We held our 7th Mobile Breakfast Series Event earlier today. The topic of discussion was “Mobile Commerce and Payments.”

The killer views of the Olympics and the Sound

Mark Young did a great job moderating the panel

The panel expertly delved into the intricacies of the mobile commerce/payments opportunity

 

The 2011 Mobile Breakfast Series is sponsored by Amdocs. A big thank you for the support.

At the end of every year, we do a forecast survey. In the last survey, Mobile Payments and Commerce were considered the top two categories for growth in 2011. Given the activities thus far – Google Wallet, ISIS, number of startups – Payfone, BilltoMobile, existing players like OpenMarket, financial guys across the board – past few months have been full of significant activity. The mobile commerce developments are right behind the AT&T/T-Mobile proposed merger and Microsoft/Nokia partnership in terms of news coverage.

I remember back in 2001/2, I was writing my 2^nd book with my good friend and co-author Nakamura-san who was CTO at NTT DoCoMo and while doing some work for DoCoMo and AT&T, we were exploring ways the mobile device will be used for commerce not only for digital goods but also for physical things. MCommerce has been around for the better part of the last 12 years in some form and fashion, in fact today it is a multi-billion dollar market already. Mobile payments are in different states of maturity and experimentation depending on the region. Do you know the value of US payment distribution – $75 Trillion out of which only 5% is based on cards which accounts for almost $3-4 trillion Total Transaction Value. Paypal is expected to process $4B in mobile payments this year generating over $70M in mobile payments revenue.

OpenMarket processes a significant amount of mcommerce business in the US today. As you will hear from the panelists, they are starting to see good traction from merchants and things are moving from digital to physical. However, things are very complicated – it is a highly regulated segment and changes don’t come every so often. The payment networks are from pre-Internet era and yet they maintain their complete dominance of the ecosystem. So, this sets up a very interesting next few quarters and a perfect time for us at Mobile Breakfast Series to assemble a stellar panel to unwind the realities of the evolving landscape.

Our panelists were:

Mark Young, VP – Strategy, NBC Universal and Digital Networks (moderator)

Rodger Desai, Founder and CEO, Payfone

Jim Greenwell, President & CEO, BilltoMobile

Andrew Lorentz, Partner, Davis Wright Tremaine

Michael Goo, VP – Mobile Strategy, T-Mobile

Joe Megibow, VP – Mobile and E-Commerce Optimization, Expedia

Mark has been involved in mobile for a long time and has been at the center of commerce on mobile since the ringtone days at Moviso. Rodger and Payfone have been in the news lately for some raising money and some key partners like Verizon and American Express. BilltoMobile has been involved in mobile payments first in Korea (under Danal) and lately in the US with all the operators for doing payments. Payments is a heavily regulated industry so players in the ecosystem need to have a firm grasp on regulatory winds to ensure their future revenues. Andrew with his deep background in the space was perfectly suited to bring up to speed with pending and existing rules. ISIS has been in the news throughout the year and Michael Goo has been representing T-Mobile to help define the operator strategy in payments. Expedia is one of the largest ecommerce companies and they are seeing some tremendous growth in mcommerce. Joe is right in the middle of all the craziness and his analytical mindset gave audience some great insights.

As i mentioned, mcommerce is not new but mobile web and apps infrastructure along with new methods of interactivity like the NFC are making things simpler for the consumers that it is moving from novelty to convenience to actual dollars.

The panel was just full of great insights and nuggets. The highlights of the discussion was as follows:

• For Expedia, the majority of the mobile traffic comes from iPhone, roughly 60-70%, Android is around 25%, Conversion rates are much higher on iPhone, The order size on Android is 10% lower than iPhone.
• From a traffic perspective, iPad traffic is double the iPhone traffic though the device penetration is 1/10th. Conversion rates are much higher
• Two years ago, the mobile traffic was around 2% when Expedia didn’t have any mobile site. Now it is almost 6% with 10% on Saturdays, Average transaction ranges in the $200-300 range.
• Given the traffic dynamics on iPad, it is a unique category in of itself – something we have argued before – it is a new category in terms of consumer behavior.
• Most of the traffic for Expedia is from mobile web as SEO and paid search drive traffic to web, difficult to do deep linking, as such mobile web revenue is 5/6 times the app revenue.
• In a multi-device, multi-network world, consumers expect the services to just work across the board with same user experience.
• Fandango drives impulse purchases of movie tickets using “near me” feature of apps 2-4 hours prior to the show vs. 8-12 hours traditionally.
• Charlie Fodie who is on the board of Payfone expects the interchange in payments to go away over time. This will be indeed disruptive, the question is the timing.
• Only 25% of consumers have credit card in their profile with their operator in the US. 30% still pay $9-10B in cash/year to the operators by walking into the store.
• Payfone sees an opportunity by doing auction based underwriting in real-time to minimize the transaction fee.
• The uniqueness of the device can be used as its fingerprint for authentication. Payfone uses the SS7 network for authentication messaging.
• Consumers are unlikely to put $1200 plane ticket on their operator bill. The mind shift is not there, maybe things will shift, but not there in the short-term.
• Operators are exploring using the consumer data as a way to refine advertising, open it up to the ecosystem.
• Durbanization of all forms of exchange fees is near.
• Payfone allows transactions over WiFi on operator bill as well.
• In Korea, 80% of people do payments using mobile so the blueprint to get more people involved with mobile payments is there
• Verizon has a $25/mo limit on carrier billing. A Canadian operator has $500, so on a 6M sub base they have a $4B cash flow thus essentially becoming a bank. The mindset is quite different compared to the US operators
• Merchants are not bought into mobile payments yet. They want to see more adoption before they start investing more aggressively with NFC and other forms of payment.
• Industry is underestimating fragmentation, consumer confusion, regulatory headwinds, consumer adoption once friction is removed, and how soon all ecommerce will become mcommerce.
• Industry is overestimating how much of the space is going to be defined by the western markets

The panel was full of key insights that impact strategy in this space. I was thankful for the speakers to have made the time, especially the ones who traveled great distances to be with us to share their insights.

Next, our focus moves to our annual mobile thought-leadership summit – Mobile Future Forward on Sept 12th in Seattle. It is shaping up really nicely with some terrific speakers. You can take a look at the info here.

The goal of the event is to look a bit into the future 2-5 years out and see what’s on the horizon. We are deep into the planning stages of preparing another successful event. I want to thank our partners of this initiative – Qualcomm, Ericsson, AT&T, Openwave, Millennial Media, Real Networks, and Synchronoss Technologies.

Hope you can join us. It will be worth your while.

Until then, enjoy the summer.