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Mobile Payments Primer – Not all the same

Mobile Payments Primer – Not all the same

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“There’s a surprising amount of misinformation and confusion being sown about mobile payments.”  That comes from a post on Mobile Payments Today.  It’s very true.  When I talk about Nooch with other entrepreneurs, friends or Silicon Valley types, nearly everyone immediately identifies Square and Google Wallet as our top competitors in the mobile payments space.

What is a Mobile Payment, anyway?

But hold on there, cowboy.  “Mobile Payments” is an absurdly broad category.  That moniker is an over-simplified label that frankly often confuses more than clarifies.  Within the vast realm of “mobile payments” are more buckets and categories of niche markets than one would ever think from just reading tech blogs.  There are merchant/P.o.S. solutions (Serve, Dwolla, Venmo), hardware solutions (Square), virtual goods platforms (Zong), rewards program aggregation, remittance platforms (M-Pesa, Western Union, Moneygram), online payment platforms (PayPal), and… P2P money transfer platforms (Nooch).

Broadly speaking, there are two main categories, if you must generalize at all: remittances and PoS innovations. For decades, those two arenas have been dominated by the exact same market leaders with the exact same 20th century technology.  Western Union charged (and still does) usurious fees to securely send money over a distance.  Visa, MasterCard and American Express have dominated the Point of Sale arena by dominating the plastic arena. In both cases, the market need was largely met and consumers built up substantial trust for the status quo, since it worked.

Today’s Innovation

Today, though, that status quo is being smashed by the innovators of this century.  NFC and various “mobile wallets” are coming to reinvent the way people pay for goods in stores.  And SMS technology and the proliferation of cell phones in the developing world has reinvented the way people send money internationally.  However, both face HUGE challenges, particularly the much-hyped PoS revolution.

PoS replacements – no matter what creative form they take – face the following barriers:

  • merchant acquisition
  • hardware proliferation among merchants
  • hardware proliferation among consumers (esp. NFC)
  • the fact that credit cards work amazingly well for most people most of the time
  • lack of interoperability
  • lack of standard methods, universal procedure
  • merchant & consumer education
Bottom line: the value to the consumer (and to the merchant) is not that substantial and usually not compelling enough to change behaviors.  Consumers like credit cards because they are super simple, very quick (even NFC would save only a few seconds over a credit card swipe), and reliable because you know you can contest a charge.  What’s the need for a new way to pay for groceries?  We don’t see it.

P2P Niche – Overdue for Change

Nooch is taking a different path. Nooch is foregoing the frenzy for merchants and focusing on filling a genuine market need.  Think about it: when you need to give money to someone, and you don’t have cash (because you’re out, you don’t carry it, you forgot/lost your wallet, whatever)… what do you do?  Until very recently, you had very limited options: pay with an IOU (Moocher McGee Method), find an ATM (the Fee-Gouging Method) or write a check (the Old Person Method.)  Despite the wonders of Square, PayPal, Google Wallet, and others, there is no simple and reliable way to solve this problem.

P2P Mobile Payments

Send money from your phone: simple, secure and fast.

So that’s why Nooch is focused on solving this need, which from experience, is greatest on college campuses. Why? Because those in college today have extremely different preferences and expectations than our parents. First, we all have cellphones, and more than three-fourths have smartphones. Second, the social networking phenomenon has been mainstream for several years, capturing nearly everyone in this coveted demographic. Finally, these Gen-M’ers expect to do basically anything with minimal effort, maximum efficiency… and not pay for it (or pay very little.)

We recently wrote about thetop 20 situations> where Nooch will help. Since then we’ve thought of dozens of others. Literally every day someone will come up to me and ask when Nooch is coming because just a few minutes earlier they had a perfect situation where Nooch would have helped save her hours of aggravation.

Infographic – The Many Strains of ‘Mobile Payments’

Enough rambling for today.  The original point of this post was to comment on the following info-graphic put out today by Mobile Payments Today, which eloquently separates the various factions within the overly broad “mobile payments” industry.  I completely understand their frustration and I think their image essentially captures the key differentiators among the several dozen companies in this space (only a few of which are mentioned in the image.)

Most. Important. Mobile payment infographic. Ever.
Most. Important. Mobile payment infographic. Ever.
Compliments of MobilePaymentsToday.com

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