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The Coming of Unholy Alliances

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8 November 2010
In trade journals, industry conferences and blog postings, a lot of attention has been placed on the roles of FIs and mobile carriers the mobile payments space. In the United States at least, these roles are typically defined as being mutually-exclusive, and the long-rumored AT&T/T-Mobile/Verizon mobile payments JV is almost without exception portrayed as an impending threat to FIs. In fact, this adversarial relationship is widely viewed to be one of the main impediments to mobile NFC commercial availability. This clearing drawing of sides would have some merit, if it weren't for what is increasingly becoming an uncomfortable thought for both FIs and mobile carriers -- the almost assured market entry of "disruptors" such as Apple, Google and PayPal. From a quick look at the industry tea leaves, it seems pretty obvious that these disruptors are pursuing ownership of customers' mobile experience (not good news for carriers) and building mobile payments platforms off of low cost transaction networks (not good news for FIs). Put another way, disruptors are aiming to turn mobile carriers into "dumb pipes" and FIs into "dumb ACH rails". As such, disruptors' eventual market entry may force FIs and mobile carriers to reassess their views of each other. To some extent, both have complementary strengths & weaknesses. Mobile carriers have an inherent understanding of mobile technology, FIs do not (try asking a branch teller about mobile apps). FIs have earned consumers' trust to manage money, mobile carriers have not (I doubt there's anyone who has never had a billing issue with a carrier). Mobile carriers have youth-oriented brands, FIs do not. FIs have millions of card-accepting merchants, carriers do not. And so on. This makes me think that FIs and carriers will eventually have to sit down with each other (if they aren't already) to figure out how to work together -- the "FI vs. carrier" paradigm may quickly be a thing of the past. Then of course, there's the possibility that the FIs and carriers may deepen their animosity by forming alliances with the disruptors -- interesting times ahead...

Comments

  • Red- nice thought-starter. One element of the ecosystem that I think you've underestimated are the major players in the phone OS market-- Apple, Google, RIM, MS, etc. I believe that the "applification" of solutions is the core disruption that will change the relationship for carriers and FIs (and associations, PayPal, etc).

    These OS providers are a constant for all the carriers, most FIs (simple mobile banking) and handset providers. There are already mobile commerce apps running over "dumb pipes" connecting to "dumb rails". They are created by a wide range of disruptors ranging from startups to PayPal. The potential killer apps for customers has tremendous variety for everything from P2P to rewards redemption to single click checkout.

    Alliances with these OS providers and core Apps firms may be the likely path for both FIs and Carriers...just not together.