The internet is on a bit of a caffeine-buzz over Starbucks’ January 19th announcement that it had rolled out a mobile payment system for all of its U.S. company-operated stores. The system, which Starbucks touts as “the largest mobile payment program in the U.S. and the fastest way to pay at Starbucks” allows Starbucks’ loyals pay with the swoop of an smartphone. The Starbucks Card Mobile App for select BlackBerry® smartphones, iPhone® and iPod® touch (I, along with 46.7% of Smartphone users must wait for the Android app to try it out myself). Undoubtedly, the App has the potential to further increase loyalty amongst Starbucks loyals who long ago figured out that they could enjoy free refills ALL day by purchasing their regular coffee with a Starbucks Card- 1 in 5 of all purchases are made with the card). However, beyond boosting Starbucks’ bottom line (and hopefully busting the line for a latté) the mobile payment system has greater implications for what could be the future “flow of compensation” in the U.S. (A question posed by A. Miyazaki here).
Paying for goods and services by mobile phone through Starbucks new payment system may a be shiny new trick for Americans but its old hat for mobile phone users across Kenya, Afghanistan, Singapore, Malaysia, South Africa, Finland, the UK, and now Haiti (among a host of other developed and developing nations). Mobile Money (m-money), has been used for nearly 10 years often taking the form of mobile payments (m-payment), mobile commerce (m-commerce), and most recently even mobile banking (m-banking) around the world. In fact, globally, mobile payments were estimated to be $69 billion in 2009 and analysts project growth to continue. The most successful m-money case is that of M-Pesa (A service of telecom provider Safaricom, the m means mobile and pesa is the Kenyan word for money), a service that boasts nearly 9 million subscribers in Kenya alone, with over 2 million daily transactions (half of all daily transactions, according to a recent MIT research report). M-Pesa has expanded their service to Afghanistan, South Africa and is planning on rolling it out elsewhere in the near term.
More than a month before Starbucks’ announcement, Nicholas Kristof of the New York Times, wrote “cash is so 20th century”. This came following a visit to Haiti where he successfully purchased food from a small grocery with no electricity via cell phone (using a SMS text message banking service provided by Voila-Comcel). Kristof pronounced, “I’ve Seen the Future (in Haiti)”. (Bill Gates, Hillary Clinton, and Jeff Sachs have all endorsed Mobile Money as the future as well).
Is mobile payment the future? Certainly m-money takes different forms in Haiti and the United States. For consumers in developing countries, the move towards a mobile wallet signifies increased convenience, perhaps savings via customer loyalty, and the joy of not having to sift through hundreds of store-cards to find your Starbucks card. However, in developing nations like Haiti, Nigeria, Kenya, Fiji, and the Philippines, the shift towards mobile money could actually boost economies, improve the livelihoods of ordinary citizens, and even give the countries a boost up towards the next rung on the “development” ladder. This may seem like a wild claim, but for the 1 billion people in the world who don't have a bank account (let alone a visa or mastercard), but do have a cell phone, m-money creates opportunity for greater financial inclusion. Beyond easing the hassle and reducing the transfer costs of small person to person and person to vendor transactions, m-money can be expanded to offer savings, loans, insurance and a host of other financial solutions where there was none. And if advancing global economic welfare doesn't do it for your- with a potential market of 1-3 billion consumers, mobile operators could earn nearly 8 billion in revenue by 2012 offering sms mobile banking services to the currently unbanked.
I have much more to say on this topic-stay tuned…..
www.starbucks.com
http://e-marketingforsensiblefolk.blogspot.com/2011/01/pay-by-smartphone-at-starbucks-mobile.html
http://www.nytimes.com/2010/12/05/opinion/05kristof.html?_r=1&ref=nicholasdkristof
http://www.cgap.org/p/site/c/template.rc/1.26.10806/
http://e-marketingforsensiblefolk.blogspot.com/2011/01/pay-by-smartphone-at-starbucks-mobile.html
http://news.starbucks.com/article_display.cfm?article_id=490
Ann Marie,
ReplyDeleteGreat article on mobile banking and proving to us that for once the US is actually behind the curve. I do think mobile banking is the future, just not in the US. One thing that the majority of the countries listed above have in common is that they do not have easy access to banking or credit. In addition, the way the pay for phone usage differs slightly from the US. Although I find it cool to just swipe your phone across a scanner it doesn't really differ from the average debit/credit card.
For Haiti, I definitely see mobile banking in their future, as long as they have lower transfer fees. Imagine if these mobile companies lowered their fees by a few percentage points. In a country that generates Billions of dollars in remittances annually this will amount to millions of extra cash, thus helping to boost the Haitian economy.
Coincidence that Bill Gates (Seattle guy) is leading the charge in Haiti, and Starbucks (Seattle company) leading the charge in the US???
Good point, Bill Gates through both Microsoft and its partners as well as his Bill and Melinda Gates foundation is a pioneer and proponent of m-money. In fact, Bill first wrote about "digital money" 15 years ago in his book “" :)
ReplyDeleteThe Road Ahead (1996)