disappear in the future. But I am looking forward to mobile money!

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