Get the women and children off the field. The big boys are attacking. The war of the wallets--as in mobile wallets--is underway. Some of the biggest names in payments and mobile communications are engaged. As Amir Efrati and Anton Troianovski write in today's Wall Street Journal the object of the war is to settle once and for all who gets to control your money that you spend using your smartphone.
On one side is a coalition led by Google that includes payment powerhouses MasterCard and Citigroup, as well as mobile carrier Sprint Nextel. They've lined up big box retailers like Toys R Us, Gap and American Eagle Outfitters to accept Google wallet payments.
On the other side isVerizon Wireless. The largest mobile network in the U.S. is partnered with competing carriers AT&T and T-Mobile USA in a payment venture called ISIS. Their vision is a mobile wallet that consumers would use to make payments, as well as redeem coupons on their smartphones.
Like many combatants, Google and Verizon were once allies. Verizon's marketing of smartphones that use Google's Android operating system provided a bulwark against its rival AT&T, which had exclusive marketing rights to Apple's game-changing iPhone until this year. Verizon and other carriers were enormously successful in pushing Android into the market place. Today Google's Android is the leading mobile phone operating system, installed on more than half of all smartphones sold worldwide.
However, Google tried to change the rules of the game itself last year when it marketed its own phone, the Nexus One directly to consumers, in competition with the carriers that had helped make Android a success. But its effort to smash the American mobile market model, where the carriers control consumer sales. failed. Google was forced to retreat on Nexus One.
So now both sides are bogged down in negotiations that revolve ostensibly around security. Verizon says if Google's wallet were to be included on its phones it would need to be integrated into Verizon's hardware. But Google says it has its own "Security Element," a chip that limits access to your security information to only those trusted programs on the chip itself.
But my first rule of business is that everything in this world comes down to money--in this case, yours. So the security issue is a proxy for the real battle, which is who gets to own you, the customer, and your money. Karen Webster, in a post on pyments.com, writes that the dispute may "be about security, certainly, but is also about control--control who has access to [the] customers and the services they are provided."
Efrati and Trioanovski are more blunt. They say that the standoff between Verizon and Google is an example of how mobile carriers have lost control of the content that their phones deliver. The iPhone saw to that. Developers who pump out apps like Angry Birds and word games seem to have more influence over consumers than the carriers who have those consumers locked into contracts. So the carriers, say Efrati and Trioanovski, have chosen the mobile wallet as the battlefield where they will make their counterattack to recapture that control.
For now Verizon and its allies seem content to sit on their massive retail networks and begin trials for the ISIS concept next year. Google and Sprint, on the other hand, seems to be relying, for now, on the creative destruction of the market place to vault it to dominance. Its goal is to make Secure Element the de facto standard for near-field communications, writes Webster. If Google's planned acquisition of Motorola's mobile business goes through, expect to see Motorola phones featuring NFC, according to Efrati and Trioanovski.
Webster believes that the flaw in all of this is that regardless of who wins the battle, a carrier will remain the gatekeeper that controls your access to your money and how you make mobile payments. The third rail here might be a cloud solution, she writes, where your mobile wallet can follow you regardless of which carrier or communications technology is involved.
At one time in the U.S. the standard was that your mobile number went with your phone and your carrier, rather than with you. It took some intervention to change that thinking but today I have the same mobile number that I've had with three different carriers. The question is whether there is enough creative-destructive force in the universe to drive the mobile payments away from carrier-based solutions to the Cloud. One thing is for certain: Just like with number portability, there are probably regulators and multiple committees in Congress that would probably be willing to help the carriers figure all this out if they can't do it themselves.
On one side is a coalition led by Google that includes payment powerhouses MasterCard and Citigroup, as well as mobile carrier Sprint Nextel. They've lined up big box retailers like Toys R Us, Gap and American Eagle Outfitters to accept Google wallet payments.
On the other side isVerizon Wireless. The largest mobile network in the U.S. is partnered with competing carriers AT&T and T-Mobile USA in a payment venture called ISIS. Their vision is a mobile wallet that consumers would use to make payments, as well as redeem coupons on their smartphones.
Like many combatants, Google and Verizon were once allies. Verizon's marketing of smartphones that use Google's Android operating system provided a bulwark against its rival AT&T, which had exclusive marketing rights to Apple's game-changing iPhone until this year. Verizon and other carriers were enormously successful in pushing Android into the market place. Today Google's Android is the leading mobile phone operating system, installed on more than half of all smartphones sold worldwide.
However, Google tried to change the rules of the game itself last year when it marketed its own phone, the Nexus One directly to consumers, in competition with the carriers that had helped make Android a success. But its effort to smash the American mobile market model, where the carriers control consumer sales. failed. Google was forced to retreat on Nexus One.
So now both sides are bogged down in negotiations that revolve ostensibly around security. Verizon says if Google's wallet were to be included on its phones it would need to be integrated into Verizon's hardware. But Google says it has its own "Security Element," a chip that limits access to your security information to only those trusted programs on the chip itself.
But my first rule of business is that everything in this world comes down to money--in this case, yours. So the security issue is a proxy for the real battle, which is who gets to own you, the customer, and your money. Karen Webster, in a post on pyments.com, writes that the dispute may "be about security, certainly, but is also about control--control who has access to [the] customers and the services they are provided."
Efrati and Trioanovski are more blunt. They say that the standoff between Verizon and Google is an example of how mobile carriers have lost control of the content that their phones deliver. The iPhone saw to that. Developers who pump out apps like Angry Birds and word games seem to have more influence over consumers than the carriers who have those consumers locked into contracts. So the carriers, say Efrati and Trioanovski, have chosen the mobile wallet as the battlefield where they will make their counterattack to recapture that control.
For now Verizon and its allies seem content to sit on their massive retail networks and begin trials for the ISIS concept next year. Google and Sprint, on the other hand, seems to be relying, for now, on the creative destruction of the market place to vault it to dominance. Its goal is to make Secure Element the de facto standard for near-field communications, writes Webster. If Google's planned acquisition of Motorola's mobile business goes through, expect to see Motorola phones featuring NFC, according to Efrati and Trioanovski.
Webster believes that the flaw in all of this is that regardless of who wins the battle, a carrier will remain the gatekeeper that controls your access to your money and how you make mobile payments. The third rail here might be a cloud solution, she writes, where your mobile wallet can follow you regardless of which carrier or communications technology is involved.
At one time in the U.S. the standard was that your mobile number went with your phone and your carrier, rather than with you. It took some intervention to change that thinking but today I have the same mobile number that I've had with three different carriers. The question is whether there is enough creative-destructive force in the universe to drive the mobile payments away from carrier-based solutions to the Cloud. One thing is for certain: Just like with number portability, there are probably regulators and multiple committees in Congress that would probably be willing to help the carriers figure all this out if they can't do it themselves.
Nice post, Bob. For myself, I foresee this battle being less about control of mobile payments and more about the data regarding what, where, and when consumers are buying the goods and services that generate them. True, the wireless guys don't want to re-learn past lessons about "dumb pipery" that their land line brethren experienced in the exploding ATM and traditional POS conflicts and would naturally want a piece of the payments related fees involved. I have a difficult time seeing Visa and MasterCard capitulating on their slices of the pie to insure that the carriers re-coup decades-old missed opportunities. Instead, I view this round as being data driven - who earns the privilege of packaging up purchasing habits of far-flung consumers and presenting them on goods manufacturers' doorsteps for a handsome fee? Clearly, that would be Google's approach and I suspect Isis has similar leanings. Visa's wallet is there merely as a blocking tactic to perpetuate its stranglehold on all payments in all channels. Controlling the SE is one approach for exacting control but there are ways around the secure element that might achieve the same end (and have in other parts of the world). For now, I'm planning on keeping the popcorn popper fired up and my larder stocked with salt and butter.
ReplyDeleteJohn MacAllister