We used to know what money was. It was tangible, something we could hold – a dollar bill, a nickel coin, a paper check drawn on a local bank, a credit card with a monthly payment. But steady changes over time often go unnoticed, and that’s the way it has been with money. Long before music became MP3s and TV morphed into YouTube and Hulu, money was changing. Today digital networks connect global financial markets end-to-end: from exchanges and banks, to ATMs and retail, to computers and mobile phones.
As humans and consumers, the way we think of money, and the way we use it, has not evolved as quickly as money has. But that’s changing. In recent years we’ve begun to use our debit cards where we used to use cash. Most “paychecks” are direct-deposited. We pay our bills online. Millions have used PayPal to buy or be paid for goods on eBay and other sites. With the PayPal iPhone app a friend can pay back a friend, or a parent can send money to their student away in college.
Money is information, and the financial markets money moves through are all interconnected. The groundwork has been laid for innovation and rapid evolution in the ways we use money. We are approaching the tipping-point for Mobile Money.
Here’s a glimpse of some of the innovations underway in the Mobile Money space that will accelerate in the second half of 2011 and into 2012:
Serve (www.serve.com): American Express has just launched Serve.com, their response to the rise of PayPal, and the accelerated growth in the Mobile Money space. With their iPhone and Android apps, one can make peer-to-peer payments just like with PayPal, but with a twist: Sign up for Serve.com and you’ll also get a Serve card that can be used anywhere American Express cards are accepted. Think of it as a re-fillable Starbucks card, but for money. Some transactions using Serve have fees, similar to the way things work with a regular American Express card. One major point in favor of Serve is the American Express brand behind it. As money continues to evolve into a truly mobile and fluid digital currency Trust will be a key factor for consumers and merchants alike. Creating a Mobile Money platform from scratch without a trusted brand and reputation is not impossible – PayPal has proved that, but it should be easier for Serve to gain traction than some of the new entrants.
Square (www.squareup.com): Square is a disarmingly cute little, square (of course) card reader dongle and app for iPad and iPhone and Android devices. Imagine this scene: It’s time to pay the tab and Friend #1 turns to Friend #2 and says: “Sorry bud but I don’t have any cash with me, too bad you don’t take credit cards…” To which Friend #2 says: “Well, actually, I do, or rather, my iPhone does.” And then Friend #2 pops the little white dongle into the audio jack on their iPhone and swipes Friend #1′s credit card through it, enters the amount, his friend signs off on it and voila! Cash changed hands. It’s not a lot different from when you return your rental car there’s an attendant waiting in the garage with a card-reader and printer on their belt. They swipe your card and the transaction is done right there. With Square, you’ll be able to accept payment from anyone with a credit card, on the spot. A transaction costs 2.75% of the amount swiped.- NFC or “Near Field Communication” (http://en.wikipedia.org/wiki/Near_field_communication): NFC is a communications technology for cell phones (similar to Bluetooth) that enables wireless transactions between the user’s phone and another NFC-equiped device, a vending machine or ticket kiosk for example. Like other communications protocols, NFC has been vetted by standards bodies since 2003 and is widely embraced by the cellular carriers, chip and handset makers and other important players like Google. A huge amount of infrastructure has already been laid for the roll out of NFC transactions, and there are currently 30+ trials underway around the world, including half a dozen in the US with big players like MasterCard, Visa, Bank of America, AT&T Mobile and 7-Eleven. I think (hope) it’s safe to say that NFC is just too geeky a name to catch on with consumers, and that just as WiFi was originally called “802.11″, NFC will get a friendlier moniker soon, as big players with different NFC applications roll out their brands.
Dwolla (www.dwolla.com) Dwolla is a free web based software platform that allows users to send, receive, and request funds from any other user, with a 25 cents per transaction (max) charge. It is designed to integrate with social networks like Facebook so that money can be transferred, even to someone without a Dwolla account set up, and without immediate access to a bank to certify the transaction. Dwolla will have POS (Point of Sale) presence enabling users to make purchases without having to carry a credit or debit card, and will also become an alternative to PayPal and Serve for online commerce. Earlier this year Starbucks went live with the service in their retail stores enabling customers to make a purchase simply by holding their smartphone up to a scanner at the register. The service also recently announced an interesting location-based “check-in” and pay service 
called “Dwolla Spots” that doesn’t require NFC or a dongle (i.e. Square) at sites where there is POS integration. And of course, there’s an App for Dwolla – iOS as well as Android. The startup has a grand vision, some heavy-hitters on its management team, and is getting lots of coverage among the technorati. Worth noting that according to Dwolla, they already have signed-up online payment users in all 50 states, passed the $1M mark in fund transfers in February of this year, and their growth rate for payments to online retailers as well as person-to-person payments has increased by an average of 270 percent each month.- Facebook Payments: Rumor has it that Facebook will announce “Facebook Payments” in 2011. There’s plenty of buzz online if you are interested in reading more.
- Noteworthy developments elsewhere: There’s a lot of activity outside of Starbucks and online shopping for Mobile Money that might not be getting headlines, but is worth noting. Some of the places where Mobile Money can do the most good are places that have very little infrastructure and are poor by Western standards. At a Mobile Money Summit (a Tech@State event) organized in August 2010 by the U.S. Department of State, there were a number of companies that presented case studies describing their services being deployed in Africa, the Middle East and parts of South America. In many cases, making and receiving payments for workers posed unimaginable challenges and risks to personal safety, and making payments for services and utilities were just as daunting. Deploying easy to use, safe and scalable Mobile Payment services over cellular networks, using simple phones (i.e. not smartphones) is the objective, and there are impressive results coming from many of the trials. Companies in this space include: kopokopo.com and Utiba.com.
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