Lee Hower, a founding partner at NextView Ventures, posted a very interesting article about the state of mobile payments. Go read it.
He explains why mobile payments are failing to disrupt payment experiences and not picking up as everyone would have expected. Turns out that “hey! how cool would it be if I could pay with my mobile?” actually never translates into action, and paying with your mobile is actually a real pain.
There are a few main reasons why mobile payments haven’t exploded yet:
- There is no problem to be solved
- Companies are failing to understand the bigger macro view about the space, focusing too much on the single product and hypothetic problem.
It turns out that the credit and debit cards are actually a pretty great way of paying. Yeah, you have to carry them around and they can get stolen or cloned. But you know what? Carrying a credit card is not a problem. You still have to carry your cash / public transport card / id-driving license / insurance card / receipts / emergency info etc. Carrying one more small card is not a problem. With Mint, you can also automatically track where all your money goes, how much you spend on food, if you are charged wrong fees etc.
So, what should I build? You should always try to focus on the underlying mechanics and platforms, understand those and decide if you want to build on top of them or completely disrupt them. There are multi-billion dollar businesses to be made on top of existing platforms (as Square understood), but the real value-add is when you try to disrupt the old system with a revolutionary product.
That is not an app for a mobile wallet, but that is a completely new store of value. You need to be the source of the capital and become a platform yourself before you’re able to solve the payment problem. Dwolla is trying hard to do that, initially by being an aggregator of all your funding sources and becoming an online account where you have money, but still can’t detach itself from bank accounts.
To really disrupt you have to be the bank. When someone will figure out a way to be the actual bank, then everybody will be able to build on top of that new platform. We’re trying to go in that direction with Dropis, a startup I invested in, and even if it’s still incredibly challenging to compete with huge companies in regulated markets, with hundreds of millions of POS systems and change consumers’ habits, it’s worth it.