Mobile Disruption Case Study: Camera Industry. Lessons for all inside mobile disruption from advertising to banking to AR Augmented Realitydown

We just have news from Nikon the Japanese camera giant, sadly, shutting down a giant factory of 2,500 employees in China. That reminded me, that I could do an update to the first-ever case study of what happens to an industry when it is hit by the mobile revolution. It is a severe case of the 'digital' revolution which powers the internet and before it, the PC-related disruption. Mobile also combines obviously the effects of the parallel 'social media' revolution which only gained true power after social media discovered mobile (as chronicled on this 'Communities Dominate' blogsite).

But the camera industry is the first case study of an 'outside' industry being hit by the mobile revolution. We see today dozens of such industries facing similar issues as the camera industry did, from the oldest industries literally like money and payments, to pervasive industries such as media advertising and marketing, to human needs industries from healthcare to education, to various high tech areas including VR and AR (Virtual Reality and Augmented Reality). The relevant point is, that the camera industry faced mobile disruption among the very first (together with the music industry and the messaging industry) and the camera industry has gone 'furthest' into its demise, due to the disruption of mobile. This is why the camera industry is the 'best' case study for ANY other industry to monitor and study, to find possible effects to THEIR industry, and better prepare and deal with mobile disruption than the camera industry was able to. That is why I regularly do the Camera Industry case study in my various workshops around the world, and it is often requested by conference producers for me to include, in my public speaking. It is the proverbial 'canary in the coal mine'. What happens to Nikon now, could happen to Microsoft soon and someone like Citibank in a decade from now...

So lets do an update to one of my most popular items. The Golden Age of Photography....

GOLDEN AGE OF PHOTOGRAPHY

If we take the period from 2005 to 2015 as a ten-year period 'decade' then that is literally the golden age of photography, when the total planetary population of cameras grew 10-fold, and today six out of ten humans alive have access to a personally-owned camera - and take pictures (and often videos) with it. We all know those are not stand-alone Nikon or Canon or Olympus cameras, they are of course Samsung Galaxies, Apple iPhones, Huawei Honor smartphones, and even basic Nokia featurephones that can be 5 years old, but still usable and that have a camera. They are mobile phones, ie cameraphones. Nearly everybody who owns a stand-alone camera like a Nikon or Canon, will ALSO have a smartphone with a camera. And most who own a stand-alone camera, also use the camera now on their smartphone (at least for some random snaps) and for some who own premium stand-alone cameras, they have ABANDONED the use of the expensive camera setup and ONLY use the smartphone camera/s. For over 90% of all people who own a camera today, the ONLY camera/s they own are on mobile phones. Less than 10% of 'camera owners' today have any type of stand-alone camera like an Olympus, Canon, Panasonic or Nikon. And of those 10% less than half use their stand-alone camera as their primary camera anymore.

In the Golden Age of Photography, the planet's camera user population not only exploded, it became only the second technical gadget used by more than half of all humans alive (the first being the 'mobile phone' which includes also those phones from years ago, that didn't have cameras on them). And while 'voice calls' used to be the primary reason for getting a 'mobile PHONE' today voice calls are not even the most popular uses of a modern mobile, messaging is the most used function and the camera has now also passed voice calls, and the camera is used by more mobile owners than placing voice telephone calls, on a 'mobile phone'. Funny, isn't it?

When cameras came onto mobile phones - as mobile phones are always carried (we even sleep with them, as I've been teaching for more than a decade, the mobile phone is the first thing we see in the morning and the last thing we see when we go to sleep) - that revolutionized the USES of the camera. First off, the number of photographs taken exploded - because the camera was always with us. The original uses for most cameraphone users were similar photography situations as with traditional cameras - family meetings, birthdays, beautiful landmark photographs on vacations etc. Then came the selfie. Suddenly a new TYPE of photography emerged, partly because it is far easier to take a selfie with the camera FACING the screen, than on most digital stand-alone cameras, whose viewing screen faces away from the camera. Of course not all early cameraphones HAD a second selfie camera. It was one of the obvious shortcomings of the early iPhones for example. But recent studies have shown that many teen and young adult consumer cameraphone users take one selfie EVERY DAY. The emergence of the selfie stick speaks volumes of how global and massive this new photography sector had become. Nikon, Canon, Minolta, Konica, Olympus etc could not capitalize on the selfie phenomenon.

As Selfies are rather 'obvious' visually clear uses of cameraphones - you can spot a selfie shooter from literally a mile away, because of how he or she holds the camera, vs people who take a 'tradtional' picture using the same kind of cameraphone. You know, with the hand held out, and aiming the phone at yourself, with your back facing the particular landmark etc. The 'selfie pose' type of photography session. But selfies are only the START of the vast range of new types of photographs that people use their cameraphones for, that traditional stand-alone cameras were (usually) not used for. So lets take 'scanning'. The popular phenomenon of taking scans of receipts or documents or invoices or travel itineraries etc, and storing those 'scanned' images on the phone. We could of course use a 'flatbed scanner' to scan such documents but most consumers do not have flatbed scanners at home (or even at the office) and that is tedious later use of the tech, while the cameraphone is instantly available, in your pocket. Lets do that now.

A related use is to scan photographs. If your relative has old paper photographs, for which the negatives are long-lost, but they are pictures of you as a child, what do you do? You don't take the pictures to a photography services company to process into digital images. No. You take out your smartphone and place the paper pictures onto the kitchen table at your relative, and you make sure the light is good, and you snap copies of those photographs onto your own phone. Instant photo-replication. Instant digitalization of old photos. Then the old paper pictures can be thrown away! You already HAVE the digital image that you wanted to keep. Why bother with the old paper... Yes, this was technically possible with stand-alone cameras too, but VERY few truly mad photo nutters would have their digital cameras WITH THEM when that random relative found the old picture of you as a 2 year old with the great-grandma... But everybody has their smartphone in their pocket now.

This leads us to MEMORY ENHANCEMENT. Then come all the issues of taking pictures to help your memory. Not intended ever to be permanently stored and shown to relatives, but simply as a memory technique. Where did I park the car? What is the temporary arrangement of the bus parking when the bus station is under reconstruction? What do I need to buy from the store? A million uses of the camera because it is in our pocket always, to just help remember things. This is camera use that Nikon could never even become part of, but literally BILLIONS of people are doing daily.

Then it gets to the near future. Facial recognition like with the new iPhones. Augmented Reality AR like Pokemon Go. Various radical new uses of the camera function, that were not in any way viable 'photography mass market opportunities' for the traditional camera manufacturers like Canon, Nikon or Olympus.

That is what happened during the Golden Age of Photography and how massively the planetary photography hobby expanded not just in owners of cameras, but in photographs taken per camera, and then leading into whole new USES of the camera in ways traditional camera makers could not hope to even participate in.

WINNERS AND LOSERS

So then winners and losers. The camera industry giants (Nikon, Minolta, Canon and Konica the four biggest) in year 2001 were based in Japan. In year 2001 Nokia and Samsung didn't make ANY cameraphones. Apple didn't even make mobile PHONES in year 2001 (the first iPhone would not be released until six years later). Year 2001 saw the first introduction of the cameraphone, in Japan, by electronics giant Sharp, who already made mobile phones. The cameraphone was such a weird curiosity, that the two biggest Japanese mobile operators/carriers NTT DoCoMo and KDDI both said no to the idea, and only the smallest carrier, J-Phone (now Softbank) dared to explore this idea. With one model. That was ONLY 16 YEARS AGO. The world's first cameraphone. Only 16 years ago.

Then the revolution started rolling. Soon Nokia, then world's largest mobile phone maker, introduced cameraphones; and within a few years was doing N-Series super cameraphones. In under five years, Nokia had become the world's largest camera manufacturer. Under ten years from launching its first cameraphone, Nokia was selling more cameraphones than all stand-alone camera makers (Japan plus rest-of-world) combined. Samsung was already heavily into cameraphones well before Apple got into the act and today of the three most popular camera brands in use worldwide, Samsung is number 1, Nokia number 2 and Apple's iPhone is number 3. Nikon, the world's largest stand-alone camera maker doesn't fit INTO THE TOP 10 !!!

So while Nokia, Samsung and Apple disrupted the camera market and utterly up-ended it, what happened to the camera giants? This was the GOLDEN AGE of photography, when global camera user base EXPLODED to ten times its previous size. What happened to 'the giants'? Minolta? Quit the camera business. Konica? Quit the camera business. Kodak? Went bankrupt. Polaroid? Went bankrupt... twice. Correct that: now three times. The remaining giants saw their stand-alone camera markets shrink at catastrophic rates. Nikon just reported its results for last year. They saw a 24% drop in their total camera business. Nikon gave an even more dire projection of their next year to come. They expect 28% drop in their camera business now for the next year! And Nikon is the LARGEST of the remaining former giants, who control a massive 30% out of this collapsing stand-alone camera market. (Third percent of nothing is still nothing.)

LESSONS TO THE OTHER INDUSTRIES

So what do we learn from this? Some stand-alone camera makers of year 2001 like Sony WERE in the mobile phone handset business, and were able to participate in the market. Sony's smartphones were briefly even ranked third-largest global smartphone maker a few years ago. Sony has had its troubles, but at least they remained in the game, because they saw the future and participated in it. Minolta. Konica. Polaroid. Kodak. Their mighty camera-related businesses collapsed. Nikon and Canon were able to 'retreat' to the 'professional' segment that only prolonged the pain. Their downfall was only delayed. Now Nikon is firing 2,500 staff at their giant China factory because there is no way forward if last year your market fell 24% and this next year it falls another 28%.

Total newcomers who had NEVER MANUFACTURED A CAMERA, like Nokia or Huawei can come in and take most of the growth. Companies who had SOME camera background but did mobile phones like Samsung and Apple, could build a HUGE market capitalizing on this disruption. What is Apple's iPhone market today, could just as easily have been Canon or Nikon or Olympus, if they had had as forward-thinking an executive in charge as Steve Jobs was when he saw the Sony Walkman musicphones gobbling up the market for the iPod music players. Steve Jobs thought that if anybody is going to cannibalize his product's market, ie the iPod, then it better be another Apple product hence the iPhone. And while Apple was very reluctant to get 'serious' about cameras on the iPhones, they did include them and therefore Apple was in the game, while most traditional camera makers like Minolta, Nikon, Konica, Olympus etc were out of the cameraphone game. Look who is standing now? Same story goes with Samsung. Where is Philips? Where is Panasonic? Where are the other big home electronics brands? Sony made its play but most other home electronics giants utterly failed the cameraphone opportunity - even when most HAD done some types of cameras, at least via the VCR-era 'camcorder' video camera-videorecorder systems, which were digital by the end of that technology evolution path. Great global electronics giants failed their future, even as they HAD done mobile phones (like Philips and Panasonic) before. Samsung saw the future and took it.

I want to also mention GoPro. It is NOT that 'any digital camera' invention will succeed in this space. MOBILE always wins. We saw this with so much evidence that it is undeniable. iPod the music player lost to Sony Walkman music phones. Tom Tom GPS navigators lost to smartphones with GPS. And  yes, GoPro the brilliant niche camera geeky gear, lost out to .. cameras on smartphones. It is NOT ENOUGH to be digital. You have to be MOBILE. And by 'mobile' I do not mean portable (like GoPro) I mean 'cellular' mobile. Permanently connected omnipresent mobile ie cellular. 2G or 3G or 4G (or 5G) cellular. Look at Apple's iPad vs iPhone. Look at Apple's Apple Watch vs iPhone. Having WiFi or other wireless is IRRELEVANT. You HAVE to have 'mobile' tech which from practical technical definition means 'cellular'. Having WiFi is NOT ENOUGH (proof? Apple iPod Touch !!! vs iPhone. Which one is left standing? One was cheaper and had only WiFi)

Mobile is unstoppable. Now lets take the lessons to current races and some observations. Microsoft? They SAW the smartphone revolution and when Bill Gates was in charge, Microsoft pursued the smartphone market vigorously (while also ruthlessly as Bill Gates would like to do, abusing his monopolistic powers). You might not have noticed, but Microsoft's Windows smartphone OS was briefly the world's second-most-used OS behind Nokia's Symbian (but their share was only 12% so it wasn't exactly a 'dominant' position when Symbian was at 70%). Then came idiot Steve Ballmer and dickishly destroyed the Windows smartphone future by screwing his ecosystem and partners time and again. Windows smartphone OS just died a few weeks ago. Microsoft has been PLAYED OUT OF THE FUTURE OF MOBILE. They HAVE NO FUTURE. They are like Nikon. The only difference is, Bill Gates HAD SEEN the future and tried to pursue it. It was Steve Ballmer who destroyed Microsoft's path to mobile. Good job, moron!

Who won the operating system war? Not Apple. Did you see iPhone's market share? It peaked at 21% for one quarter five years ago, it is now down to around 14% and falling. Once the whole digital IT world was OWNED by Microsoft and Windows (in the PC era). Today, the future - this whole CENTURY - belongs to.. Google's Android. Microsoft's Windows reached at its peak well over 1 Billion users. Facebook reaches over 2 Billion users. But Google's Android? It reaches THREE BILLION human beings by the end of this year, 2017. Google has won the war of the century. And because Microsoft threw in the towel, they will become as relevant to the tech world as well, Olympus is to cameras today. Yes, you can find one in a specialist store, they still do technically exist. But they are irrelevant to the market of photography. Microsoft Windows will shrink to become a niche specialist IT platform used by some large legacy organizations, and Microsoft will live two decades of continuous decline of relevance to eventually disappear, eaten up by some healthy giant, not for their 'reach' but rather, to hire their skilled staff. (And good riddance too, when that happens)

But look at banks! What happens to money? I said from the start, that money will become mobile. Not plastic, not online e-cash. Not bitcoins. Money will be mobile. Mobile phones become our wallets (and our driver's licences and our passports etc). This is NOW accepted as probably true, as Americans (finally) got into mobile payments thanks in great part to Starbucks mobile wallet, and then - after an eternity, finally also Apple's mobile wallet. In China alone, the mobile payments annual turnover is 100 TIMES larger than the mobile wallet turnover in the USA. And China's economy is only slightly larger than the US. Japan's mobile payments are MASSIVELY bigger than the USA. Europe? More than HALF of all Europeans use mobile payments already! So if you thought mobile payments are 'hot' and 'new' you must have been reading the obsolete thoughts of American tech or banking writers. Go visit Turkey or Romania or Kenya or the Philippines or Estonia or Japan or Finland or South Korea or Norway or Somalia or Sweden or ....

In mobile payments, money, banking, we will have the 'Nikons' giant banking conglomerates who fail at capturing the mobile opportunity. We will have the 'Nokias' and Samsungs and Apples and Huaweis who come from the outside and succeed in 'mobile money' and will take a disproportionate share (and end up buying many of the dying dinosaurs). We will also have the hapless 'Microsofts' who TRY to get in, and fail totally. And we will have the struggling 'Sonys' who will have momentary glory but will find the new digital mobile world difficult to survive in. And who wins the race for the mobile wallet? That battle was already decided. It is Google's Android. Of course.

What about the 'Reality' industries? VR and AR? Virtual Reality and Augmented Reality? I was among the first 'Reality' experts to say AR will be big and VR will only be a niche. And I was THE first to be able to explain WHY it was so. Duh. It is because of mobile. VR like Oculus will never be a global platform, and now the various VR experts are increasingly starting to believe. But because AR can be consumed (with the CAMERA function of) smartphones - AR will be FAR FAR bigger - witness Pokemon Go.

So think about newsmedia, or advertising, or retail, or travel, or healthcare, or education; etc. Or government. Did you know the first passports are already available on mobile phones - done first in the UAE (which was also the first country to do mobile phone based driver's licences)? Yes. The future is here. And the key to being a viable business in the future, is mobile. And one VERY valuable lesson you can bring to your staff is the case study of the camera industry. How the big giants failed to capitalize on the Golden Age of Photography, and the Japanese giants gave their industry to players from South Korea, Finland, China and the USA. Don't let YOUR industry miss out on the mobile revolution. Learn from the lessons of the first case study of mobile disruption.

Comments

[Jim Glue]

Correct me if I'm wrong, but the Starbucks app connects to your existing bank or credit card. I don't buy Starbucks, but I do use a few other merchant apps that have built in purchasing....and they all tie to my bank and/or credit card.

AOL IM had no reason to be killed by mobile...no more than Skype, FB messenger, twitter or any other web service. AOL had numerous problems transitioning from their private content, and dial up service to the open internet. They were dead before mobile.

Take BBM as the counter example to AOL IM. BBM was born on mobile, and died (ok, it still lives) due to being slow to make the decision to not be a "reason to buy a Blackberry" but rather "the world's best and most secure MOBILE messaging" platform. But it was ALWAYS a mobile platform.

[Jim Glue]

Help me understand something....stupid American that I am. Here in the backwaters of the USA, we have many options for mobile payments. Even person to person. Many options. However, all of them tie to your bank because....THAT's where your money is, backwards that we are.

I have an app I use to buy a train ticket, and then use that app when on the train. It's "mobile" but it simple takes money from my bank.

With a service like Paypal....I put money into my Paypal account -- FROM -- my bank. So yes, when I use Paypal, I'm not using a bank. (being so backwards, we've only had paypal since...well...before smartphones).

Are your "bankless" mobile money just another form of "Paypal"? Or Ebay...where I can also "store" money (taken from my bank)...and then use without my bank?

Is it that around the real advanced economies like Kenya where people are skipping "banks" and paying with the very secure texting protocol....are they using a "store and forward" money system analogous to Paypal/Ebay?

[E.Casais]

Most of the discussion and confusion comes from mixing up "money" and "payment method". Most solutions alluded to (credit cards, NFC, Apple Pay, Starbucks, PayPal, etc) are payment methods -- they are not money.

Money to be money must fulfil the following conditions:

1) Be universally accepted.

Hence, those rewards from various firms or casino tokens do not count -- they are not universally accepted. The generally correct rule is that if you can pay taxes with it, then it is money.

2) Be fungible. If you consider money as tokens, then they must interchangeable.

Hence, IOUs (in whatever form) are not money, because neither IOU with different dates, nor signed by different debtors can be seamlessly interchanged.

3) Not be embodied in any artefact with an intrinsic use-value, separate from the pure exchange-value.

Thus, soap bars, cigarette packs, silver, gold or any other metal are not money -- because they have an intrinsic use-value, and can be used for something else than settling transactions. This is something many of us have experienced in those countries where coins suddenly disappear because their metallic value is higher than their facial denomination.

4) Assuming it is legal (e.g. not trading in stolen goods), executing a transaction with money completely and irrevocably settles it; no further operation is needed thereafter between any of the two parties and any other party.

When you transfer cash, or wire from your bank account, that's it. The transaction is completely and irrevocably concluded. Neither the one paying, nor the one receiving need do anything else -- they are free to go other businesses.

When you pay with a card, the transaction is _not_ completed: there are several parties that must _still_ perform a variety of operations, and the transaction can be aborted at several points. Thus, you, the buyer with a credit card, must _still_ effect a payment from your bank account to the credit card company. "Plastic money" is actually not money. Same with IOUs: the receiver of an IOU must _still_ collect the money from the debtor.

Is Bitcoin money? Obviously, it fulfils (3), but fails (1). Not understanding its most arcane details, I cannot vouch for (2) (there are those theoretical issues about a large enough player being able to cancel some bitcoins, for instance). As for (4), I doubt it is true, since one must enter or leave the Bitcoin market by acquiring or selling them with...real money.

Is M-Pesa money? Most probably yes (again, one would have to delve deep, deep into its technical implementation to be 100% sure): operators responsible for the system had to be granted a banking license. This is a strong sign that M-Pesa is actual money.

A useful heuristic to determine whether any fancy Internet scheme is money or not is to answer the following question: can I transfer an amount to another private person directly, without involving any other intermediary in the transaction, except perhaps a bank (i.e. no credit card company, no Internet platform corporation, no Apple, no Google, no PayPal)? If not, then it is not money, but a payment mechanism.

Despite some dismissive comments about "Ugandan peasants", systems like M-Pesa are probably the closest to being real mobile money. I wish we had that in our "advanced" Western countries. Apple Pay, Google Pay, Samsung Pay, Paypal & co are only payment infrastructures built upon several layers of interconnected intermediaries, i.e. complicated and costly solutions.

And all this means that, sorry Tomi, banks (commercial and central) will play a central role in whatever mobile money scheme in the future, for they are the ones directly creating, storing and transferring it. Even if it means that Google, Apple or Amazon have to get an official banking license from the government, and their own clearing accounts at the central banks. On the other hand, credit card companies, Internet platform companies (think Paypal) and all associated network entities may well meet their demise.

[Winter]

@E.Casais
"1) Be universally accepted."
Nope, money has to be accepted in a certain community. Most currencies are not accepted legal tender. I cannot pay using rubbles or yuen.

"2) Be fungible. "
Sounds reasonable

"3) Not be embodied in any artefact with an intrinsic use-value, separate from the pure exchange-value."

That is a difficult one. Both gold and silver do have use values outside of money.

The official "definition" is functional. Money is:
1. Medium of exchange: Money can be used for buying and selling goods and services.

2. Unit of account: Money is the common standard for measuring relative worth of goods and service.

3. Store of value: Money is the most liquid asset (Liquidity measures how easily assets can be spent to buy goods and services). Money’s value can be retained over time. It is a convenient way to store wealth.

Bitcoin can fulfill all three functions. I agree that the use in direct purchases is limited at the moment. Starbucks tokens have very limited use in any of these functions.

But you are right that the discussion here is mixing up "money" and "payment". I do not think the "money" part will be changed very much in the near future (btw, all money is virtual). All these new types of "money" are not yet up to the task of serving the needs of even a small country. The Bitcoin blockchain size is already close to the breaking point.

The real innovation is in payment methods and financing. Direct micro payments, savings, and investments is what will be the real breakthroughs. Many countries already have a very efficient and well functioning banking and payment system. In these markets, streamlining payments would be of value. However, in much of the rest of the world, banking services are underwhelming and underserving the people. I see a market for mobile banking here.

[Jim Glue]

Thanks for the explanation and combined with Wikipedia....I'm not sure M-Pesa is all that different than Paypal or any "store and forward" money system. If I were able to connect Apple Pay to PayPal, I would pretty much have the M-Pesa concept. ApplePay instead of the texting mechanism and Paypay instead of Vodophone for the "store and forward".

Everything else about M-Pesa is just about adoption.

[E.Casais]

@Winter

"Nope, money has to be accepted in a certain community."

All right, I forgot that precision -- universal within a certain community (usually a country).

"Both gold and silver do have use values outside of money."

That is why they are not very good vectors for money. Tokens with no utilization other than serving as money (and not to manufacture jewellery, reflecting layers, electronic connectors, or disinfection products) are the right medium.

Number (4) is crucial and can usually serve to distinguish between a payment mechanism (IOU, credit card, etc) and actual, underlying money.

The traditional trinity (exchange, store, account) is of course correct, but operationally, when looking at how to implement one (banknotes, coins, cowries, ledger entries, blockchains, whatever), a currency must fulfil the four conditions I listed.

We agree about a possible important role for mobile in streamlining payments, but this will have to take another form than all the "XYZ Pay" schemes being pushed at present. Basically, at the cost of a complicated infrastructure, they only support commercial transactions between customers and merchants from which they buy goods or services. Direct transfers from person to person, or drawing cash are generally impossible or cumbersome. I understand that all those scenarios are actually possible and simple with M-Pesa -- which means that such a scheme is much closer to what mobile money/payments should ultimately look like than what we have in 1st world countries.

This also answers Glue's question about the difference with Paypal. Amounts stored in Paypal accounts are not really money. First, not that many parties accept Paypal transfers (I cannot pay my taxes, rent, utility bills or groceries with them). I cannot draw cash against a Paypal account. I must first transfer from Paypal to a bank account, and then I can freely use the money. Paypal thus fails criteria (1) and (4). The legal status of Paypal reflects this not-quite-money situation. Although it has a banking license in the EU, it does not have one in the USA, and in many other countries its status for transferring amounts is extremely restricted. It's just another layer of infrastructure over existing payment networks -- whose justification I never quite understood, living in a country with an excellent banking system.

[Jim Glue]

You have to first deposit money into M-Pesa as well. I don't know whether you can pay Kenyan taxes with M-Pesa or not, but the money IN your Paypal account is as real as the money you put in your M-Pesa account (ran but the Telco's).

Paypal money is US currency. I'm sure the money in M-Pesa is Kenayn currency in the same way.

M-Pesa may have caught on broadly in a handful of 3rd world nations, more so than Paypal...but it's still just "store and forward" of the underlying "real" national currency.

If I connected my Paypal account to ApplePay, then I'd be able to use it broadly inside the US. But who'd pay the microtransaction fee?

I don't think the three of us are disagreeing much. Mobile money isn't really about "money" as it is about "low friction, low cost transaction of money".

I don't think banks are threatened by mobile in the developed world. However, I do think credit cards stranglehold as the means of simple money transfer is indeed threatened.

How long before Apple can do what so many stores/gas stations do in choosing to use a bank debit instead of a cc transaction automatically? You'll still have the notion of using a CC to pay for something you don't have the money for...to borrow money for a time.

But I think the "I have the money, but I don't like to carry cash around, so I use credit cards" portion of their business is being jeopardized.

Take Walmart's battle over ApplePay. I think they were just fine with the Apple part of ApplePay but want to get out from under the burden of the CC fee's.

Apple teamed up with the CC companies to get broad support quickly, but the day will come when ApplePay will be established enough to cut out the middlemen of CC companies just like Walmart and other Merchants want to do.

[E.Casais]

@Jim Glue

No, you do not get it.

To summarize: for all practical purposes, Vodafone in an M-Pesa country (or whatever operator runs the scheme) is a bank -- not a store-and-forward-paypal-like organization; a bank.

Almost all people using M-Pesa do not use any other banking services, they do not have banking accounts, and do not use credit cards, debit cards, or ATM.

Yes, you deposit money first. Bring cash to a Vodafone retailer -- who will credit your M-Pesa account. Or wire from a bank account. Or, if you really want to, from a Paypal account.

Want to withdraw cash? Go to a Vodafone retailer and perform the reverse operation. You do not need to wire to a bank, then visit a bank branch to withdraw money. Vodafone _is_ a bank -- and had to get a specific license (to the displeasure of actual banks in Africa).

You cannot do that with Paypal. You cannot do that with Apple/Google/Samsung Pay. Whether depositing or withdrawing money, cash or electronic, you always have to go through a bank -- that is where the real money is. As I explained, you can do very little with a Paypal account -- you basically must wire to/from a real bank account (remember point (4)? Money in a bank account is real money; money in a Paypal account is money in the middle of a transfer).

Transfer from person to person? It happens directly in M-Pesa. With Paypal? First wire from bank to Paypal. Transfer from Paypal to Paypal. Wire from Paypal to bank. Again, see criteria (4) above.

As for paying Kenyan taxes with M-Pesa, guess what: yes, you can, the Kenya Revenue Authority is organized to receive payments via M-Pesa...

Remember, Vodafone acts just like a bank.

What you are suggesting is a contraption to simulate M-Pesa that stacks banks (which levy their fees), credit card corporations (that levy their fees), PayPal (that levy its fees) and something like Apple Pay (which levy its fees). It is complicated and costly. It won't do.

I disagree that banks are safe in developed countries. If they understood the coming mobile payment disruption as Tomi points out, they would meet together and set up a universal scheme (within a banking union, that is) to enable payments at the point of sales (NFC and QR), wirings for bill payments (manually enter particulars, or scan them from invoices), and direct person-to-person transfers (NFC or BT if face-to-face, manual entry of particulars if not) via mobile phones.

They would completely bypass credit card companies, Google, Apple and Paypal in those areas, and only leave the (riskier) credit aspect for grabs. As you suggest, this would basically kill the "use a credit card instead of cash" business of Visa, Mastercard, Diners, Amex and others.

I do not see them progressing in that direction, which makes me think they will soon see Internet companies developing such schemes and becoming competing banking institutions -- to the detriment of traditional banks.

[Jim Glue]

I'm still not seeing the HUGE difference. You bring cash to your phone company. And that's different than bringing cash to a bank?

The phone company is a bank in the scenario you describe. The shortcoming of Paypal is that you can't go to your local Verizon store and put cash into your Paypal account.

I'm not seeing the HUGE breakthrough here...no more so than the plethora of AMT that you have in the US that area everywhere, in gas stations, in supermarkets, on street corners...and yes, in banks.

Once you've loaded up the money in your M-Pesa account, it appears greatly like any other store and forward. Or any other bank for that matter. You have to establish an account with the phone company.

Is the big deal that phone companies are able to compete with banks?

[E.Casais]

@Jim Glue

No there is basically no difference between an M-Pesa account and one at the Consolidated Bank of Kenya. Except that the former is geared to be managed via a mobile phone, and not via debit cards, ATM and PC like the latter.

The fundamental difference though is that M-Pesa operators, unlike banks, do not provide general commercial credit. Operators do provide some credit that is strictly limited to postpaid contracts, but there is no question of mortgages or letters of credit in trade, for instance. Credit is the big sensitive issue that central banks and governments must supervise because it can easily wreak havoc on an economy.

Nevertheless, having a telecom operator being a bank is a _huge_ deal. If Google, or Amazon, or anybody else were to become a bank, it would be a _huge_ affair as well. Huge, as in "eating banks' lunch".

The difference with Paypal is also vast. Let me repeat: with Paypal the only thing you can really do is transfer between Paypal accounts. That's it.

Want to "load" a Paypal account? You must go through a bank first. Want to withdraw from a Paypal account? You must go through a bank first. Want to deposit cash? You cannot go to an operator shop. Or a bank teller. Or any place at all (Paypal has no retail outlets). Want to withdraw cash? Same issue. Want to pay bills or taxes? You must first transfer to a bank account. You cannot have a Paypal account without a bank account.

Want to do all that with M-Pesa? No issue at all. All is done directly. You do not need to have a bank account in addition to M-Pesa.

Paypal is a store-and-forward system (as you call it). Money kept in a Paypal account is not real money until it re-enters the banking system. Banks are currently the place where money is actually created, stored and used (most of it); M-Pesa belongs to that universe -- and that is why African banks are a bit miffed by operators entering their club with such a successful scheme -- that does not require cards with chips or magnetic strips, POS terminals or ATMs. But hey, those traditional banks have no offering for people with no credit history, no permanent income stream, possibly not even a permanent address, and who cannot afford all the fees and commissions that they levy.

As for Paypal, Apple, Google, they are just intermediaries living off the financial streams -- besides convenience at the POS, they do not provide any fundamental financial service (contrarily to credit card companies, which at least provide credit).

If anybody else repeats M-Pesa or provides something similar in the rest of the world, then we are in for a massive disruption in basic financial services.

I am not an enthusiastic fanboy of M-Pesa -- as I hinted above, we can probably do something more elaborate in advanced countries. But the current hodge-podge of credit/debit cards, Paypal, Apple/Google/Samsung Pay is just useless overhead that must go and be replaced with a streamlined, pared-down, integrated scheme.

[Chris Vail]

One of the earliest commenters mentioned a crucial technology that made mobile possible: cheap digital memory. This sticks in my mind because, decades ago, when I was starting out in software engineering, an interviewer from IBM told me that humans would never have enough memory to do all the computing they wanted to do. The real restriction on cameras was that film was expensive. 'Automating film' created the camera golden age.

As for money, we are in the midst of a transition from the American model (laissez faire) to the Chinese model (the government directs the market). This will be hastened by the next economic crash (the financial changes made since 2008 have not fundamentally fixed the problems with the American model). Hopefully another world war will not be included. But the Chinese approach to markets is a difference that will make a difference in the future.

[Winter]

@E.Casais
"If they understood the coming mobile payment disruption as Tomi points out, they would meet together and set up a universal scheme (within a banking union, that is) to enable payments at the point of sales (NFC and QR), wirings for bill payments (manually enter particulars, or scan them from invoices), and direct person-to-person transfers (NFC or BT if face-to-face, manual entry of particulars if not) via mobile phones"

I can already do all that on my phone with my bank. There are ATM everywhere and many shops allow to withdraw cash at point of sale. I can buy stuff on the internet and pay directly from my bank account. My salary is paid into my account and all my bills and transfers are paid out of it. I only use my CC when I travel and to buy stuff in foreign countries. I really do not see what else should be added?

What worries our banks are crowd funded loans and other services. They make their money from loans and managing investments. That is where the competition is comming in.

[davebarnes]

"But the camera industry is the first case study of an 'outside' industry being hit by the mobile revolution."
I would argue that calculators were the first industry to disappear thanks to phones.

[E.Casais]

"I would argue that calculators were the first industry to disappear thanks to phones."

Not sure about that. Calculators are still very much used in schools.

Dictaphones perhaps?

[Abdul Muis]

I think Watch, alarm clock, dictionary.

[Tomi T Ahonen]

Hi all

Just posted the updated Nokia forecast number and first-ever regional footprint by anyone of where Nokia is selling smartphones..

Tomi Ahonen :-)

[Tomi T Ahonen]

Hi E

FABULOUS comments, gosh, very smart stuff, thanks!

I'll read the thread and digest and come back with comments (now gotta go eat, I was working on the Nokia numbers for past gosh, 36 hours..)

Tomi Ahonen :-)

[Abdul Muis]

I just rethink about this...
actually... portable music player (walkman/discman) is the one that dead by mobile phone.

[Tomi T Ahonen]

Hi Everybody & E

(Great comments E!!)

So first the 'disclaimer'. You guys know I am not an expert on the music industry or gaming or healthcare or education or advertising or messaging or indeed, money/finance/banking etc. I am a mobile guy, it's all I know. I have LEARNED absolutely immense tons of insights into music, gaming, healthcare, education, advertising, messaging and yes, money industries - THROUGH their disruption by mobile. Plus countless others like social media (Communities Dominate) and newsmedia and mapping/navigation and virtual reality and augmented reality and on and on and on. This WHILE our OWN industry went from 2G to 3G to 4G (and onto 5G) and the phones went from voice to text to media phones and camera phones to web-enabled phones to smartphones. Just trying to keep abreast of the smartphone 'bloodbath' wars was more than a full-time job for many years, when the smartphone industry was literally the world's most competitive global industry - and far far less fiercely contested industries like say automobiles and airplanes had ARMIES of journalists tracking their market shares haha...

So I am NOT an expert on 'money'. I am NOT an expert on the 'banking industry' or the financial services industry or even 'digital money' (while I do write about it, had a whole chapter on digital money in my fifth book already, literally ten years ago). I tell everybody that when I need 'guru' advice on digital money, I turn to Dave Birch the British author who is a good friend and has helped me understand that industry a lot.

What I have accidentally become, is somewhat the world's topmost expert on MOBILE money because I was into mobile money well before M-Pesa (I knew some of the creators of that service) and I had seen most of the truly innovative mobile payments players from literally the start of the mobile money industry going before M-Pesa to Smart Money in the Philippines, the Osaifu Keitai (mobile wallet) of NTT DoCoMo in Japan and of course the whole mobile payment idea was invented in Finland by Coca Cola. So I then wrote the world's first book on mobile payments and I probably have the widest knowledge of any published 'expert' on the breadth of global mobile money/payments industry and its true pioneers. Most other 'experts' would have a very murky picture of the years before M-Pesa and many Western experts would not know the heritage of Japan to mobile payments where almost every m-money innovation was first commercially deployed in Japan from NFC payments to the mobile wallet.

That all said. I still am 'only' a mobile expert and I do not pretend to know the money/finance/payments/banking industry ANYWHERE near well enough, to consider myself an expert in it. Exactly same relationship as I have with advertising, music, gaming, healthcare, social media, messaging, etc. I always make it VERY clear whenever I speak to any such group, that I am not an expert of THEIR industry, I am a mobile guy.

With all that, to E's wonderful comments. I do not have a 'methodology' to distinguish how 'money' is different from say 'banking' or 'payments systems' but we all 'know' that money is somehow different and have some gut feelings about it. So E's four points are FABULOUS (and E, I will be using these in future discussions with my clients, these are VERY good). Let me first just copy from E's comment:

Money to be money must fulfill the following conditions:

1) Be universally accepted.

Hence, those rewards from various firms or casino tokens do not count -- they are not universally accepted. The generally correct rule is that if you can pay taxes with it, then it is money.

2) Be fungible. If you consider money as tokens, then they must interchangeable.

Hence, IOUs (in whatever form) are not money, because neither IOU with different dates, nor signed by different debtors can be seamlessly interchanged.

3) Not be embodied in any artefact with an intrinsic use-value, separate from the pure exchange-value.

Thus, soap bars, cigarette packs, silver, gold or any other metal are not money -- because they have an intrinsic use-value, and can be used for something else than settling transactions. This is something many of us have experienced in those countries where coins suddenly disappear because their metallic value is higher than their facial denomination.

4) Assuming it is legal (e.g. not trading in stolen goods), executing a transaction with money completely and irrevocably settles it; no further operation is needed thereafter between any of the two parties and any other party.

Absolutely fabulous listing of 4 explicit clear distinctive characteristics of 'money' that separates it from other payments-related mechanisms.

Now, lets take one recent 'new money' invention from outside of mobile and digital. Airline miles. When airline miles were only rewards programs for airlines, they were 'loyalty' schemes with some value. Those miles were not 'money'. BUT when airline miles became available to be used in very wide range of purchases (hotels, restaurants, various physical goods payments/purchases) beyond the services of the airlines - that is when airline miles (of the most popular systems at least) became a 'currency'. A virtual, unregulated currency but one that is (somewhat) convertible and you could even transfer that money to another person (outside your family, eventually) who could then use the miles equally in whatever way they wanted. You might THINK you were giving them a gift of a free flight but they could theoretically go and buy something else with those miles, similar to if you gave someone a gift of cash.

I am not saying airline miles are AS convertible as cash, so they are perhaps an 'inferior' form of currency but airline miles (of the big programs) ARE a money instrument. I hadn't thought of this even as I was amassing lots of miles, until the Economist made this argument elegantly about a decade ago in their big article where they measured the value of this, the then-newest international payments currency type. They concluded it is a new currency. So to fit E's definition, not perfectly, but close enough, airline miles are a new type of MONEY (as distinct from say in-game payments tokens or whatnot).

Now virtual gaming currencies CAN be sometimes converted to real dollars (such conversions are usually VERY strictly forbidden but tend to be relatively easy to achieve) but if the gaming currency - as its own currency - cannot be used outside its own game/s then its not 'yet' money. But imagine inter-operability of virtual currencies? Why couldn't you have an exchange-rate between the virtual money of one gaming world vs another? I do think this will come relatively soon and that would move in-game virtual currencies into something closer to real money.

BUT we HAVE one newer international currency already after airline miles. It came from mobile. It is air time. In MANY emerging world markets, airtime can be used as a pseudo-currency, so you can pay for you haircut by minutes of airtime, or pay for the taxi ride by minutes of airtime etc. They often are conducted by the physical means of SIM card transfer (that SIM card has a balance, you hand the SIM card over as payment and the person receiving the payment can stick the SIM card in the phone, do the value-check and verify it does have the amount that was agreed).

In many emerging world markets you can OFFLOAD airtime at local resellers and 'take out cash' instead. This is done at resellers of air time (local small merchants) who prefer to get rid of their cash this way, rather than walking it to the bank - and because airtime is convertible, the merchant can then sell the airtime to the next customer who needs a top-up. There is a cost of course, and an inconvenience level (modest inconvenience) but it does mean that airtime IS a new monetary instrument and in many countries far more 'like money' fitting E's rules than airline miles are even in their best markets. But airtime has a further fascinating dimension - INTERNATIONAL TRANSFER. You can send airtime minutes across international borders - and make MONEY payments this way, bypassing the heavy fees of say Western Union international money transfers. This newest form of currency was of course first discovered in Africa and it was discussed at Forum Oxford where the revellation of the world's newest currency was disclosed. And that was, gosh, nearly 10 years ago by now, I think it was still at the end of the previous decade so say year 2009 or so...

So apart from what you know about Apple Pay, and Starbucks's mobile wallet and say M-Pesa; and perhaps some insights from current Japan and China (and Northern Europe?) there are MASSIVE new changes going on, and one of them is, that a 'truly only mobile' payment method - airtime minutes - has emerged as a MOBILE MONEY. Fits E's definitions perfectly (in some countries, not of course all, yet)

I will now go to individual comments but this listing of 4 attributes is brilliant, lets use that to distinguish what is mobile payment, mobile banking, mobile money.

Tomi Ahonen :-)

[Tomi T Ahonen]

First comment

EVERYBODY please RE-READ E Casais's answer to Jim Glue which starts 'No you do not get it'. It was posted by E on 31 Oct (in case this thread gets to be very long haha, it well might)

If you do not understand WHY M-Pesa is DIFFERENT from Paypal or Apple Pay or Starbucks Mobile Wallet - re-read E's excellent response. M-Pesa in Kenya applied for a BANKING LICENCE (years after they had been in operation, claiming 'we are not a bank, we are not a bank' then they 'noticed' they actually had 'become a bank' and went to regulator saying, oops, we think we may have become a bank, should we apply for a banking licence).

You can WITHDRAW cash from your mobile wallet on M-Pesa WITHOUT putting that money to a BANK first (which is why Paypal is a payment method, NOT a bank). In many areas of mobile money (Philippines, Kenya, Somalia, Tanzania etc) you can withdraw from your 'mobile wallet' (like M-Pesa or its equivalents) and pull out CASH at THOUSANDS of merchants (who usually also sell air time, so the local prepaid mobile SIM card vendors, who also sell air time, become the 'virtual ATM cash machines' in those societies).

There is no 'bank teller' or 'bank building' or 'bank office' but M-Pesa the telco, IS A BANK. They take banking deposits (in Kenya in Kenyan Pesos the local currency) and you can have you rent paid, yes your taxes paid, your salary arrives on M-Pesa. EVERY local merchant today accepts M-Pesa in Kenya.

So please re-read E's excellent answer that started 'No you do not get it'. And this is no criticism of Jim Glue of course, the questions and comments and debate are excellent. We are ALL learning tons from this debate. Don't worry if you had a misconception. We will be all better for this debate, and understand the mobile money disruption FAR better after this discussion (including me...)

Tomi Ahonen :-)