Digital money society

It’s hard to escape the mobile money land grab at the moment. In the last few weeks I’ve written the word ‘m-wallet’ more than ever before in such a short time. But while the players involved say there’s enough pie to go around, it might not be to everyone’s taste.

In an interview with an Australian paper this week, Scott Thompson, PayPal’s global president, nodded toward the “massive opportunity” around points of sale in retail stores. PayPal, he said, “can now be a tender type, an option for payment at point of sale because that device is essentially a computer when it’s connected to a network.”

Thompson revealed that PayPal is working on three options for retail store payments, including one via mobile phone. It’s all part of the fanfare, since PayPal and parent eBay’s big bust up with Google, but it’s a tune everyone’s singing along to.

At the end of last week I spoke to Bill Gajda, Visa’s head of mobile, following the company’s $110m acquisition of mobile banking specialist Fundamo. Fundamo focuses on the emerging markets, where more than two billion people have a mobile phone but no relationship with a financial institution. This, says Gajda, represents a tremendous opportunity to provide basic and then more advanced financial services to the unbanked, by virtualising a Visa account on a mobile phone.

Visa argues that while mobile financial services in developing markets have become a core service offered by many mobile operators and financial institutions, these services are often limited in scalability and reach and are not interoperable with other regional payment services or global payments networks. Fundamo’s strategy is for m-banking and m-wallet to co-exist. Where the m-wallet offers a full accounting system and is far more cost effective way to reach emerging markets where bank accounts are not commonplace, while m-banking offers more advanced and connects to an existing bank account. The idea is to build up a user base with one service and expand it with the other in the future by expanding the utility of closed-loop systems.

Visa is taking advantage of the fair amount of fragmentation that still exists within this sector. “Relatively small companies have led the pioneering technology in this space. But as banks and operators move out to reach millions of people you need a roadmap that’s scalable and reliable with added features and benefits like a standards based approach with interoperability,” Gajda says. “The land grab started years ago but now accelerating and we are participating in land grab. We’re going to existing mobile money schemes and offering a Visa overlay to open up their system and allow for new kinds of transactions and interconnectivity between these closed loops.

“What we want to do in medium term is create a mobile payments ecosystem the same way we created a physical payments ecosystem,” he says.

With his long history at the GSMA, where he served seven years as chief commercial officer, Gadja sees a lot of similarities in his new role. To open up the value for everybody, you need to open the m-finance sector up to a broader ecosystem. “It’s like starting with voice connections on one network only, then interconnecting between networks. SMS in the US didn’t explode until we had inter-standard roaming. We’ve seen the same in the payments industry and will see the same in mobile payments,” Gajda said.

And his relationship with the operator community should help Visa out, as the finance firm sees operators as a key method of distribution and customer facing trusted brands.

But as we’ve seen with the launch of Orange’s mobile payments service, Quick Tap,, the business model for an m-wallet is an indicator of a radical change in the mobile operators’ positioning in the value chain. The operators are taking a step aside in order to remain relevant. There’s nothing to stop a company developing services running on top the connectivity provided by the operators. So they have to be smart to remain relevant.

As Gajda puts it: “There’s always a bank in the background, but many customers view operators as the issuer of an account. So it might not be that they play a diminished role in the future, it’s just that there’s more players coming in, and it may be a bigger ecosystem. So we intend to work with banks and carriers to make it an inclusive ecosystem.”

For a firm like Visa, this means tying its portfolio together across different markets. While on one hand it’s targeting the unbanked with a mobile wallet platform, via a new agreement with mobile money provider Monitise it is virtualising existing Visa accounts on mobile phones and offering a new array of payment types for things like mobile top-up, utility payments, and transit ticketing – all applications that can be pitched to what are less developed markets now, in the future.

The endgame is about much more than mobile payments or mobile banking. It’s a combination of the two, where the frontiers between m-commerce and e-commerce are blurring. “It’s the start of a digital money society,” says Gajda. “Closed loops cannot do the transactions we all take for granted if we have a card and computer. But by linking a Visa card with all these closed loops you enable people to perform other e-commerce transactions. You accomplish convergence. It’s the start of the mobile digital money society.”