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Alex,

I don't think that definition is broad enough. If an m-commerce transaction is done via a mobile, the underlying payment might be a card or a bank transfer, but the behavior is most definitely mobile in form. Uber, for example, doesn't allow you to make purchases via their browser, it has to be via a mobile device (whether phone or tablet) because geo-location is critical to its functionality and success. You couldn't call an Uber transaction on iPad e-commerce in that respect, and calling it only m-commerce, but not allowing that definition to include the mobile payment, belies the fact that every Uber payment must be initiated from a mobile device by its nature.

Wikipedia, incidentally, defines Mobile Payments as:

"Mobile payment, also referred to as mobile money, mobile money transfer, and mobile wallet generally refer to payment services operated under financial regulation and performed from or via a mobile device" 

In Kenya, this would include every phone to phone mobile money transfer via M-Pesa, for example. These are replacing cash, by and large. So mobile is displacing a traditional payment in another form. How could you not classify that as a mobile payment, simply because it doesn't happen in a retail store?

The definition of in-store purchases on a phone, where it replaces cash/card/cheque, would appear to be too narrow. While I understand the m-commerce label, the point of mobile is the fact you can purchase anywhere, and an in-store purchase is no longer a good enough definition for a device that can purchase at anytime, from anywhere. 

I think the definition should include P2P payments from one person to another, because they could reasonably replace a traditional cash exchange in person for goods/services.

I think the definition should include any e-commerce or m-commerce transaction that is done through an App on a mobile device (smartphone, featurephone, phablet and tablet), where that would replace a transaction that was previously done in-store, in person, or via a browser.

If the payment is initiated by a mobile device - the person is choosing to pay with their phone, versus an alternative modality either in-situ or remotely.

Your definition appears only to refer to a mobile payment made from a mobile wallet in a retail store - I think that is a 1.0 plastic/cash/cheque view of the payments world, not a 3.0 web/mobile/geo-loc/digital identity view of the world.

BK

Alex,

The whole point of mobile is that it is mobile - you don't have to be in a store to make a purchase. A purchase of goods or services outside of a physical retail store doesn't make the purchase any less impressive in respect to modality. If my instinct is changing to pull out my phone and order a pizza, pair of shoes, books, book a cinema ticket, download a music or app, why should we eliminate that as a measurable shift in behavior? 

If I've bought a cinema ticket on my phone instead of going to the box office and tapping my phone, why would you suggest that it's not really moving the needle in respect to cinema box office purchases?

To your point, the transactions for Seamless, Uber and Fandango are not replacing eCommerce transactions - these are new behaviors replacing cash on delivery and phone payments, cash or card in taxis and cash or card at the box office respectively. In each case these are net new payments, not replacements of online payments. The fact that they are not made by tapping a mobile phone to a contactless POS terminal in a store is meaningless - mobile payments are emerging as a new behavior, unlimited by physical location constraints.

You should not measure the success of mobile based on payment artifacts of old.

BK

@Ketharaman

Your position is:

1. Mobile wallets have not hit mainstream
2. They cater for fewer than 1% of transactions
3. Tiny fraction of the payments market that's worth trillions of dollars every year, and
4. More specifically that there is a sum total of $500Mn of payments in the US last year, most of which was Starbucks

So, let me break it down for you.

Starbucks

Starbucks revenue this year is estimated to be $14.6Bn in revenue, 10% of which comes through mobile transactions according to the Chief Digital Officer Adam Brotman - seehttp://www.mobilecommercedaily.com/starbucks-sees-almost-100pc-growth-yoy-in-dollars-loaded-on-mobile-cards

Seamless  

Will generate $100Mn in revenue this year, 30% of which is through Mobile - http://www.reuters.com/article/2013/02/13/us-seamless-revenue-idUSBRE91C17M20130213

Fandango

Fandango's mobile purchases increased by 170% in 2012 to 30% of all their purchases, leading to a total of $72Mn in mobile sales - http://www.internetretailer.com/2013/01/02/fandangos-mobile-ticket-sales-soar-171-2012

Uber

Uber is expected to generate $125Mn in revenue purely through their Mobile App in 2013 - http://allthingsd.com/20130822/uber-filing-in-delaware-shows-tpg-investment-at-3-5-billion-valuation-google-ventures-also-in/

Amazon

Amazon does $5Bn in mobile sales via apps according to Citi Analysis - http://www.pymnts.com/briefing-room/mobile/playmakers/2013/Report-8-Percent-Of-Amazon-Sales-Are-Mobile

App Store

Apps Store revenue via mobile totals $26Bn, 17% of which is in-App purchases/sales - http://techcrunch.com/2013/09/19/gartner-102b-app-store-downloads-globally-in-2013-26b-in-sales-17-from-in-app-purchases/

EBay, PayPal, Braintree

EBay did $13Bn via Mobile last year, PayPal does $20Bn of it's $44Bn in payments via mobile (that's close to 50%) and Braintree will do $13Bn this year in dedicated mobile payments ($46Bn right there)

$80Bn and counting

If you add up those few retailers, understanding that there are more than 400 retailers who now offer mobile commerce sales in the United States alone, you already have close to $100Bn in total mobile purchases/revenue, and Starbucks alone exceeds the $500Mn estimate.

However, the more interesting trend is that of those that offer mobile purchases, you regularly see 30-50% of the payments already coming via mobile. While not every retailer offers mobile as an option, and thus we don't see 30% across the board, the fact is all you need to do is offer mobile and you'll see adoption of somewhere between 10% and 50% on today's figures.

By 2015 on the estimates provided, here are a list of companies for whom mobile will make up more than a third of their revenue:

1. Amazon
2. Zappos
3. Starbucks
4. Fandango
5. Seamless
6. Uber
7. AirBnB
8. Kickstarter
9. iTunes (App store only, not Apple entirely)
10. Sephora
11. Urban Outfitters
12. BestBuy, etc

It doesn't take much to do this research and come up with these numbers. The facts are clear, mobile is defintiely mainstream for those retailers and service providers who offer mobile purchases. For those who don't - it probably isn't mainstream yet...

Your base assertion is that Mobile is not yet mainstream. These numbers blow that assertion out of the water, unless you are telling me that $100Bn in revenue = $500Mn in revenue, mostly from Starbucks...

BK 

@Ketharaman,

The problem isn't the GigaOm report, which is based on the Onavo Insights report, it is your assumption that a mobile in-app purchase of a good or service = mobile wallet. It doesn't. 

Let's take the likes of Uber which is excluded from the Onavo report for some mysterious reason - Uber generated $125m in revenue last year ONLY via the app. One mobile 'wallet' that is generating more than 20% of the total estimated spend you say is attributable to mobile? That doesn't even start to explain the $2Bn in payments via Starbucks App annually, etc.

The data doesn't add up, but the more serious issue in the logic is that you've determined a specific purchase of a good or a service in a store is the measure of a mobile wallet. This means any online purchase of an app or service like Uber is not a mobile wallet, but something else. Which skews your data incredibly. 

The issue here is that your proposition is based on such a thin slice of data that it is not reasonable or representative in any true fashion, therefore the entire article is not credible.

Mobile wallets are processing Billions of dollars globally already, but if you want to argue mobiles aren't making an impact, the only way to do so is to skew and marginalize the data to such an extent as to justify the status quo. That is not a balanced view of the world.

While I may be accused of being a little bullish on mobile/digital from time to time, my assertions are always based on a total world view of the data and emerging customer behavior. 

If 30% of customers in Starbucks are paying with Mobile, that is already higher than the use of cheques, for example. So would you call cheques mainstream? If so, how can you argue mobile payments are not mainstream? If you're going to use goods and service purchases to justify the mainstream measure, then volume of mobile payments versus volume of cheques would show neck and neck comparisons. You can't have your cake and eat it too. 

Mobile Wallets are mainstream - get over it and move on please...

I'm sorry, please go back to the drawing board on this one.

BK

Ketharaman,

There is so much wrong with your line of logic and assumptions here I don't really know where to start.

Firstly, the $500m figure you've quoted is simply flatout, misleadingly and spectacularly wrong.

PayPal alone is expected to do $20 Billion in mobile payments this year alone, Braintree (their recent acquisition) is expected to do $4 Billion in mobile payments this year - taking the total in one combined company up to $24Bn.

82 Billion Apps will be downloaded in 2013, the vast majority bought through a mobile payment on a smartphone. For Apple alone this caters for more than $33 Billion dollars in revenue received in payments through the mobile phone.

While Starbucks is a fantastic example of a closed loop system doing 30% of urban payments in-store and 25% nationally, another recent success you might have heard of called Square recieves over $15Bn in payments annually through mobile phones - you might argue these are 'card swipes' but they are mobile receipt of payments conducted on a mobile phone. These are payments that could not be done without a mobile, and have migrated from cash in most instances. 

Just right there we've got over a hundred billion of payments in the US through mobile devices before we start taking into account NFC transactions, P2P payments, QR code enabled payments, etc, or looking further afield outside the US.

You are living in a bubble if you think mobile has few takers, and this sort of commentary is not only ignorant, but grossly misleading. Get your facts straight please...

Brett King
BANK 3.0 

So did you or didn't you!? :)

Ketharaman,

It's definitely not binary. I think many are looking for absolutes in this discussion, but the reality is that it is far more complex. 

For example, in most developed economies right now, cash use is declining at a rate of somewhere between 2-7% annually. In Japan, however, cash use is increasing. Primarily because cash-on-delivery e-Commerce and m-Commerce is skyrocketing in popularity. However, culturally if you were to try cash on delivery in some other developed economies, you'd get people arguing at delivery time over price, whether they ordered the goods, etc - thus COD just would not work the way it does in Japan.

The fact is there is no set rule or formula on how cash will be phased out. There is only one certaintity - cash use will continue to decline and will either take 20+ years to disappear, or at some stage will find equilibrium at minimum levels for specific use cases where it remains the easiest, most anonymous method.

Kevin Hart in "The Memory Bank" (1999) made an interesting case for how cash use would centralize during this decline that has always resonated with me however:

"Once we move down from the scenarios of history on a grand scale to money management by ordinary people, the question shifted relative use of the money instruments available. In Britain, for example, right up to the 19th century, there were normally several currencies in circulation in addition to Stirling; in this situation, having been temporarily banished by state capitalism, is likely to be restored.

If modern society has always been supposed to be individualistic, only now perhaps as the individual emerging as a social force to be reckoned with. This claim rests on a single overwhelming fact, the large amounts of information can now be processed cheaply concerning the individuals involved in economic transactions any distance, thereby making possible the re-personalisation of complex economic life.

This leads to the curious speculation that the state's legal tender will end up appealing mainly to the criminal elements of society, John Locke's nightmare of a world dominated by an informal alliance between corrupt politicians and economic criminals."

Mobile has too much going for it not to 'ascend' as the article above notes. While there is a generational aspect to comfort around cash, etc, the likelihood that mobile payment innovation will produce a shift in habits can hardly be argued. The only argument is the speed and dynamic of this change. We'll need to wait another 10+ years to know for sure how the trend is firming up and what impact it is having on cash.

Now Germany is saying Bitcoin is 'real' and should be taxed...
https://www.finextra.com/news/fullstory.aspx?newsitemid=25132

The question is not cash versus virtual currency, but it is government backed currency versus consumer backed currency. If I am getting paid salary in BitCoin or my business is earning profits in BitCoin, then I should expect that it will be treated like any other currency in respect to taxation and reporting.

You can't tax something that isn't real, and you can't tax a virtual currency unless you argue that it works just like a real, centrally-backed, government-recognized currency. The more BitCoin gains traction, the more likely it will become a niche currency that is legal recognized to prevent taxation and money-laundering breaches.

Surely it is time for Ketharaman Swaminathan to tell us why this estimate is wrong and why cash is still going to be king in 200 years!

@Ketharaman

Sorry, that's not at all an accurate assessment of how the market sees and values banks, nor the value creation offered by banks.

Because of risk mitigation and the cash reserves banks have to carry, their multiples are typically much, much lower than IT companies. That is a measure of organizational efficiency. 

AAPL alone made $41Bn in profit last year compared with $4.2Bn for BAC, or $43Bn for BAC, WFA and JPM combined.

However, a much better way to look at this is simply Earnings per employee.

BAC, C, JPM, WFC Earned $51Bn in profits with 1.051 Million staff for a total earnings of $48.5k per employee

Comparatively

GOOG, AAPL, MSFT, ORCL Earned $84.7Bn in profits with 342,000 staff for a total earnings of $247.8k per employee

Banks are simply not efficient organizations compared with IT companies.