Apple Pay will made its global debut in the US this month, with New Zealand soon to follow, but if it wasn’t for the egos of Western companies mobile payment could have been in widespread use across the West for the last 15 years.
That’s the damning view of Pinar Ozcan, Assistant Professor of Strategic Management at Warwick Business School, who believes “squabbling and a lack of compromise” among collaborating dominant industry groups has stunted the growth of mobile payment.
“Finally the Western world will have mobile payment thanks to Apple, but we could all have had this a long time ago if it wasn’t for a clash of egos,” Ozcan claims.
“The mobile payment industry is a perfect example of titans in different industries clashing over a new concept.
“Often firms from distinct industries have difficulty reaching an agreement to launch a new market due to a history of dominance in their own industry and lack of joint collaboration experience.”
This lack of agreement, in the eyes of Ozcan, in turn leads to a “weak compromise” on market architecture with unresolved interdependence.
“This creates a vicious cycle where other players hold off investments in market infrastructure and, in turn, the disagreeing parties lose any incentive to work on an agreement because the market is not taking off,” she adds.
Studying the mobile payment market in North America, Europe and Asia between June 2006 and June 2011, Ozcan says interviews across industries including banking and network operators revealed just how difficult it was for the differing industries to see eye-to-eye.
“The financial industry is in a defensive position against this proposal. Until now, they owned their customer and whatever payments the customer was making,” reports a US-based financial consultant.
“They have a lot to lose from sharing their card payment business with other players because cards are not just a source of revenue, but also a way to create loyalty and an opportunity to cross-sell products and services.
“So banks are not excited about opening their business to mobile network operators.”
Referring to the banking sector another interviewee, a senior sales associate at a US mobile operator, added: “They either don’t need us or don’t need this market. Because if they needed it, we would be talking right now.”
Finally an associate director of mobile payments at a US bank chipped in by saying: “Who would you trust with your digital money, your bank or your wireless carrier, who keeps charging you every time you go over your monthly plan?”
Near Field Communication (NFC) was the preferred choice of technology to get the mobile payment industry rolling, but Ozcan says mobile operators needed access to bank accounts, while in turn, banks needed mobile operators because the user’s bank information and the payment software needed to be integrated into the mobile service of the user.
But wrangling over who deals with and essentially owns the consumer saw it delayed for almost three years, she adds.
Eventually, a technology development known as ‘single wire protocol’ emerged with the first Nokia SWP phone announced in April 2009. However, Nokia shelved the phone in February 2010 without it ever being launched.
“Overall, almost 10 years after the first discussions on mobile payments began, and five years after the technology became ready for deployment, the key players failed to agree on the market architecture due to disagreements on who would control the customer relationship,” Ozcan adds.
“This disagreement then extended to the responsibility for securing the transaction, but the companies eventually lost interest and looked elsewhere.”
Ozcan believes the longer the players from distinct industries disagree about the market architecture, the more likely they are to invest in alternative architectures within their own industry, further inhibiting market emergence at the convergence of industries at both global and local levels.
“Whether Apple Pay is finally the service which cracks the mobile payment industry and brings the cross-industry squabbling to an end, while at the same time paving the way for a true emergence of a technology touted for years as the next big thing, remains to be seen,” she adds.