Six rules for mobile payment success

A free lesson to everyone thinking of mobile payments on what it takes to have a successful mobile payment scheme. Even the very basic things are consistently forgotten and then some time after launch people wonder why the service didn’t take off..

1. Speed & usability: a mobile payment scheme needs to be as fast or preferably faster than current payment methods. This means 10 seconds is already pushing it and anything beyond 30 seconds makes it completely hopeless for in-store POS transactions. For speed-crucial applications, we’re talking about one second or so, which is why NFC-based systems have a good chance of making it. From a usability point of view, there can’t be too many buttons to press or dialogs to reply – because none of the other methods make you do that either.
2. Use-case convenience: it needs to be as convenient or more convenient than current methods for the intended use case. Parking is a good niche because you are much more likely to not carry correct change with you than not have, say, a credit card with you when going shopping.
3. Fast set-up: nobody is going to go through too much trouble in signing up for a system they’re not sure they’re going to use. Completely automatic provisioning would be best, if possible.
4. Cost: mobile payments cannot cost more than other ways of paying. No excessive transaction fees are possible; not to the customers, not to the merchants. With payment card fees in the 1-5% range, this makes for a challenging market – especially when a new player, the mobile operator, often wants in on it also.
5. Availability: it needs to be usable in more than one obscure kiosk in the middle of nowhere!
6. Patience from the players: mobile payments suffer from the same classic problem as any other new payment method; people don’t want to use a payment method that can’t be used to pay for anything anywhere, and merchants don’t want to sign up when there are no customers using the method. Significant take-up is not a matter weeks or months – it’s years or even decades.

One can get away with breaking or bending one or two of these “rules”, but not too many – sadly, many systems currently in use miserably fail more than one point. The most used service in Finland is probably Helsinki’s public transportation SMS-ticket ordering system. It fails in usability (what idiot came up with the code A 641 anyway?) but scores points in convenience and cost.

In other services, there are no mitigating points. For example, pictured on the right is the Coke machine at the Sello shopping center that works using mobile phones as well as coins. The killer, however, is the price: it costs over 20% more (€1.81+call price vs €1.50) to pay for the Coke using the phone than with coins. Of course it doesn’t help that there’s a supermarket right next to the machine where you can buy the bottle even less.. Another example is Mobiiliraha which completely fails rule #5 – availability. They have a list of merchants where it’s accepted – a whopping 8 merchants. The pitch “And our group is growing!” at the bottom of the merchant list that has not grown for years now seems pitiful.

Of course, all the rules can be forgotten by remembering that a new service needs to solve a problem, not create new ones.