Watch Your Back Visa, Vodafone Is After Your Lunch.

Just an article I posted on my website in July 2001, looking at the potential of mobile phone companies to become the future Visas of the world. I put my money (or rather my career) where my mouth is, and became, among other things, head of m-commerce for Maxis Communications, Malaysia's leading mobile telco.


Question 1: What first started out in 1950, has a direct billing relationship with its customers, and now 50 years later found itself in the pockets of 1.6 billion customers?Answer: Credit card

Question 2: What first started around 1990, has a direct billing relationship with its customers, and now finds itself in the pockets of almost 500 million customers, but only 10 years later?Answer: Mobile phone

That's right. Diners Club, Visa and Mastercard and their bank associates took 50 years to create 1.6 billion billing relationships. But mobile phone companies have created almost a third of this number of billing relationships in a fifth of the time. So why the alarm bells for the Amex's of the world? After all, mobile phones are mobile phones and credit cards are credit cards right?

Well, for now, yes. Mobile phone companies have been focusing on providing voice services to their customers, and credit card companies have been providing credit and payment services to theirs. But all this will change soon.The key to this is that, in both instances, the service providers have a direct billing relationship with their customers. And through this billing relationship, mobile phone companies will increasingly encroach on the payment gateway function of their erstwhile credit card brothers.

Credit cards and mobile phones are already sharing the same technology for storing information. Look at leading smart card manufacturers like Gemplus and you will find that credit card and the mobile phone markets are the two most popular applications of smart card technology.

The battle looks quite one way, after all, as a dated Nokia ad pointed out, there is a greater possibility of a mobile phone, armed with smart card technology, to include payment functions. Less likely is the scenario of a credit card having a telephone function.

Other factors are also in favour of mobile phone companies. As NTT Docomo has illustrated, the arrival of mobile Internet has created new revenue streams for mobile phone companies. No, not in terms of access charges from greater airtime, but through revenue sharing arrangements with Internet content providers.

Example. Japanese surfers wanting information on sea wave levels on Tokyo beaches subscribe to a content service delivered through mobile Internet for Y100 a month. This gets deducted from the subscriber's mobile phone bill. Y50 of that goes to the content provider, the other Y50 goes to NTT Docomo. A win-win situation: The content provider can focus on his core business of providing content, NTT Docomo provides all the billing infrastructure.

And as smart card technology in mobile phones becomes ubiquitous, look forward to mobile phones being used as magic payment wands, waving through purchases at supermarket checkouts, vending machines and train stations (hey, Mobil is already issuing its own magic wands for "wave and drive" petrol purchases).

The prize? Visa recently release data indicating it is approaching the $2 trillion level in overall sales volume. A mere 2% charge on all these transactions is a big, big market.

So does the future of payment gateways belong to the global mobile phone firms like the Vodaphones and Hutchisons of the world? Very likely. These guys already know how to use roaming technology to bill customers in their home countries. Once they've figured out how to persuade merchants around the world to adopt smart card reading technology and brought one or two financial risk managers on their payroll, they will be ready to sit down for lunch.

Visa's lunch.