Thursday, December 16, 2010

Patterns of Success - Debbie Baxley

I worked with Debbie Baxley while at IBM. She was the Partner in our Financial Sector team responsible for mobile payments and I had a team doing smart cards and then some work in near field communication. She is currently a Principal at CapGemini leading their National Retail Payments practice which includes mobile payments. In addition, Debbie has been a leader in the Smart Card Alliance Contact-less and Mobile Payments committee.

John - Debbie, thanks for taking the time to speak with me today. Before we get into the core interview questions I was wondering if you could explain a bit more about mobile payments.

Debbie - Well there are actually three uses of the mobile device for banking. The first is the way you can interact with your bank or financial services company to check your account, transfer money, etc. A growing number of financial services offered through applications or browser based solutions on your phone. The second, not so common in the United States,  is person-to-person payments. This is implemented using text messaging and is very common in emerging countries. For example, in Kenya there is the M-Pesa system that allows people to transfer money via SMS over the SafariCom network. Finally, one that I am very excited about, is the emerging use of near field communications. This is similar to the system used in Japan (FeliCa) where people use there phones for payments, coupons, tickets, opening locked doors, etc.

John - Lets compare Japan and the United States. Japan has had FaliCa for how long?

Debbie - About ten years.

John - And it was adopted very quickly. How come they have had it for so long and it is in common use while the US is still experimenting with NFC?

Debbie - A few reasons. First in Japan there is a dominate service provider (NTT-DoCoMo) who has over 50% of the market. Second, NTT-DoCoMo acquired a bank and could provide payments onto a credit cardl. Third, they heavily subsidized the merchant adoption of the POS readers. In the US none of these factors exist. We have to get device manufacturers, service providers, banks, credit card companies, and merchants to all agree on adoption. We have also obsessed on the revenue model instead of encouraging rapid adoption.

John - So in the area of mobile payments have you seen any patterns of success?

Debbie - In the United States there has not been a significant success yet. However, I would say that in each of the trials, there have been learnings which have helped shape the future deployments. For example, we learned that the interaction with the phone had to be straight forward and not take more then five minutes to install/configure a new app or service. 
I do think that in mobile payments the markets reach a tipping point where mass adoption takes place. In some situations like micro-payments in Kenya the technologies (SMS) were already established and in use and there was a real need for easy transfer of funds from one person to another that the banks were not fulfilling. This resulted in almost immediate adoption. In the case of NFC we need a critical mass of both merchants with readers and consumers with devices so that mobile payments become a regular part of daily financial transaction. If Apple were to release iPhones with an NFC chip that might be enough to be the tipping point in the US.

John - And have there been any real failures?

Debbie - Again, with mobile payments we are still to early in adoption to see dramatic failures. If we look at a complimentary technology, contact-less payments, that has failed to achieve the adoption rate we hoped for. It was initially promoted as easier to use because the transaction did not require a signature. Then the network guidelines were changed so that magstripes could be used without signature so the time savings advantage was eliminated and although there are better fraud prevention on the contact-less cards, the banks and credit card companies did not want to point out the weaknesses of the magstripe. Today there are approximately 80,000 contact-less readers in the US... about 2% of all readers.

John - Why will the NFC Phone succeed when contact-less cards failed?

Debbie - Because the phone will be able to interact with the user. It will be able to read information. For example, in a store you could tap your phone on a poster advertising an item and immediately get a coupon and/or go to a web site that contained more information about the product. Finally, the NFC Phone will be able to do more then just act as a credit card. As in Japan, we will use the phone for movie tickets, plane tickets, coupons, at some point even replace cash... cash has germs!

John - So what do you think THE NEXT BIG THING will be? About three years out?

Debbie - I do believe that we will see most smartphones with an NFC chip incorporated and that the major banks and credit card companies will be supporting mobile payments via NFC. I think that merchants will adopt this primarily for the fraud prevention and if they can get some direct benefit from the frequent use programs (instead of getting air miles, get a discount coupon to use in the merchant's store) that will be even better.
And three years from now I think that there will be an intersection of some social media marketing aspect to all of this. Did you know that currently a mobile advertisement has 10x the conversion to sales rate as an ad seen on TV or print?

John - Thanks again for sharing your insights with us.


  1. As usual Deb has a discerning eye for the key trends in mobile banking. When I look at the way my kids use technology now 24, 22 and 19, it becomes apparent the mobile device platform will be strategic for many businesses including the banks.....Brian Eatock

  2. Brian,
    One part of the interview that did not make the post was the conversation over how I would have to train myself to always carry a device with me if it came with an NFC chip and held my bank cards. This does not seem to be an issue for Gen Y types.
    Debbie did say that when she went out socially she no longer wore a wristwatch but carried her smartphone... so cool.