Google, MasterCard, Citi & First Data.... Fail to deliver on potential

It's out.... Google & MasterCard's Mobile Payments announcement has been formally announced and the industry is now in a hype as opinion pieces, scrutiny and scandals hit blogs & twitter.


But what surprises me most is that the announcement falls short of my expectations. As I mentioned in my post yesterday, Google could have leveraged the Open Handest Alliance and Open Standards of its Android platform to raise the industry to a level that would be hard to follow. We could have seen the possibility of open source developers building ePOS Apps for businesses, driving digital transactions into new market segments where traditional POS devices are too costly. 


Google could have created an offering that goes beyond the limitations of NFC, but have been happy with MasterCard PayPass' NFC network. Is this just a speed to market play from the Google & MasterCard? Or is this actually their strategy?


Let's hope that this is just a speed to market play, otherwise Google & MasterCard have under-estimated the potential of their current assets.

Google & MasterCard... combining strengths

Google has dominated news in the payments space over the past few days, as the rumors and industry hype pushes toward the confirmation that Google is set to introduce a mobile payments platform that will turn its Android smartphones into a digital wallet. Google invited reporters to attend a "partner event" on Thursday in New York to demonstrate what it called its "latest innovations." It plans to unveil a mobile payments system that will run on the Android operating system and be available on phones from Sprint Nextel Corp, Bloomberg reported on Tuesday. The Internet search and online advertising gorilla will work with MasterCard Inc, the card processing network, to launch the system they told Reuters on Tuesday. A separate repost in the Wall Street Journal suggest Citigroup is also in on the action. That's three household names partnering to capture your digital wallet, three names with equally powerful market size and presence to shift the market towards mainstream adoption.


Many would have also read VISA's announcement back on May 11, demonstrating their ambitions and plans to build a global digital wallet service due to hit the market later this year. Visa’s mobile wallet initiative really could revamp the way we spend money, and the way we interact with our smart phones. Similar attempts have been initiated in the past by handset manufacturers, mobile operators, public infrastructure, but never made their way to the mainstream market. Hopefully, we’ll get to see what the future may look like as soon as this year, assuming Visa sticks to the outlined plan.


As Google prepares their announcement, lets look at the value each of the partners brings to the table. Firstly their is no questioning the role of MasterCard in the venture, they currently have the world's second largest card processing network, behind VISA's. But their scale is far from insignificant. MasterCard operates Banknet, a global telecommunications network linking all MasterCard card issuers, acquirers and data processing centers into a single financial network creating a global footprint that creates a network that would comfortable touch a large majority of the world's smart phone owners, creating an compelling case for moving your MasterCard connection from the cards in your wallet to your Android Smart Phone. Adding to the value of the network MasterCard has PayPass, an EMV "contactless" payment feature, which could foreseeably be delivered via a mobile device, currently available in many of MasterCard’s issuing bankcards. MasterCard has an estimated 190 million cards in circulation in the United States alone, 960 million worldwide.


Google on the other hand provides on of the worlds most popular mobile operating systems. Google acquired Android Inc. in August 2005, making Android Inc. a wholly owned subsidiary of Google Inc. and selected at the OS of choice by Google when they launched themselves into the Mobile Operating System market. The first commercially available phone to run the Android operating system was the HTC Dream, released on 22 October 2008. In November 2007 a powerful consortium was formed that could play am important part in Google's announcement. The founding of the Open Handset Alliance, a consortium of 80 hardware, software, and telecom companies devoted to advancing open standards for mobile devices, including Broadcom Corporation, Google, HTC, Intel, LG, Marvell Technology Group, Motorola, Nvidia, Qualcomm, Samsung Electronics, Sprint Nextel, T-Mobile and Texas Instruments. Creating a diverse, powerful network of manufacturers that collaborate under the message of open software. A very different approach to Apple's single manufacturer and tightly guarded source code approach.


It's estimated in Q2 2009 that Android had a 2.8% share of worldwide smartphone shipments, but by Q4 2010 this had grown to 33% of the market, becoming the top-selling smartphone platform. In May 2010, Android's first quarter U.S. sales surpassed that of the rival iPhone platform. At Google I/O, May 10, 2011, Google announced that 400,000 new Android devices are activated every day and more than 100 million have been activated.


The initiative from Google & MasterCard has now signed up retail partners Macy's Inc., American Eagle Outfitters Inc. and Subway, though it is unclear the scope of the US deployment. Will this be another industry pilot?


What does all this mean? I see this as a re-confirmation that 2011 is the year of the Mobile Wallet. Big brands making big moves, ones that are far beyond pilots and experimentation. This announcement, along with VISA's states to be the Mobile Payments industry tipping point driving mainstream adoption globally. My personal hope is this drives a global replacement of the cards issuing networks, creating a simplified financial & payments life for all consumers. By separating our society from the legacy infrastructure of cards & POS devices, the networks of MasterCard, VISA, American Express can penetrate deeper into the under and unbanked parts of the world. It should also be the catalyst for the reduction of overheads for payments, leading to cheaper payments services.


One possibility that still remains unknown is how Google's open standards approach will impact the way we all do payments. It could lead to the possibility of open source POS Apps being built for Android devices, creating an opportunity for Android to replace the millions of POS devices and machines worldwide. One thing for sure, is the open standards will gain a heightened level of scrutiny over security, encryption and privacy.


In summary, I think this is a very positive move by two large complementary industry players combining their strengths, network and consumer foot print. I guess we will have to wait to hear the details of VISA's announcement to know how far they have taken their vision & plans. In my opinion, if VISA is to raise the bar on MaserCard, they make a deal with Facebook, putting a VISAnet Connected Wallet behind the 600 million Facebook users, and giving Facebook's Merchant plans global network strength.

Proof: Social Networks are Viable Commercial Businesses

Many of us would have read in the news today that LinkedIn(LNKD), the online professional networking platform, had an overly successful IPO with their shares going for up to USD 120 after opening at pricing at just USD 45 before opening. An astounding achievement for an small internet start-up, in a time where social networks come under continual scrutiny over their commercial value.


The success of LinkedIn's IPO now fuels the rumor mill as companies like Facebook, Groupon, Pandora, Kayak and other look to launch their own Public Offerings in the coming year. Could any of these repeat the success of LinkedIn, or are we witnessing a bubble created by first mover advantage. One this is for sure, LinkedIn's Market Capital has accelerated beyond many individuals wildest dreams. So now we can all get in on the action, as retail investors buy up stock in a previously dreary Tech Stock market.

Financial Institutions in Disruption & Innovation

Mobile Technology has posed one of the more disruptive changes to the Financial Services industry in decades. It will rewrite the expectations of consumers and their needs from their financial intuition. Suddenly 24x7 accessibility, instant fulfillment, enriched contextual service, simplicity and mobile will be the trend of tomorrow's successful retail bank. But what is stopping the banks from making these moves today? It's not a technology limitation, because all the necessary tech is already available. Is it the legacy mindset of the banks? I think so.


The banking sector has one huge thing going for it. It has survived multiple depressions, recessions, revolutions, evolutions and innovations. Their slow but steady approach to progress protects them from hype, risk and bad decisions (except in recent times). So how does an traditionally risk adverse intuition position itself fo future success? There are several cases of success. 


Take for example Australia & New Zealand Bank's transformational subsidiary in Cambodia, WING. A business aimed specifically at a new market segment for the bank on a technology the bank had little experience with, mobile. Big establishing a separate brand & operations, ANZ was able to protect the Mothership while experimenting with a new approach to the market. Similarly National Australia Bank, used the UBank venture to dable in new generation direct banking.


So will we see more experiments like these as banks grapple with with the evolving Generation M as they push into primary markets? I would suggest so, as it allows the Traditional Bank to survive, while creating a the ability to learn new technologies and customer needs.