Is the Mobile Payment Tipping-point Approaching in the US?
If recent surveys regarding mobile wallet use are accurate, the mobile payment boom is about to happen. The next two years could see a rapid adoption of mobile wallets among credit card holders, causing a paradigm shift in the way we make purchases offline and online.
20% of US Customers Are “Likely” to Load Their Credit Card into a Mobile Wallet
According to Business Insider’s Intelligence Unit the potential number of adopters of mobile wallets in the United States, among consumers with credit cards, is growing fast. The survey measured credit card holders’ negative and positive intent to store their credit card information into a mobile wallet as “Not Likely” or “Neutral,” and “Likely” or “Definitely” respectively. They also measured the number of people who “Already Have” stored credit card information into a mobile wallet.
If this data holds true, it’s likely we are on the precipice (FINALLY!) for a mobile payments boom in the United States.
Scenarios for a Mobile Payment Boom
Scenario One: Entrenched Laggards, Constant Growth of Positive Intent
My first impression from this chart by BI Intelligence was that there is a wave of mobile payment adoption coming among credit card holders. However, we need to make some assumptions to see how rapidly this wave is approaching. First, let’s try to get a grasp on the situation.
Key Assumptions:
- 33% of respondents who say they are “definitely” going to load their credit card DO
- 33% of respondents who say they are “likely” to load their credit card DO
- People with negative intent (“Not Likely” or “Neutral”) will remain fixed
- YoY Growth for positive intent will remain constant
In this What-if scenario, we can clearly see that the number of people planning to store credit card information in 2017 will likely increase at a faster rate than previous years. At a constant rate of YoY growth in positive intent only 95% of the population is represented. It is also likely the laggards will continue to decrease over time though we have kept them constant in this scenario.
Furthermore, if we reduce the number of people with positive intent who actually load their credit card -- conversion -- from one in three (33%), the growth rate for people who are “Likely” or “Definitely” going to use a mobile wallet must increase even more dramatically.
Scenario Two: Laggard Floor, Moderate Conversion
Let’s modify our key assumptions to create a scenario where we have a moderate conversion from intent to action and growth in positive intent, but a similar distribution of responses over time.
However, let’s also assume there is a floor for laggards who show negative intent.
Key Assumptions:
- 33% of respondents who say they are “definitely” going to load their credit card DO
- 20% of respondents who say they are “likely” to load their credit card DO
- The sum of negative intent (“Not Likely” or “Neutral”) cannot be less than 16%
In this scenario we get a picture that’s more believable. We see a spike in positive intent next year, and have adjusted the growth of positive intent moving forward so we get a similar distribution among “Likely” and “Definitely” reponses. At the same time, assuming a moderate conversion rate (one in five, and one in three respondents respectively) among people with positive intent, we see a nice growth curve among those who “Already Have” stored their credit card information into a mobile wallet.
Among those consumers who have already stored their credit card into a mobile wallet, how many do we think have transacted? In general we see a drop in retention of 33% for any major step along an experience. That leaves us at 66% of people who stored a credit card on a mobile wallet, transact with a mobile wallet; which is about what we would expect based on media reports on Apple, Android, and Samsung Pay use among consumers who can use the service.
Does this seem like an aggressive forecast? Not really. If this is correct, it puts consumers transacting with a credit card via a mobile wallet around 30% in 2019.
In other words, half way through the Early Majority stage on the Diffusion of Innovation scale.
Does this mean my Mobile Wallet is about to be really successful?
It’s unclear what success means, but certainly it means a paradigm shift in the way people transact in less than five years. There are many companies banking on this shift, hence the options for consumers are growing as the market is becoming more fragmented.
Currently, most players measure success by number of registered cards, number of transactions, and the value of those transactions. However, profitability for mobile wallets is something still in the future, though certainly that future is less distant today.
How long can you stick in the fight?
Many traditional financial institutions will continue to see their mobile wallet as a value-added service, while customers who are over-served by those institutions will adopt alternatives with superb mobile experiences. Eventually, those alternatives are likely to move up-market taking away more of the retail banking market from traditional financial institutions.
Are you focusing on a superb mobile experience?
Of course, your payment service is worthless without acceptance. It is essential to have great retail partners who are part of the daily lives of your target audience. And while acceptance is key, so is awareness of your mobile wallet.
Most iPhone 7 users who have a credit card stored on Apple Pay fail to use it because they simply forget it is an option or they don’t know it is. Of course, universal acceptance would resolve this… but until you can get that (please don’t hold your breath) making sure your customers know where your mobile wallet is accepted is critical.
Combining these two critical factors, Acceptance and Awareness, into a superb mobile experience will mean you have a shot at catching onto and riding that wave of mobile wallet adoption.
Can you monetize enough?
The question still remains, how can you monetize your mobile wallet even with a wave of new customers? The recipe for success in consumer-facing mobile payments is still unclear.
There is a plethora of business models and new technologies being experimented with all the time by dozens of players across the payments value chain. Many of these are designed to reduce cost and generate income from that savings, others are designed to create more value by offering discounts or loyalty rewards, while others promise a faster checkout, or try to provide instant settlement.
The list of players is long and diverse. In nearly every country in the world there are several mobile payments players including banks, startups, telcos, retailers, and OEMS. There is a different recipe for each of them.
Ultimately the winners in each market will be those services which can combine Acceptance and Awareness, with a Superb Experience, and a unique Business Model which leverages New Technologies that address cost and speed. I wouldn’t call that a recipe, but perhaps you can call it an outline.
Bluetooth Mesh Networks for Retail
Disclosure: I currently work for SK planet, a wholly-owned subsidiary of SK telecom, one of the companies which sets Bluetooth standards.
The Bluetooth Special Interest Group (SIG) confirmed the introduction of new standards to support mesh networking via bluetooth. There were a few startups like Ubudu and Zuli.io that didn’t wait for the standards and these innovators are the first-movers in creating futuristic customer experiences with bluetooth mesh networks. Now that the standards are out, and it’s a watershed moment for IoT.
Bluetooth Beacon Mesh Networks
A mesh network could hypothetically extend the range to whatever distance you need. When a beacon is stand-alone it can advertise itself up to a few meters. Even with two-way communication (transmitting or receiving small packets) the potential utility of the beacon is limited to hyper-localised use cases. For example, while near a beacon in a store the client can request specific information about that location from the server; or, perhaps I could use my phone to turn on/off a lamp while near that lamp.
 |
| Bluetooth Smart Mesh Network |
A mesh network allows me to extend the range by linking the beacons together. It accomplishes this in two ways: 1) by routing directly to a beacon somewhere in the network to enable a specific experience (e.g. turn-off the kitchen lights downstairs); or, 2) by flooding the entire network or a subset within the network to create an experience using multiple beacons (e.g. set living-room to mom’s profile). Using a mesh network subsets can also be created allowing for unique experiences for connected devices within a specified subset of the network.
Futuristic Consumer Experiences
Smarthomes have been all the rage for a couple years now, and the new standards for mesh networks will accelerate that. However, there are some exciting opportunities for retail consumer experiences as well. Here are a few ideas for implementing bluetooth mesh networks for in-store experiences.
Custom Subsets or “Rooms”
Custom subsets are probably the most well known IoT use case that leverages a mesh network of beacons. This is the oft given example of Smart Homes: dad walks into the living room, the lights dim and TV switches to Bloomberg News. The living room is a subset within the network, and the settings of all devices within that subset can be adjusted to fit the preference of a user. Additionally, a hierarchy of users can be created (i.e. Dad overrides son) and those settings can be engaged simply by walking into a room.
 |
| Experiences Adapt To You From Room To Room |
In retail, you can easily imagine this being used to create unique experiences at furniture, luxury audio and video showrooms. The question remains, how is this triggered? An end-user with a smartphone application is the answer most of the time today. Whether or not the use is a customer or salesperson is another question. On the one hand, the lure of customising your own experience while in a showroom could tempt customers to download your software, it may be more efficient to create software for clienteling.
Shopping Efficiency
How much time have customers wasted trying to find products within large department stores, shops within large shopping malls, or the toilet? Networked signage could be used to assist customers and make their journey more efficient. A customer could select the target destination within an app on their smartphone or on a digital sign. As he travels through the store or mall, visual cues can be triggered to guide the customer on his journey.
 |
| Signage Alerts When You Arrive |
These cues can be in-app via notifications (“you’re going the wrong way”) or via digital signage (“Customer XYZ here is your destination”). In this use case, a mix of proximity technology like geomagnetics or wi-fi would be the best way to guide customers. However, incorporating visual cues will reassure customers and probably create new opportunities to surprise and delight them.
Personalised Signage & Electronic Labels
Networked Signage and Electronic Labels are another opportunity for retailers and customers. A label which displays a price with e-ink can dynamically display discounted prices to customers subscribed to loyalty programs or with a digital coupon. In fact the packet-size of data needed to display a price is small enough it should be possible without the internet. A networked electronic labels could dynamically generate prices for a section of a shelf, so customer can compare discounts on multiple brands.
 |
| Dynamic Prices On Electronic Labels |
More dramatically, personalised media could be presented to customers at any digital sign. Digital Signage connected to a mesh network could request content from the cloud via the network.
Dynamically Adjust to Audience
With enough connected signage and labels, retailers could abstract further to create experiences for audience types. For example, customers of a given profile at a given time of day within a given store could tend to coalesce within a certain subset of a mesh network. At the same time another group of customers of a given profile could coalesce within another subset. This would allow for digital experiences within either subset to be tailored for those audiences.
 |
| Flooding Subsets To Adapt For Audience Profiles (Green vs Orange) |
In Conclusion
Without a doubt the experiences retailers can create leveraging bluetooth mesh networks will be essential to the success of their mobile software. A few technology startups like Ubudu and Zuli, as well as large companies (SK telecom among them) are already moving to make bluetooth mesh beacons a commodity. Digital Signage will be the obvious choice for retail, but the real question will be what unimaginable use cases will creative marketers invent for mesh beacons? I’m not simply referring to engaging content on a screen, but beyond that what new devices will we connect and how will they create more value and efficiency?
Are Self-Published Authors Earning $1 Billion on Amazon?
Amazon began as an online bookstore. Books were Jeff Bezos answer to the questions “What obvious thing do you know that no one else knows?” He knew there was a longtail of demand for books, that there were people frustrated because either they couldn’t find the books they wanted at their local bookstores or they couldn’t find them quickly. He knew there was a longtail of supply for books, that there was potentially an infinite number of books to fulfill that demand. And he knew people would flock to his webstore if he could provide a solution to connect demand with supply better than anyone else.
While the Everything Store is supposed to have been founded on the premise that the internet would make it easier for consumers to find “Everything” at a lower price, books were the perfect proxy for “Everything.” Books presented a clear problem for both mainstream and niche consumers which could be solved, presented a nearly endless longtail and an eternal shelf-life.
Today the longtail is growing in influence as the power-dynamics of publishing is shifting away from major publishers and into the hands of authors.
The Endless Longtail of Books
The Association of American Publishers (AAP) is “the largest U.S. trade association for the consumer, educational, professional and scholarly publishing industry.” They have for years been tasked with creating standards for publishing, keeping tabs on the book selling industry, and hosting events that bring the industry together to maintain a community of publishers, authors, and distributors. AAP represents publishers, and reports on their performance based on platform (print, or digital) and category monthly and annually. Last year they reported that eBook sales are in decline, and infact they were for publishers.
But the real story here was not that publishers represented by AAP are reporting a decline eBook sales; rather, how consumers are choosing to buy independently published eBooks. Fortune, in response to a NY Times article publicizing AAP’s sales statistics as a “plot twist” (that eBooks were in decline while print sales were improving), reported that according to independent industry analysts at Author Earnings the market for eBooks is relatively stagnant though long-term trends favor eBooks becoming dominant over time. What’s remarkable is not the struggle between digital and print, but rather that independent publishers… or self-published authors… now sell more eBooks than the Big 5 publishers who have traditionally dominated book sales.
The ascension of “indie publishers” indicates that a) consumer demand for niche books continues to be strong, b) the quality of indie published books has been or is being syndicated by the masses.
The Writing on the Wall
This shift in dynamics is going to accelerate as consumers earn more trust in authors selling to them directly. Authors already prefer to self-publish in-theory because they can earn substantially more. Selling directly through Amazon means pocketing 70% of the cover price. Selling through a publisher authors typically get 25% of their publisher’s net (for eBook sales). However, cutting out the middleman today still represents an opportunity cost to authors seeking shelf-space offline where 70% of book sales still happen, not to mention abandoning the prestige of making the NY Time Best Seller list.
Arguably many authors today will earn more by sticking to self-published eBooks, but making the NY Times Best Seller list as a self-published author is still unlikely as is getting a deal to produce a major motion picture based on your work. But the dynamics are changing and The Martian is timely example of this, having become both a best seller and a major motion picture.
The Martian was a self-published serial novel that just got traction. Its popularity online caught the attention of Crown Publishing (a division of Penguin Random House) and the rest is history. Success stories like The Martian will certainly inspire more writers to self-publish directly to their audience rather than submit to the complex and onerous demands of the publishing industry.
The Martian was a self-published serial novel that just got traction. Its popularity online caught the attention of Crown Publishing (a division of Penguin Random House) and the rest is history. Success stories like The Martian will certainly inspire more writers to self-publish directly to their audience rather than submit to the complex and onerous demands of the publishing industry.
Better for Consumers and Authors, and Publishers?
Consumers win in this new paradigm of publishing. It means more choice from an increasingly wide range of authors and genres, at a lower cost. Authors win because as they build trust with consumers the more willing those consumers are to pay a few bucks to download their eBook. In fact, authors are set to gain tremendously from this new dynamic. Based on my own back-of-the-envelope estimates self-published authors are approaching $1 billion in revenue on Amazon.
Statista estimates eBook Sales totalled $6.74 Billion in 2015, of which Amazon controls 71% (according to some estimates) giving them $4.79 Billion in eBook Sales. Averaging the percentage of sales per category reported by Author Earnings from January 2015 through January 2016, Indie Published and Uncategorised Single-Author Publishers represent 24% of sales or $1.14 Billion.
Assuming those authors pocket 70% of the cover price, self-published authors earned approximately $800 Million selling on Amazon in 2015.
The question remains whether this will be good for publishers? Clearly it is a better model, allowing consumers to syndicate books first means a more democratic vetting process, less overhead, and higher chances a book will hit the best seller lists once it’s picked up. But that could be temporary, over time the publishers could simply become irrelevant.
Amazon's future could be acquisition...
Well, it's a gloomy Monday but don't let the weather keep you down. It just means some makeoli and Korean seafood pancakes are waiting for you somewhere. ;-)
Last week most of us witnessed Amazon's unveiling of the new Prime Delivery drones. Bezos says the service will be running in 4-5 years, despite the challenges and many skeptic reviewers it is entirely possible that will happen. The doubters claim three major issues: vandalism, safety, and theft.
The real BIG THREE challenges have nothing to do with these challenges (which anyone with a mild imagination can figure out how to solve). Rolling out a drone delivery network takes... well, first a (1) NETWORK! Creating any kind of network, software or hardware, is not small task and requires lot's of really smart and creative folks from all levels of abstraction to get down. The next REALLY BIG challenge is the (2) OS. What will run these systems? Android? Not likely. Which leads me to the FINAL BIG challenge, the (3) battery. Even if you manage to get the right network, and the right OS... you still need a battery -- of course, if you read my email about Graphene you might not consider this to great a challenge!
Enter... the entrepreneur.
Matternet is an awesome startup that will be either the next big platform or, at the very least, a significant acquisition down the road. Backed by Andreesen Horowitz (two guys who have a knack for early-stage investing I'd say) the company is rolling out it's network where the walled gardens have the North can happily get involved... Africa. How do you convince an unwilling populace to adopt the technology? Make it about helping people (since it is ultimately anyway!). How do you get your medicine in 30min instead of 5 days? Drones.
The company was founded way back in 2011, and has since developed it's first drone which can carry a small package. Their ultimate goal is to deploy delivery drones which can carry up to 1000kg.
Enjoy... and BTW if you're from Seoul watch the video for a neat surprise.
https://mttr.net
The App & Mortar Opportunity
Shopping destinations are crowded with connected consumers. However, retail has yet to perfect a means to harness mobility to direct traffic to retail stores.
What is “App & Mortar”?
By 2010 every destination shopping center was crowded with a new way to drive traffic to their stores, but no-one has been able to do it right. Yet.
At the time, several applications sprung up that tried to address the market including Shopnear.me, Snapette, Shopkick, Fancy, and more. The runaway success of Groupon and LivingSocial (starting a little earlier in 2008) left some important lessons for new ventures in the space. Specifically, retailers were frustrated with cash-flow problems created by newbies who came once and never again, not to mention the potential for erosion of loyalty and brand value.
In 2012 and '13 big retailers are finally taking this opportunity into their own hands. According to Flurry, the “App & Mortar” segment of mobile applications grew by more than 500% in the past year. Flurry’s data indicates much of this growth was driven by the likes of Starbucks, Walmart, and Macy’s, who have all invested significant resources into their own mobile strategy.
Forbes reported that more than 80% of retailers have a presence on mobile (Check out the infographic below by Cognizant). Most of them are offering all the things you’d expect, from shopping and payment to (of course) deals and store location. Retailers who can, do have a mobile presence, and some are doing a great job of executing.
What’s the big opportunity?
Shopping is often about brands, but those brands extend to the destinations. In 2010, my briefly lived startup focused on Santana Row, San Jose, precisely because the location itself is a brand. People travel there to shop, but also to spend an afternoon with family and friends. It’s a social experience as much as anything. These destination cater to a consumer who enjoys spending an afternoon in a well decorated space, where beautiful and unique things surround them, and (of course) can be acquired.
There are hundreds of high-quality individual or regional shops in any given, well-branded, retail destination. This includes a range of retailers from clothing and accessories, to health and beauty services. Are we going to rely on each retailer to have his or her own application? Do the math, that’s a lot applications and no-one wants to spend the energy to keep track of them all.
Big retailers have the advantage, since we all could use a Starbucks app or Westfield Mall app. However, that leaves a huge opportunity for the App & Mortar retail aggregators servicing the destinations and the experience. Connecting people with brick-and-mortar retail through mobile devices will change the way we shop; rather, already has. But the real promise of mobile applications for retail has yet to be fully realized.
What is “App & Mortar”?
By 2010 every destination shopping center was crowded with a new way to drive traffic to their stores, but no-one has been able to do it right. Yet.
At the time, several applications sprung up that tried to address the market including Shopnear.me, Snapette, Shopkick, Fancy, and more. The runaway success of Groupon and LivingSocial (starting a little earlier in 2008) left some important lessons for new ventures in the space. Specifically, retailers were frustrated with cash-flow problems created by newbies who came once and never again, not to mention the potential for erosion of loyalty and brand value.
In 2012 and '13 big retailers are finally taking this opportunity into their own hands. According to Flurry, the “App & Mortar” segment of mobile applications grew by more than 500% in the past year. Flurry’s data indicates much of this growth was driven by the likes of Starbucks, Walmart, and Macy’s, who have all invested significant resources into their own mobile strategy.
Forbes reported that more than 80% of retailers have a presence on mobile (Check out the infographic below by Cognizant). Most of them are offering all the things you’d expect, from shopping and payment to (of course) deals and store location. Retailers who can, do have a mobile presence, and some are doing a great job of executing.
What’s the big opportunity?
Shopping is often about brands, but those brands extend to the destinations. In 2010, my briefly lived startup focused on Santana Row, San Jose, precisely because the location itself is a brand. People travel there to shop, but also to spend an afternoon with family and friends. It’s a social experience as much as anything. These destination cater to a consumer who enjoys spending an afternoon in a well decorated space, where beautiful and unique things surround them, and (of course) can be acquired.
There are hundreds of high-quality individual or regional shops in any given, well-branded, retail destination. This includes a range of retailers from clothing and accessories, to health and beauty services. Are we going to rely on each retailer to have his or her own application? Do the math, that’s a lot applications and no-one wants to spend the energy to keep track of them all.
Big retailers have the advantage, since we all could use a Starbucks app or Westfield Mall app. However, that leaves a huge opportunity for the App & Mortar retail aggregators servicing the destinations and the experience. Connecting people with brick-and-mortar retail through mobile devices will change the way we shop; rather, already has. But the real promise of mobile applications for retail has yet to be fully realized.
