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Don't just take my word for it:

http://mikefaley.com/post/30681043689/why-uber-is-awesome

Liz,

I've heard people describe their first Uber, Moven and Starbucks experience in just that way...sorry to be the contrarian.

But I get your point. It's not about the payment - I've actually been saying that for quite a while:

https://www.finextra.com/blogs/fullblog.aspx?blogid=5389  

BK

There is actually a simple way to resolve this. There are only two categories worth measuring:

1. Mobile Wallet payments that replace a card, and
2. Mobile-derived payments that originate from a mobile instead of any other channel

The later is absolutely necessary because the vast majority of behavioral shift in payments occuring globally right now is around the use of mobile to originate a payment, while not replacing a card swipe or chip transaction in a store, this is even more disruptive on a medium-term basis because it involves a fundamental consumer behavior shift.

Let me illustrate this way.

What is the primary method of buying a book today? Let me give you a clue, it isn't walking into a bookstore.

What is the primary method of buying music today? Again, I could give you a clue, but it isn't walking into a music store.

In measuring the disruptive nature of technology like the Kindle and iPad for books, or the iPod and iPhone for music, we could tactically measure the shift in consumer behavior that would lead to the disruption of the music and books distribution business. The same is true in payments today.

Today we are seeing a marked and significant shift to the mobile as the originating device for payments. While @Ketharaman has argued these are not yet 'mainstream', mobile derived payments is demonstrating a behavioral shift that we've never seen before. We didn't see this magnitude of behavioral change when cheques (checks) were commercially introduced. We didn't see this magnitude of behavioral shift when credit cards or debit cards were introduced, and we didn't see it for online or e-commerce payments. These shifts took much longer.

People have shifted to using their phone to initiate mobile payments far quicker than any new payment technology we've seen in the past 100 years, and while mobile is not the dominant method of payment for consumers today, that is what behavior is showing us will happen in the next 5 years. To argue that it isn't that way today, so it won't be in 5 years, isn't logical or rational IMHO.

The impact can be measured through some simple metrics:

1. What percentage of e-commerce transactions now originate through mobile or mobile apps? Amazon, Zappos, BestBuy and others all measure mobile-derived revenue in 5-10% of total revenue these days.
2. What percentage of software/game purchases are made via a mobile device compared with other methods? Apps and in-app mobile purchases have moved the dial here tremendously. 
3. What percentage of in-store transactions have moved to closed-loop app purchases or dedicated branded apps? Starbucks is a great example. 

and so forth...

On this measure, we've had enormous shifts in behavior in the last 5 years. Is this likely to slow or speed up?

BK

@Neil,

I agree. The market has moved on and is finding it's own way, outside of definititions that don't make sense given exhibited behavior.

@Neil,

I'm with you on this - any transaction that originates via mobile demonstrates mobile 'behavioral' shift and therefore should be counted, but what Alex appears to be saying it has to be a pure-play mobile transaction, in a store, replacing a card or cash transaction.

I think this definition is too narrow as it doesn't speak to the fact that a consumer's behavior has changed, and the data you've shared clearly speaks to that.

AliPay transactions are a great example. I would say it is likely that most of these transactions are nett new revenue for Alibaba and while closed loop (like Starbucks) would only be largely possible for customers who have mobile (but not access to a store or laptop). Thus, the measure of whether it replaces exisiting payment devices is hardly the point, the point is that mobile has enabled a completely new method of engagement and revenue.

Brett

Ketharaman,

This doesn't happen much, but in this case I completely agree with you.

Please write down the date of this unusual conjunction.

Brett

Alexander,

Nice in theory, if a little academic. 

However, in the end how does a customer describe a Starbucks Payment, buying a Kindle from the Amazon store on their phone, or using Uber to take a cab? They don't define these as card payments, m-commerce transactions, or closed-loop payments, they think of them and classify them as mobile payments.

The thing is, regardless of the academic definition, the key here in terms of disruption to traditional distribution models is behavior, modality and friction, and even if there is a credit or debit card at the back-end of a mobile initiated payment, a consumer's behavior has been fundamentally altered from the traditional approach to the payment problem. 

This results in significant shifts in the distribution chain. Buying a book on Amazon is still buying a book, and the back-end production or manufacturing process of the book remains largely unchanged, but the distribution landscape has been completely turned on it's head - just ask Borders. 

You don't need to adhere to a classical or academic definition of a 'payment' if in the end altered human behavior results in massive disruption to the front-end layer of the business. It's still all about the role that mobile has played in defining the new owners of the customer experience and how quickly the incumbents are rendered obsolete.

What decisions will Starbucks make in respect to the way they sell coffee with 30-50% of their customers abandoning cards and cash in favor of a mobile app over the next couple of years? How much will Uber change the dynamic of the taxi industry? What will happen to cinema box offices when the majority of tickets are bought through a mobile device?

These are material business model changes based on behavior. The fact that technically a card was used to top-up the Starbucks App, or was at the back end of the Uber/Fandango process doesn't change the fact that a consumer now makes a very different, conscious decision not to pull out his credit card in those payment instances ,and that my friend, is what kills incumbent businesses.

See US Postal Service, Polaroid, Blockbuster, Encyclopeadia Britannica, Borders, Kodak, HMV, etc for more information.

I'm amazed that even though we've seen this play out time and time again, across multiple industries and models, that incumbent players still think that their particular business is immune from disruption because 'they're different' or exceptional in some way. This cycle has been playing out for hundreds of years as markets change, it is just life.

Consumer behavior is the killer app - not the mobile wallet.

BK

I think it is fair to point out that Bitcoin's trading volume was 972,867 in the last 24hrs, which would mean Silk Road contributed around 10 days of total trading value\volume to the Bitcoin economy which has been going for 6 years.

The 30% and 10% respectively in respect to Starbucks were reported in their last quarterly earnings call.

10% of $14.6Bn of Starbucks Revenue is not $500m nor is it $600m, and to argue that Starbucks is the only company in the US doing mobile payments is ludicrous. The maths doesn't work.

The problem is one of definition. A mobile payment is not a mobile payment unless it is a card proxy very specifically in a store at a POS, but that would suppose that other payments made my mobiles are not payments, but something else - perhaps m-commerce transactions that initiated via a mobile, but not a in-store payment. That definition only makes sense if you are comparing retail, in-store payments versus purchase behavior and transactions. But even if that is your definition, the $500m and $640m estimates are still wrong by the simplest fact check of Starbucks' own reported figures to the market for transactions made at the POS in-store, replacing other traditional forms of payment. 

The biggest leading measure of whether mobile is making traction against other forms of payment is behavior, the second is total volume and mix of transactions. The metrics of how many physical cards or how much cash gets used in a retail store versus a mobile wallet acting as a proxy for a card, is not a broad enough assessment of the impact of mobile on the way people pay, and that is why this argument is flawed.

Nice reality check Liz.

While I do think that the interwebs are already "big", when it comes to "babys with iPads" this is indicative of environmental influences that will influence this future generation's behavior and instinctive decisions. For example, my 13 year old daughter grew up around computers and has never lived a life without the internet. Her instincts for how she gathers information is framed by that. She's not instinctively going to use a cheque or reach for an Encyclopeadia off the shelf, for example. Part of that is her instincts are different, part of it is there are better options - like your finger.

My 4 year old son thinks every screen should be a touch screen, because that is what he's grown up with. He's certainly going to grow up thinking about communication with his peers very differently from you and I. His instinct will not be to grab a phone off the wall to make a phone call, or write a letter to his grandmother, or maybe even use a mouse.

Payment modality has been changing constantly for thousands of years, it shouldn't surprise us that it continues to change. What surprises me is that despite the enormous influences on our behavior that is disrupting the world around us, that many want to believe so badly that we aren't changing, or defending the status quo as if that is more pure or better because it is a recent historical traditional use.

This isn't about stuff - it's about human nature when it comes to interactions. When day-to-day behavior is fundamentally changing, that is something that rightly will be discussed and debated over whether it is good, bad or mobile.

But I appreciate that it is sometimes frustrating.