Google & Motorola.... anything for Mobile Money?

In a bid to strengthen its mobile business, Google announced today that it would acquire Motorola Mobility Holdings, the cellphone business that was split from Motorola, for US$40 (S$48) a share in cash, or US$12.5 billion.(TodayONLINE). The offer - by far Google's largest ever for an acquisition - is 63 per cent above the closing price of Motorola Mobility shares on Friday. Motorola manufactures phones that run on Google's Android software.


But is this deal likely to effect the world of Mobile Financial Services? To gain an insight into the potential we need to look at the history of the two businesses.
Motorola has had a roller coaster history over several decades. Many of us would recall devices such as the StarTAC and the RAZR, under the Helo Moto messaging. But even with these pinacle devices, Motorola was never able to achieve the mass market scale of its competitors Nokia, LG and Sony Ericsson. The first Motorola device to use Google's open source OS, Android 2.0, was released on November 2009, the Motorola Droid. The handset division was then spun off into the independent Motorola Mobility.


Google on the other hand has been on an ever growing distribution base in the Mobile OS space since it's acquisition of Android in 2005. Then with the support of the Open Handset Alliance, Google launched it's first release of the acquired platform in 2007. Since that Android has seen a spike in distribution across some 80 device manufacturers. By the fourth quarter of 2010, Android become the world's best selling Mobile OS.


The challenge for Smart Phone OS providers, has always been the market share limitation globally. In 2011, roughly only 25% of global devices are smart phones. This is where the Google Motorola opportunity comes in.
With Motorola's device experience, Google should be able to create move to penetrate lower down the value chain of the handset market. Thus opening the door for richer distribution of services over the open source OS market. With mid and low end devices powered by Android in the hands of the 700 million mobile users in India, or the 180 million in Indonesia, the distribution of mobile service becomes easier and richer. A perspective very different to Nokia's recent announcement of factory preloaded applications.


A parallel initiative run by the Grameen Foundation, AppLab, who seek to engage with organisations, government entities and socially-minded companies interested in better understanding and meeting the needs of the poor. AppLab has had a long history of building services on the Android platform, particularly in markets such as Uganda, Indonesia. Overlaying Google's OS, Motorola's device experience and grass roots level programs such as AppLab's means a powerful network of organisations with simple tools that can overcome the commercial barriers that Mobile Operators put in place to restrict the success of services trying to access their customer base. Resulting in the easier, quicker and more cost effective creation, distribution and management of mobile services such as Mobile Money.


In summary, with the effective collaboration of open source OS(Google) and a device manufacturer(Motorola), we have for the first time, a complete non-Apple mobile eco-system for the creation of services for delivery over mobile

Recipes to Success #1: Building the EcoSystem

Over the years, I am continually asked what is the 'secret sauce', 'silver bullet' or 'killer app' to ensuring Mobile Money success. And I have to admit, there is no secret, there is only the ability to learn from the repeated mistakes and successes of those that have pioneered before you. Such an approach isn't specific to emerging markets, developed markets, Africa or Asia, but it is a strong set of learnings that one should investigate, understand and consider when making their own play in mobile financial services. One of the key successful factors is understanding and building the eco-system.

Far too many mobile money businesses go head first into launching products that have little market research and little consumer understanding on the chance that 'build it and they will come' or 'copy M-Pesa' will ensure success. Operations like these are continually faced with disappointing adoption rates, or low active utilisation. Thus leaving executives puzzled or disillusioned on around the hype of mobile for financial services.

Building the Eco-System is at the top of my list of insights as a theme that many forget. This may sound simple and straight forward, but one needs to be aware this is not something you can buy, outsource or ignore. It's a constant journey of discovery, adaptation and refinement. It doesn't finish upon launch, nor does it finish within the first year. Best of all, it a journey that will engage you in the fascinating exploration of cash and transaction flows within your market. It involves understanding the various actors within the community, how and why they interact, where they interact, what is the relationship between them. Only with this level of understanding will the market opportunity for Mobile Money be obvious. This could be as simple as witnessing the amount of cash that friends or family send between each other via trusted couriers, or huge queues at a factory on payday. This is your secret sauce, engaging and understanding the world people live in, then finding the points in the ecosystem that could be better.

I have such a recipe, which I have used dozens of times to guide the industry towards success. Engage, Penetrate, Accessibility, Control, Sustain & Learn, Re-Plan, and re-Execute. Let's take a look at each step:

1. Engage: 

First and foremost you must find a way to get amongst your target market. Spend time understanding their everyday needs, pressures, movements, etc. Find out how much cash they carry, and why that amount. Where they travel regularly to buy things, get services, or exchange money? Document everything you find, take photos, exchange contact details. These people will be key in your journey of market understanding and service refinement.

2. Penetrate: 

With a clearer understanding of the market, document your theories on where you feel a service can penetrate the ecosystem. Remembering commerce and financial transaction already happen, your just looking for gaps where you feel a service might enhance or benefit those involved. Start by listing just a dozen. This list is where you make a soft launch of the service. Get those people deeply engaged, because they will be your champions over time.

3. Accessibility: 

Okay, so now you have a few theories on getting into the ecosystem, but you have to remember, once you convert transactions from cash to virtual money, such in the cause of Mobile Money. Those individuals brave enough to be early adopters will need assurance that they can still get access to their money. There is no point trying to address the payday queues at a factory, if the only way they can get cash is to travel to a bank or ATM to make a withdrawal. The access needs to be within their current life & ecosystem, but of course you already know where their life happens from your engage findings.

4. Control: 

While hyper growth is fantastic, it also means you have to scale your service foot print to meet the demand, which creates a risk that you have poor customer experiences outside your existing field of service. Take Facebook for example, they executed a carefully controlled launch, one university at a time. During the initial phases of your launch you will learn ten fold from your original market engagement findings. The ecosystem in which you activate needs to be readily accessible so you can quickly collect market feedback. Make sure you document this feedback, as it will be extremely valuable as you refine the service offering.

5. Sustain & Learn: 

As the ecosystem organically grows, you need to maintain your engagement so that you may observe it grow patterns, behavioural usage, challenges, etc. Ongoing observation and documentation.

6. Re-Plan: 

Revisit the theories you had during the penetrate phase and add to the list, no doubt the number of theories you now have are double or even triple. You need to link your findings in the field in a cyclical manner enabling a highly engaged feedback mechanism into your market planning, service planning and penetration plans. These will be key as you enter more and more ecosystems. Don't be afraid you remove the theories that didn't work, just don't forget why didn't work.

7. Re-Execute: 

This is where the model completes the cycle. Go back and re-engage, whether that is engaging a new ecosystem, or reengaging the same but broader community. You'll enter with an enhance understanding, which will make you more observant and in tune with the community.

This all may seem fairly straight forward, but you'd be surprised how often companies looking to enter the Mobile Money space forget to engage the ecosystem and learn through a repeatable process. The process is scalable, so as your team size grows the process remains with a greater power as you gain more and more perspectives on the market.

So there you have it. A Jamie Oliver style recipe for success in launching Mobile Money. If you'd like ore details, I am always not to far away.

VISA & Fundamo... Game Changing

Fundamo CEO.
Hannes van Rensburg

Today, VISA Inc announced the acquisition of Fundamo (http://corporate.visa.com/media-center/press-releases/press1128.jsp). You would have read in recent posts that the industries largest players, continue to make large strategic moves in 2011. Today was very different, today VISA 100% acquired Fundamo. Yes, I know this blog is going to sound bias given I work for Fundamo. But I assure you, my person opinion prevails here.

Fundamo has worked hard to develop themselves as an industry leader in the Mobile Financial Services space under the guidance of industry heavy weight, Hannes van Rensburg. They've endured multiple iterations within the industry, as it moved from experimental first movers, to the mature enterprise platforms we see today. The GSMA recognises their customer Celpay in Zambia, as the oldest Mobile Money operation in the world, pre-dating M-Pesa, G-Cash and Wizzit. Fundamo's poster child has always been the deal with MTN Group, which saw Fundamo technology deployed in multiple countries. This was a partnership that fused the might of a Mobile Operator Group in multiple emerging markets, with the thought leadership of the team at Fundamo. Thus creating one of the world's leading multi-country Mobile Money businesses, something M-Pesa has been unable to achieve with Vodafone, and Orange still struggles with.

VISA on the other hand operates the largest payments network in the world with roughly 40% of the worlds Credit Card market and just of 60% of the debit card market. Recent years have seen VISA push deeper into emerging markets with PrePaid products, such as their deployment into Pakistan for the distribution of flood relief funds. VISA has also launched products such as VMT (VISA Money Transfer) which taps into the P2P markets. They also recently invested in CyberSource and PlaySpan, adding to their partnerships with Monitise & Device Fidelity.

The acquisition of Fundamo integrates a industry leading mobile financial services platform, with existing presence in countries across Africa and Asia, into Visa’s global network. Thus bringing to market the first open door for the previously closed loop payments ecosystems that have dominated Mobile Payments to date. Creating a new market potential, far greater than VISA has seen before, and creating a tipping point to drive consumer adoption of mobile as a payment instrument. This move is a true game changer. It means that VISA products can now be extended to the 4 billion plus mobile users world wide, including the highly aspirational emerging nations with greater the 100 Million population.

This announcement when coupled with VISA's complementary assets in the industry is sure to be a success. It essentially gives them all the tools they need to deliver on their May 11th announcement, VISA unveils next generation electronic payments (http://corporate.visa.com/media-center/press-releases/press1124.jsp) only with Fundamo, it now has the footprint to drive deep into emerging economies. 

Exciting times ahead

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.