Knee jerk that reaction, doctor

An apparently reputable business publication set the blogosphere abuzz recently with the report that a very prominent tech company was planning to make its play in the mobile payments arena. Other media outlets picked up the report and blogs were lit by the fuse of speculation.

The rumors coming out of this tech company are probably true to some degree. However, the source of the insider information on which the apparently reputable business publication based its report is suspect in my view. You would think this consultant with all this juicy information was vetted by the apparently reputable business publication. But who knows these days.

So I researched the consultancy. I can't get to the website. There's always a problem loading the page. I found the consultancy's phone number and called it up. The receptionist said the consultant was on the other line. I asked if I could have the consultant's voicemail. The receptionist said she would take a message. (No voicemail?) When she took my message, I had the impression she wasn't actually writing anything it down. When I said thanks, she muttered something and hung up. (Maybe she's a temp, or his wife.)

I did a little research on the consultant. He seems to have a decent background, is reportedly an expert resource for media outlets. But, on the other hand, he has a crappy website, a lousy receptionist, and no voicemail.

So I am left to wonder about the factuality of his insider knowledge about future product roll-outs by this tech company, and yet one media report using this guy as the source got the whole tech world hyperventilating. It just proves how easily led we still are. 

If a Big Lie comes wrapped in the mantle of authority projected by an apparently reputable business publication, will we have the wisdom to at least take a second look at it before broadcasting it like mindless parrots across the world?

I doubt it.

Oh, mighty Isis!

As a Gen X outcast, I recall the joy of Saturday morning cartoons of the late 1970s -- Batman, Scooby Doo, The Jetsons, Yogi Bear. But also the live action adventure series Shazam!, which chronicled the exploits of Captain Marvel, and its sister series Isis.

Isis was about a young teacher who finds a necklace that transforms her into the mythical goddess Isis when she utters the incantation, "Oh, mighty Isis!" As Isis, the woman could fly and command the elements of sky and earth.

All I really remember about the show is Isis in flight, with her arms extended out in front of her. The rest is a complete blank, probably because the episodes weren't memorable. (The show only lasted one season.)

This is the dilemma of the new Isis -- a brand new mobile contactless payment network at the point of sale. It is made up of AT&T, T-Mobile, and Verizon. The big three telecoms are trying to leverage their 200 million U.S. wireless phone subscriber base to transform themselves into a payments network like Visa and MasterCard.

Isis is going to use Discover's network of 7 million retailers to develop its own Isis branded network over which smart phone payments will be made.  It's a bold but problematic undertaking because V/MC are such entrenched, well-known brands that operate powerful, worldwide networks. Of course, the card brands also have designs on mobile payments, with pilots in the works that seek to circumvent the power of the telecoms.

So, will Isis soar or bomb? It is very much an open question that hinges primarily on how consumers want to pay with their phones. Remember, Isis was kicked off the air back in the late 70s because not enough kids like myself watched the show. If not enough consumers opt to use Isis, 30 years from now we'll be strolling once again down the hazy corridors of memory lane.

A rupee for your thoughts

Banks worldwide have proven themselves woefully inept at providing poor people a means to help them prosper financially. Either banks take advantage of them or have no clue how to market services to them or figure they are not worth the effort since they are, indeed, poor. So there exists a gaping need amongst the world's poor for financial tools to help lift them out of poverty.

That's where alternative financial services (AFS) come in. These are processors and program managers that offer microfinance loans for people to start businesses and hire workers; payment cards that are not tied to bank accounts; mobile phone services such as bill pay and money transfers to electronically direct money where consumers want it to go.

Take, for instance, India. This country of over 1 billion people has an inordinate amount of desperately impoverished people. Lately, the Reserve Bank of India (RBI), which manages the country's monetary policy, granted licenses to alternative financial services companies to expand their networks amongst the nation's poor. Using the services mentioned above, these companies are busy reaching out to the "unbanked", expanding prepaid card reload networks, and striking partnerships with telecoms for mobile payment capabilities.

It is ironic that RBI is controlling this initiative, since the bank was unable or unwilling to help its own poor directly. But maybe it has seen the light philosophically, or perhaps to be more realistic, it recognizes the profits available through its AFS intermediaries. I'm sure those bank licenses don't come cheap.             

Prepaid and the mobile wallet

There seems to be an affinity between prepaid cards and mobile payments. The percentage of people around the world who have cell phones is very high, even in desperately poor countries. The percentage of people around the world who don't have access to bank accounts, and thus have no debit cards (let alone credit cards), is pretty high. Therefore, the only electronic payment vehicle the world's poor have access to are prepaid cards, because they are not tied to bank accounts or lines of credit. And, since the worldwide unbanked do have cell phones, the wireless phone-prepaid card connection is made.

The same logic applies to the underbanked. Teenagers are representative of this group. Because of their age, they have limited access to bank accounts. So the teen market is a primary one for prepaid cards. And what teen doesn't have a cell phone?

Finally, smart phone payments are likely to be small-dollar purchases. You will probably opt to buy a sandwich at the deli using your phone, not when you make an expensive purchase, like buying a car. Prepaid cards are seen as ideal for those small-dollar purchases, as well, because the cards are really just the electronic substitute for cash. And most people don't buy cars with cash.

It's another reason why folks will slip that prepaid card into their mobile wallet when they take their date to the movies, not when the car needs new tires.

Ubiquity

"Ubiquity" is a popular word in payments. It is an especially relevant term for mobile payments, where ubiquity means that all brick-and-mortar merchants in the U.S. have point of sale terminals configured to accept payments via smart phones. It means that when consumers come into stores, they can make purchases just by tapping the phones on the terminals.

But if the ability for all merchants to accept mobile payments is not there, then it diminishes the convenience factor for consumers. If a shopper wants to pay for groceries with a smart phone, but the merchant's terminal is not set up for it, then the shopper gets frustrated, puts the phone away, and returns to a payment card or cash for that purchase. Maybe next time the shopper wants to pay using a smart phone but thinks better of it because of that negative past experience.

Therefore, to encourage consumers to use mobile phones to make in-store purchases, the ability to accept smart phone payments must be everywhere. Imagine a time when smart phone-enabled terminals are as ubiquitous as Lady Gaga...Ah, what a thought!