Mobile Payment

The 150 free seats for our 5th Mobile Monday Beijing session were taken in less than a week and the Innovation Gardens filled up with an attentive audience to hear our three great speakers. Those delivered very informative presentations about the current status, stakes and challenges of mobile payment.

Guojun Xu introduced Smartpay, a pure mobile payment player and its services, explaning how mobile phones are complementing banks by becoming personal Points of Sales (POS). Simple applications like charging phone credit (top-up) or payment of utilities alleviates pressure on banks and makes life easier for users. Smartpay was bullish of the development of mobile payment following the spread of mobile phones (400 millions in China) and the growth of the Wireless Value-Added Service sector.

Chen Yu of Yeepay had a different point of view on the viability of mobile payment as a stand-alone service: the company started with such a view and rapidly shifted to a larger e-payment strategy, integrating offline, online, mobile and phone (voice), giving as an example ticketing companies like eLong or cTrip and their call centers. He also drew comparisons between the US and China’s bank infrastructure and consumer perception.

Both Smartpay and Yeepay underlined the challenge that lies in building partnerships with banks and merchants while focusing on consumer benefit to drive service adoption. Overall, those two presentations showed how successful companies deal with China’s specificities in terms of infrastructure (bank, logistics), labor cost and users’ learning curve (call centers cheaper and more trusted than purely online systems). In a way, those services are not high-tech but innovative in the way they integrate into their local environment. Another interesting point is that those services largely let mobile operators out of the picture. Well, money for payment is taken from the users’ bank account directly so operators do not add much value there…

Our last speaker was Joseph Zheng from Nokia, who introduced their newly launched mobile wallet, integrating the NFC (Near-Field Communication) technology (”contactless card”), compatible with European Mifare and Japan’s Felica technologies. If there is a challenge around mobile payment, it is nothing compared to mobile wallet: cutting-edge technology aside, it requires a tremendous energy and balancing to build the necessary ecosystem that brings the real value to users. Nokia has been running trials in China and is gradually convincing players in the value chain.

To use the popular “Tipping Point” idea, the challenge with this service is that there are several tipping points to overcome: one with the leading operator (getting only the number 2 in not enough), and one with merchants/transportation companies/others. This ecosystem more or less follows, for the [users + merchants] system, Metcalfe’s Law (saying the value of a network is proportional to the square of the number of users of the system): the more locations there are where you can use the service, the more attractive it is, the more users it gets… and the more merchants want to offer it.

As speed is of the essence, the key is to identify which applications could attract users first – and those applications will not necessarily be the ones bringing the most revenues! In Japan, two systems are competing with the same technology: a pure mobile wallet, and a contacltess transportation card (like in Beijing’s subway). Guess which one won?

Following the presentations we ran our very first panel discussion, joined by Joe Quini from the consulting company BDA, who brought insights on how NTT DoCoMo managed to make mobile wallets a success. NTT DoCoMo had not only vested interests in the company developing the technology but also a strategic plan to get into the banking sector (and consumer credit) and purchased a bank for that… There is little doubt that China Mobile could replicate NTT DoCoMo’s success on spreading the technology, but the direct benefits for CMCC might still be a bit unclear.

Last, one lucky participant from China’s leading search engine Baidu was offered a full pass to the China Internet Conference organized by the Internet Society of China in September (see “Featured event”). Another participant from the consulting company BDA won a 1-day pass for the conference. Congratulations to them and thanks a lot to our partner the ISC!

Patient readers are rewarded below by the presentations files:

• Smartpay – Mobile Payment – .PPT HERE
• YeePay – Payment in China – .PDF HERE
• Nokia – NFC, Creating a New Magic of Touch – .PPT HERE

See you in September!
– Benjamin Joffe