Citi rounds on Isis, urges other banks to join Google Wallet

The sad fact for everyone working to develope mobile payments is that the pricing of payments and thus also profit margins are on such a low level that it is not feasible to share these margins with additional participants in the value chain, like the telcos, without increasing the price for payments made with mobile phones beyond what end users today pay for "traditional" electronic payments. If existing revenues from payments have to be shared with addituional mobile channel participants, someone must make a loss or customers need to pay more for mobile compared to for instance electronic card payments F2F or over the internet. Therefore mobile payments will require presence of true additional values on top of the payment execution if end users are expected to pay for all newcomers to the value chain.

You make an excellent point Jan-Olof.  The lack of a credible business model is just one of the reasons why I believe mobile NFC payments have been enormously over-hyped and will not take off in a big way for many years, if ever.  Another reason is the lack of an acceptance infrastructure.  Current volumes of contactless payments are tiny, and so merchants have very little incentive to install the contactless readers which are required for mobile NFC payments to work.

As the moderator of this panel, I would like to add that there was a whole discussion of mobile offers that this summary left out.  Mobile offers are the key to the business case with mobile wallets; by charging merchants to deliver targeted offers to prospective customers, banks and wallet providers such as Google can recoup the costs of the technology without imposing transaction fees.  NFC payments by themselves cannot provide enough value to justify the investment, which is why Isis is having trouble.

OK Aaron, fair point.  However, you can do something very similar with chip-based loyalty applications on standard contact payment cards.  Vendors like Welcome Realtime have developed co-branded multi-merchant loyalty solutions for several banks in Turkey particular, but quite a few other countries.  These can be quite sophisticated - for example, in addition to allowing instant updating and redemption of loyalty points at the point of sale, the merchant can deliver highly targeted offers or messages.  I'm not sure, but I think the merchant can also deliver offers to the cardholder's PC, before they enter the shop.  Admittedly, a mobile solution would add another dimiension in terms of convenience and mobility, but is that enough to justify all the hype?  The chip-based loyalty applications I refer to have had some local success as far as I know, but they are difficult to build, take a long time to get right, and have hardly set the world on fire yet. 

I guess I should also mention that there was no unanimity on the panel regarding the inevitability of NFC; U.S. Bank's Dominic Venturo, in particular, highlighted the importance of testing other methods, such as SMS, mobile apps, and 2D barcodes.  The big advantage that NFC has over card-based solutions, in my mind, is the user interface and processing power that a smartphone affords, which should allow more sophisticated applications.  However, it does have a serious dependency on the merchant's willingness to upgrade their terminals, and other technologies will no doubt be used in the near term.