Mobile Payments Will be "Hybrid" for Some Time

The founding of a new industry, such as mobile commerce, always will threaten the leaders of the industry that risks being replaced, at the same time it offers brand-new opportunities for attackers of all sorts. 


That perhaps especially is true when an existing way of doing things necessarily involves a collision between several large existing industries. In the case of mobile commerce that might reasonably include banks, payment processors, retail software and hardware, mobile services, retailing, marketing and advertising. 


At least early on, successes often have taken a line of least resistance. Starbucks did not focus on anything "fancy," in technology terms. But it gained huge traction, fast, by essentially linking a smart phone with bar code readers and prepaid cards. 


Google Wallet likewise essentially has taken the tack of linking a mobile phone with a prepaid instrument as well. Square, Intuit and PayPal have used dongles to turn smart phones or tablets into retailer point of sale terminals. 


The main point is that early successes have happened where innovators built something new that works with a huge installed base of supporting infrastructure and common user behaviors. 


It might not have seemed so logical, at first, to unite an established behavior and payment instrument--the prepaid card--with smart phones to create a "mobile payment" system. 


Nor might it have seemed so logical to use a simple dongle to turn a smart phone or tablet into a retailer payment terminal. But taking the line of least resistance has proven successful. Rather than attempting to change behavior, or create huge new ecosystems, some have adapted existing behaviors and ecosystems in new ways. 


Along the way, suppliers will find themselves working in fields in which they have little experience. Problems will arise.  Security will remain an issue, for example. Sometimes the obvious answer will be to marry expertise in one field with capabilities of another. 


That sometimes will take the form of "mashing up" a mature technology and set of processes, such as "prepaid cards," with a technologically-emerging set of hardware and software, such as smart phone devices and apps. 


In the history of technology disruptions, that is a common pattern. Hybrid approaches often work, early on, because they are practical, and build on what is already accepted practice. Think of steam engines on sailing ships. Initially, it was not practical to drive a ship solely using steam engines. So shipbuilders grafted steam engines onto sailing ships. 


The full replacement of an older technology might take much longer. Consider that the first mobile phones went into service in 1946, but it wasn't until the mid-1990s that "most" people used them.


The first video games were played in 1961. But video gaming did not first become a mass behavior until the early 1980s. The first personal computer was created in 1964, but significant adoption did not happen until the mid-1980s. 


That is why the "prepaid account plus mobile phone" will be a successful early approach to mobile payments. It is a hybrid of existing behaviors and processes. Only later will mobile payments emerge in a more "finished" mode.