The Bankwatch

Tracking the consumer evolution of financial services

The payment space is heating up with mobile front and centre, but where are the Banks?

Payfone is an interesting new service and I like their security model.  They are able to take unique features of the phone from the SIM card and the phone itself to generate a unique fingerprint that is used in the security of the payment transactions.  This is similar to the methodology used by RSA for two factor authentication of online banking.

But it is the more interesting that they have just received $19 million in funding, and will be using the Amercian Express Serve platform.  The details are outlined in this NY Times piece.

The other investors in this $19 million round led by AmEx include Verizon Investments and Rogers Ventures, both venture capital arms of their respective mobile carriers. Payfone’s existing shareholders include Opus Capital, BlackBerry Partners (RIM) and RRE Ventures.

Payfone will combine its mobile authorization and payment services with American Express’s recently announced digital payments platform Serve

Payments might just be getting interesting with mobile being front and centre. Note that Rogers Ventures (part of Rogers Communications) are part of the Payfone funding round.  This was a recent announcement from Visa on mobile payments.

Relevance to Bankwatch:

Where are the banks?  It has long been speculated that telco’s would be a significant part of the competition felt by banks, yet they continue to let it happen in front of their eyes.  Somehow banks cannot internalise that payments are a potential service and should be viewed accordingly.  This debate has been going on internally for years.  I can recall a large consultancy performing an internal analysis of the potential for payments as a line of business.  It was a great report that I can only say was greeted by a classic ‘dead cat bounce’.

Banks see everything as an account, whether it be a loan, a deposit or a mortgage.  The model is to associate a service fee with that the deposit account and handle items such as transactional activities as a bundled service captured by the service fee.  They created this model and they are bound by it. 

Customers see the bank through the lens of the one fee they pay and therefore associate the value of their bank to them through the lens of the monthly bundled fee.  This has become a straightjacket for banks in their strategic view of new services, and I believe is part of the reason that payments have not been taken on as a strategy.

Meanwhile the telco’s are not exactly moving at lightning speed in the payments space. Predictions of their owning that space go back more than 12 years, and yet in 2011 even Rogers are seeing this as a strategic investment only now.  But at least they are doing it.

Where are the Banks?

This from 2006 Social Money and Payments is a large market

This from Japan 2009 DOCOMO to laaunch mobile remittance service

Written by Colin Henderson

April 14, 2011 at 09:17

Posted in Uncategorized

%d bloggers like this: