Unless you work in a financial sector related to payments, you might be missing out on coverage of a developing market opportunity. For a few years, the financial trade press has touted “alternative payments,” consumer options that don’t include cash, check, or credit cards.
While alternatives such as PayPal have been around a while, the alternative payments story is now getting legs due to the burgeoning cell phone/smart phone market. Imagine turning billions of phones into instant micropayment devices.
Most of the coverage of this exciting, emerging topic has been from either the international angle (where cell usage is more advanced) or from the technology perspective. It’s chicken and egg as to whether downplayed coverage from the U.S. consumer perspective has led to limited growth in the U.S., or the other way round.
Looks like the latter.
One of the more innovative alternative methods is called peer-to-peer, P2P. Similar to how teens swap music directly with each other, P2P lets two people swap money via cell phone. Citigroup is one of many companies, large and small, exploring mobile payments. In December, though, it stopped a year-long P2P test. Citi simply did not see meaningful consumer participation.
Declaring a growth opportunity dead is easy to do “for now” when results are that obvious. The tricky part is forecasting the market three years out. In a case like mobile P2P, it is as important to look at the barriers to growth as it is to focus on the drivers.
There are some structural and educational barriers, to be sure. A company like Citi could throw gobs of money at that, but it might not be enough to overcome a barrier I call “the metric system syndrome.” If you’re old enough, you’ll remember how close the U.S. came to adopting the metric system of measurement back in the 1970s.
DOA. Rejected across the board, up the block, and down the drain.
Americans are comfortable with cash, checks, and cards. Mobile payments really don’t replace much of any of that. It brings convenience, but lots of questions about security and control. Americans love control – look how long it took for debit cards and mobile banking to catch on (both mostly with younger generations).
Citi still has a toe in the water, with an investment in mobile payments pioneer Obopay (a company we'd add to the Lairig Marketing Index if it were public). But until Obopay gets Citi and its large bank brethren to come together to address the “control” issues in a comprehensive, scaled manner, this growth opportunity will remain just that – an opportunity.