We Don’t Have A Mobile Payment Problem; We Have A Mobile Shopping Problem

We Don’t Have A Mobile Payment Problem; We Have A Mobile Shopping Problem:

Image courtesy Gopago

Mobile payment systems feel like magic. Wave an smartphone in the air with a wandlike flourish, or tap two of them together like Captain Marvel’s bracelets, and invisible currency changes invisible hands.

Contact-free and tap-and-go payments powered by NFC (near-field communication) give great demo. They’re all the rage at this year’s Mobile World Conference in Barcelona, where Spanish bank La Caixa just rolled out an ambitious city-wide payment system. But even at a Google Wallet-friendly Starbucks, waiting in a ten-minute line only to pull a phone out of our pocket and fumble with it rather than a credit card barely feels like the future.

“Consumers don’t really have a mobile payment problem,” says Jack Stephenson, director of mobile, e-commerce and payments at JP Morgan Chase. “Ninety-five percent of the time, paying with cash and credit cards actually works pretty well. Consumers have a mobile shopping problem. There’s a difference,” he said in an interview with Wired.

Really? Even after all of these apps offering reviews, check-ins, coupons and social discovery for retail? “If you ask the average customer, they don’t care about 50 cents off a cup of coffee,” says Gopago CEO and founder Leo Rocco. “They’d say, ‘I want to skip the line!’”

Gopago is a mobile payment company whose primary focus is making shopping easier by moving both orders and payments from the line to the smartphone — any smartphone. Chase recently invested a substantial-but-unknown sum into Gopago in exchange for Class A stock and a limited-term exclusive partnership.

It’s not the only iron Chase has in the fire. Chase was an early investor in Jack Dorsey’s Square, and along with Barclaycard and Capital One, Chase credit cards will also soon be part of Isis, an NFC-based mobile wallet initiative backed by AT&T, T-Mobile and Verizon. But Rocco and Stephenson’s vision of the problems and possibilities of mobile shopping are clearly in sync.

“There’s a lot of noise in mobile payments,” Rocco told Wired. “The real question is, ‘how do brick and mortar businesseses use mobile smartphones to make commerce work better?’”

The key, Rocco says, is to demonstrate clear value for merchants as well as consumers by building services around the transaction. “Our model is [online restaurant reservation service] OpenTable. They started in 1998, but only took off when they built their network through the restaurants. They were able to tapped into the reservation and table management software. After they gained restaurants’ credibility and helped them modernize, and customers were comfortable using the technology, it all came together… We want to bring that same kind of power to all kinds of storefronts: retailers, cafés and quick-service restaurants, dry cleaners, tailors and salons, as well as any brick-and-mortar store who wants to compete with Amazon.”

Rocco thinks Gopago’s focus on merchants will give them an advantage over better-known players in mobile micropayments. For instance, he says, local merchants are unlikely to trust eBay’s PayPal or Amazon, since over the past fifteen years, both companies were seen as trying to put brick-and-mortar stores out of business. Gopago’s products also don’t require costly investments in hardware with fixed footprints like kiosks or NFC readers; transactions can be managed with an iPad — that Gopago typically provides.

Finally, by partnering with banks rather than credit card companies, Rocco thinks Gopago can save merchants money. “Together, the credit card companies had a monopoly, because they owned the payment network,” he says. “Now that network is the internet.”

Instead of paying a substantial fee on a transaction where they still bear substantial risk, merchants can pay a lower fee with lower risk by effectively transacting directly with the bank; Gopago only makes a percentage, it doesn’t directly handle the payment.

That’s where Jack Stephenson and Chase’s mobile payment system come in. Stephenson is one of the best-known thinkers and architects of money management on the mobile web, from helping pioneer mobile payments at PayPal through developing mobile banking applications for Chase, allowing customers to pay bills or transfer money in their bank accounts on the go.

For Stephenson, mobile shopping, or “M-commerce,” is a new kind of “blurry behavior,” a twice-over hybrid. From Chase’s perspective, it’s somewhere between mobile payments and mobile banking. From a merchant and consumer perspective, it’s somwhere between a digital point-of-sale system and online shopping, whether mobile or not.

But like Rocco, Stephenson thinks the real key to M-commerce is winning over the merchants, not the consumers. The trouble, he says, is that most of the world isn’t like Starbucks — a giant chain that owns all its stores and can convert them all overnight to a single POS. This holds back widespread adoption if (and only if) we’re looking for a one-size-fits-all solution.

“We have such a diverse set of merchants,” says Stephenson. “It’s almost impossible to find a point-of-sale system that works equally well for a supermarket, a car rental shop and a jeweler. And multiple POSes at scale is really hard to do… There are no national or industrial standards, and we can’t necessarily wait for big technological changes like NFC.”

This is why Gopago’s app-driven approach, which requires minimal changes to a merchant’s existing technological setup, is one of the easiest to get to scale immediately, especially for small, independent merchants.

It also allows the company to go beyond simple transactions, to build services that connect merchants with their customers. “When I as a merchant get more information about and can communicate directly with my customer,” Stephenson says, “then it’s not just that I know when Jack walks in to my store, that Jack likes XYZ… If things are slow at my store or restaurant, I can email Jack and offer him a deal to come in.

“All this,” Stephenson says, “adds value around the transaction.” Rocco adds that most of Gopago’s current customers like these added services so much that they automate them; if condition X, then message/offer Y to customer group Z.

The fundamental currency, though, for both merchant and customer, is time. M-commerce saves both the customer and the merchant time. The dynamic systems that a company like Gopago can build around the data better allocates time.

Finally, I don’t think you can overestimate the value that Chase provides because it is a bank. We live at a time when it’s fashionable to demonize banks and valorize technology companies. Still, the fact remains that given most people’s valid concerns about the privacy and security of their information, as a bank, Chase is regulated in what it can and can’t do with your data in a way that Google or Facebook or Apple or Amazon fundamentally are not.

And banks are brick-and-mortar institutions with ties to other brick-and-mortar institutions. “A community bank is a business’s lifeline,” Rocco says. “There’s no better way to get introduced to trusted merchants than to align yourself with a trusted bank.”

Over the next 12 to 18 months, Gopago is working with 5000 Chase branches. Chase is also piloting its mobile payment programs, starting with San Francisco in April, then Dallas a little bit later, before building out the system at scale. Over that time, Gopago will try to win over those small (and large) merchants one by one.

Does this mean that a company like Gopago can beat Google, Square, PayPal or Amazon? Not necessarily. But the infusion of cash from Chase means that it can build its infrastructure and compete with its bigger rivals for talent. Rocco’s already hired away Navneet Singh, former Lead Product Manager for Google+ and Senior Engineering Manager at Oracle, to be the company’s chief product officer; he also says he’s hired two top vested engineers away from Facebook, who are ready to start something new.

“The talent pool for people who really understand mobile payments is slim,” Rocco says. “We can really compensate these guys.” Turns out there’s real money in this business after all.