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Mobile payments come of age: A brief history lesson

Mobile payments mark the latest iteration in our 19,000-year history of commerce, says Harvey Koeppel. It's up to CIOs to make this evolutionary development work better.

Once again we have confused the business of technology (the stuff that defines the IT industry) with the technology...

of business (the stuff that defines everything else). Remember when the world was about "e-this" and "e-that" (early 1990's)? A few years later, people tired of "e-everything" and switched the buzz to "i-this" and "i-that". Doesn't seem all that creative a switch, but the "i" seems to have staying power, perhaps thanks to Apple.

It does seem that anything that is described as "mobile" these days sells. In addition to mobile payment solutions, we have mobile wallets (would you really want a wallet that was stationary?), mobile devices, mobile phones (really a mobile device), mobile videos, mobile businesses (catch-all for anything sold out of the back of a truck), mobile sculpture (thanks Calder) and, my all-time favorite, Mobile, Alabama (dating back to the early 1700's), to name just a few. Try my GoTo popularity test: An Internet search for "mobile," which yields 5.3 billion results, versus my popularity test benchmark -- "Barack Obama" -- that returns 198 million. Need I say more?

Mobile payments: Déjà vu all over again

Payments have always been mobile:

As early as 9000 BC both grain and cattle were used as money or as barter. The first grain remains found, considered to be evidence of pre-agricultural [currency] practice, date to 17,000 BC. In the earliest instances of trade with money, the things with the greatest utility and reliability in terms of re-use and re-trading of these things (their marketability), determined the nature of the object or thing chosen to exchange.

Source: Wikipedia

Later on, coins and precious metals replaced cattle and grain, interestingly, more mobile and much more convenient by their nature. Banknotes first appeared in 7th century China and spread west across Europe throughout the Middle Ages. Again, paper bills provided much more convenience for issuers, buyers and sellers. And bills were/are certainly more mobile than sacks of coins.

Credit cards (plastics) were introduced in the 1940's –1950's with the development of Charg-It and Diners Club cards. The first association-based card was issued in 1966 by the Bank of America, originally called the BankAmericard and then renamed Visa. A plastic card was, again, much easier to deal with than wads of bills. Are we seeing a pattern emerging? Let's recap: Cattle → grain → shells → metal coins → paper bills → plastic cards -- that's a 19,000-year-march towards increased convenience backed by universal trust … and all of these forms of payment were always mobile!

So what's all the fuss about?

I am going out on a limb here and assuming if you are reading this post that you have at least heard of, if not already used, products such as Apple Pay, Samsung Pay, Google Wallet, Softcard (AT&T, Verizon and T-Mobile), PayPal (eBay) or CurrentC (Sears, Target, Wal-Mart and many others). Note that the combined market capitalization of just those companies mentioned here is approximately $2 trillion.

Not enough to make a fuss about? How about a few more sobering metrics for your consideration? As of this writing, there are 1,135 companies worldwide involved in mobile payments startups with an average valuation of $4.3 million (total of approximately $5 billion), backed by 41,923 investors and supported by 171,826 social media followers.

'That which we call a rose by any other name would smell as sweet.'

-- William Shakespeare, "Romeo and Juliet", II, ii, 1-2

What's in a name? Based upon the briefest of historical perspectives presented above, it seems that "mobile" is not new; "payments" is not new; "mobile payments" is not new; so why are some of the largest enterprises on the planet investing billions in this space? Because as we have seen, mobile device technology-enabled payments are new and growing fast. This space is the logical extension of the progression from cattle → grain → shells → metal coins → paper bills → plastic cards → mobile device technology enabled payments.

Now reflect upon the characteristics that underpinned and continue to enable currency to work at scale: utility; reliability; trust (nowhere more evident than "In God We Trust" on US currency); and convenience.

Now reflect upon the technologies that are being developed and brought to market that underpin mobile device technology-enabled payments:

It is likely that many other new technologies are being developed by the 1,135 mobile payments startup companies referenced above. Not surprisingly, what all of these technologies have in common is that individually and in combination, they make mobile device technology-enabled payments more useful, reliable, trustworthy and convenient.

The CIO imperatives…

As CIOs and IT executives, it is clearly time to embrace these technologies whether they are embedded in payments-related applications or others more relevant to your enterprise and/or industry. Most of these technologies have reached critical mass, and some are even mainstream at this point. The more we as an IT community understand the capabilities and constraints of these mobile payments technologies, the more effectively we can integrate them and the more useful, reliable, trustworthy and convenient mobile device technology-enabled payments will become.

For this next form of money to gain acceptance, achieve global scale, and for its usage to become as matter-of-fact as the dollar bill (or the credit/debit card), the user experience must be seamless from end-to-end, must be convenient and must be secure.

  • Consumers having to open new accounts or to signup vendors they want to pay, will not work.
  • Services that accept payment instructions electronically only to convert those payments into checks that then get mailed to payees, will not work.
  • Having one form of mobile payment to buy your coffee, another to pay for your groceries and another to purchase that new lawnmower, will not work.
  • Simply converting the current system into an electronic equivalent that is carried around in your mobile phone is paving the cow path -- incremental improvement but far short of the real value that a fully-integrated electronic payments environment can bring to individuals, enterprises and governments.

We have the technology -- we can build this system!

Let me know what you think. Post a comment or drop me a note at hrkoeppel@aol.com. Discuss, debate or even argue -- let's continue the conversation.

Next Steps

For more IT executive advice from SearchCIO contributor Harvey Koeppel, check out his CIO's guide to future-proofing the data center, and why CIOs need to take charge of data ownership.

This was last published in July 2015

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What can CIOs do to build a better mobile payments ecosystem?
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is there any software available to do e commerce business to do transaction through mobile phone ordinary mobile phone like china mobile phone not through smart phone repeat not through smart phone is such software is available kindly do let me know i do know mobile payment done through smart phones is there any possibility to done through ordinary mobile phone to do transaction done through e commerce business is such software is available please do let me know
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I think CIOs really need to push for an industry-wide standard. If it doesn’t come from them, then the ecosystem will continue to fragment, which will in turn prohibit acceptance by the consumers.
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1. They need to be aware of lots of things that matter. 
2. They need to start caring about many things that matter
3. What matters can be found partly in comment 1 and 2 
4. As a tester and end user, I would give most importance to security aspect of payments acosystem
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I love this article. I especially agree with the "what will not work" section.

I haven't used iPay yet, but I use the Starbucks mobile app every so often. Mostly because it is more fun than pulling out my boring old debit card, and it also keeps tracks of my drink count, eventually yielding me a freebie every so often.
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The big problem is to gain acceptance and, to do that, I think the solution needs to be extensible beyond a single platform. The current situation reminds me of the format wars between VHS and. BetaMax or Blu-ray vs. HD DVD. I use Google Wallet a fair bit, but many of my financial transactions are made through PayPal, and those two formats don’t play well together. I think consumers are not going to readily accept a solution until a common standard is reached.
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