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  • Jack Lau

No more seat on the Mobile Payment bus?

Recently, at the Hong Kong University of Science and Technology, there is a program to help freshman and sophomore students get real life experience through special internship and mentorship called HeadStart@HKUST. At the thank you dinner, a number of students went up stage to talk about their working experiences.

One pair really caught our eyes. It was not about their internship job nature. It was about the pair of students' daily travels and living experiences which were really interesting. This pair of students did a daily commute from home to an office in Shenzhen through subway and bus on a 5-hour round-trip cross border journey every day. Mind you that these are 18-19-year-old students. One would have thought that the students would have hated the commute. It is not like there is no other opportunity in Hong Kong closer to home. Rather than complaining, they really thrived on it, citing that this was an eye opening experience for them for the summer.

They just loved it going up there, working alongside with their mainland counterparts and literally immersed in the environment. They also talked at length how the social media and payment technologies changed their daily lives so much up there.

In fact, when we told this experience to another friend of ours in Beijing --- someone who was originally from Hong Kong. He gladly told us that in this regard, China is really leading the mobile payment revolution.

Actually, this is almost becoming a cliché to many people.

But, we still want to look at this from a different angle.

Take Apple Pay. Apple charges about 0.15 percent of the transaction as processing fee. It has just been launched recently in Hong Kong. The system rides on the like of Visa Pay Wave technologies. And, with the upgrade of the credit card payment terminals, the popularity seems more dependent on the business partnership and promotion. Yes, it has to fight with the incumbent, Octopus. But, Apple Pay is slowly drawing a following. The brand loyalty, and also the possible promotion campaign done by Visa and American Express are helping. Even the local banks are pitching in with incentives and offers.

But, let's pause for a moment here…. Who else can be a winner in this mobile payment platform? Are all seats taken already?

Pundits have even argued that even the like of Apple Pay will face an uphill battle in this region, and that everyone who needs to be in the eco-system has already signed up. No more seat on the bus, they say.

Rather than providing an answer right away, let's do a survey on the up and coming players which are in this sector and see.

In the latest round (we mean the last couple of months), the kind of deals we see are mostly e-commerce (Paymt in India got another US$60M at a valuation of $4.7B, after receiving $680M in an earlier round; Zilingo in Thailand raised US$10M for establishing a fashion platform); peer to peer payment (Walmart just announced a joint effort with MoneyGram to do wire transfer); POS (there are a number of more agile companies trying to change a POS from a dedicated hardware unit to a software plugin for your iPad). We also see a number of people in augmented reality who are trying to enhance your online shopping experiences.

In the sense of the bigger picture, we do feel that it is getting harder in the backend payment system. We wonder whether it would be like the credit card market which is dominated by a handful players. However, in the credit card market, there are still the settlement banks in the food chain. But, in the like of WeChat and AliPay, they themselves also act like the deposit bank. While this is not fair, the fee that one can draw from a transaction, while extremely lucrative, is still small for most of these giants --- of course unless they leverage on the payment do things like e commerce and create an enlarged eco system.

However, we feel that the next battle is the fight for end consumer experiences. Technologies such as 4K, augmented reality should drive sales in home and/or online shopping experiences. Technologies to drive loyalty program, cross selling, and product awareness would obviously be very important. While the industries have talked about using big data to more accurately predict consumer needs, we feel that there is still more room to grow.

We also want to mention as a side note that a number of the on line and mobile experiences are now easily done with open source or nearly free cloud based software. Be it an on line store or a POS, there are a number of good choices for new shop owners to choose. But at the both ends of the food chain, they are more tightly controlled. The payment and the cloud technologies are increasingly being dominated by the giants. (Amazon cloud takes roughly 31% of the market; and the next biggest player Microsoft is only 9%. We do not yet have data on the Chinese players.) And, again it seems to be a classic winners take all scenario.


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