2014-08-21, @BalticForge

Mobile payments – will we live to see the „big bang“

Mobile payments – will we live to see the „big bang“

This is probably a boring subject to everyone already, as we hear more about mobile payments than actually have a chance to try them or use every day. It‘s better to try once than hear about it for a hundred times, but we‘re still lost in the labyrinth of choice. Let‘s just try to see what‘s stopping us one more time (and I believe, not the last). Most of the bloggers or mobile Payment startups try to defend themselves and look for reasons of their failure only skin-deep. I hear various abstract excuses: Payment only isn‘t enough, users want more, the Payment has to be invisible, we need extra value, etc.

Let‘s remember how cards came into being 60 years ago and revolutionized the Payment sector. Then two essential means were present – technology and marketing.

When Bank of America issued its first cards in 1958 and started sending them to its clients on a massive scale, it was also increasing the amount of possible payment points. Today it‘s called the Chicken and the Egg problem. Although, Bank of America was, and still is a huge organization, and not a startup of today. Later on, when other banks joined in, card issuing and servicing was outsourced to the organizations known as VISA and MasterCard today, the correct marketing strategy was formed naturally. All banks could issue and service cards. VISA/MC was only acting as an ACH and they still use the same business model today. If you’re issuing the card, you receive the biggest slice of the pie (interchange), if you’re servicing the card, you have to sell it for more to have some profit left after you pay the “lion’s share”. That means, that strategically this model is perfect: the “lion’s share” goes to the expansion of the cards (amount of clients) in order for the system to generate itself. In parallel, technological support was necessary.

I bet all of you can remember when the card readers were self-copying paper type devices and no technology was apparent. Later on, when the computers appeared, we got electronic readers connected via phone lines, and later internet. The card is merely your ID, according to which your bank balance is checked (through VISA/MC), to see if you have enough funds for the transaction. That means that technologies quickened and eased the plastic’s servicing, but fundamentally didn’t change anything. Now we also know of such companies as First Data and others.

Today we have the same problem and you can say that we’re 60 years behind. Mobile payments are the new fashion and only the startup community is trying to find solutions, yet the banks are completely passive. The banks are calmly observing, some of them don’t understand the technology and the most innovative ones tackle the Chicken and the Egg problem.

In the mean time, the only thing we have to do is to look back at history and do what was done then, just for the new technological means available to us today. Yet, the question remains – does this initiative belong to technology or marketing? That is, should the banks find the solution and come to an agreement, and only later on the technology comes as a service element, or should the technology flourish first, and the banks will just have to use it?  Unambiguously, this should be a technology created by a third party and not the banks, as the history showed us a successful example of this. The separation of ACH as an independent third party supplier calmed the banks down and allowed them to create a unified network. If you think about it, we’ve never seen competitors joining – an independent third party supplier is always needed.

Today we see closed loop mobile payment development tendencies. Banks and startups are creating their own mobile wallets and are trying to get the retailers to join in. We’ll end up in the situation where all retailers will have to integrate with all mobile wallets separately. The need for a unified standard is as important as ever. WoraPay tackled this problem precisely. The open mobile payment ecosystem offers a unified payment standard to retailers, banks and PSP startups. WoraPay creates a platform that can be joined quickly by anyone wanting to allow mobile payments anywhere in the world. Card’s advantage is greatest when traveling, likewise mwallet unified standard system’s greatest advantage is payment in retail or internet anywhere in the world using your own bank account.

About WoraPay

WoraPay is a mobile payment system for financial institutions and mobile wallets which enables payment for goods and services to thousands of users. The company was founded by Aurimas Bakas, Vaidas Adomauskas and Nerijus Celkonas in Lithuania in 2012. WoraPay is used by wallets such as Paysera, Medicinos Bank, Moblet, WioPay and other financial institutions and mwallets in Central and Eastern Europe. This year WoraPay rose seed funding from Entree Capital.  For more information visit www.worapay.com

About Entrée Capital

Entrée Capital provides multi stage funding for innovative seed, early and growth stage companies all over the world.  Entrée Capital was founded by successful entrepreneurs with a track record of having successfully invested and exited over twenty businesses on five continents in the past decade.  Entrée Capital has specific expertise that extends to enterprise software, payment, e-commerce and mobile markets. Among the other investments, Entree Capital has invested in the other payment companies such Flypay, mCash, and Scan.  For more information visit www.entreecap.com


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