The innovation of mobile payments is certainly consumer-centric, driven by the input and desires of everyday people. The Mobile Payment industry has significantly evolved over its lifetime, although that period spans just nearly over 20 years. Mobile Payment diffusion into society has proven to be slow and thorough from a macro-lens, yet fast-paced through a micro-lens. Due to mobile payments’ need for a network effect, a social construct is evident. Additionally, mobile payment platforms act as a system, requiring merchants, consumers, and strong infrastructure. Lastly, the transfer of technology pertaining to mobile payments has been obvious throughout the adoption. In my paper, I will explore how the consumer-centric force within mobile payments and innovation is stronger than figuring out how to transfer money into the pockets of producers.
Given the brief history up for analysis in the mobile payment industry, Bill Maurer, Robert Kauffman, and Tomi Dahlberg are primarily able to broadly focus on the innovative process and its specific implications on mobile payment diffusion. Partially because this is a fairly new technology and partially due to the fact that the long-term effects cannot be studied historically in an effective way, we see economists, anthropologists, and sociologists’ input rather than pure historians. As a result of this, the process of innovation will be a fruitful topic in my paper that will both build off of principles outlined in the reviews by Maurer, Kauffman, and Dahlberg as well as arguing against certain beliefs outlined.
Strictly as an innovation, Maurer pinpoints that mobile payment platforms are being created on top of base communication platforms, allowing for growth starting a step ahead. Beginning with core infrastructure, we can compare the US and Japan. Japan’s strong mobile telecommunication lends itself to leverage mobile communications as the means to create payment platforms. The US, however, has a stronger grasp on fixed-line internet and will likely build upward stemming from the web. Looking through history, the first notable mobile payment platform in the US, PayPal (founded in 1998), attempted to provide secure financial transactions on individual devices. They stand as a pure example of web-based software — proving that the US is best equipped for web-based services. Publishing his analysis in 2011, Maurer witnessed PayPal’s acquisition by eBay, further magnifying cohesive working as a system, structured with eBay as the base platform for PayPal. Additionally, looking at PayPal’s initial mission, we can boil everything down to the end-user. This exemplifies how consumers innately choose the direction a technology proceeds.
As Kauffman dove into “the major forces that drive the evolution of technology-based innovations” (Kauffman 373), it was clear that there was a need to evaluate the critical role of society historically. In 1921, when the ‘charge card’ was introduced, it signified the beginning of innovation within our financial transactions (enabling rewards while making purchases). Eventually, this evolved into the BankAmericard in the 1950s (paying bills on credit with minimal downside), online banking in the late ’90s (ease of access/efficiency), and today the societal need for mobile payment platforms such as PayPal (quick, secure, lack of physical card/cash). The societal drivers of innovation have been obvious by the needs of the consumers in this certain industry. Maurer identified trending consumer-driven growth in developing nations. In Kenya, a third-world country, “over 13 million people…send money to friends cheaply and securely over mobile phones” (Maurer 1). In 2007, when this technology was introduced, it enabled better financial instruments, decreased theft, and better microloan rates (OSAC). This same concept applies to the Philippines (GCash is used by over 2 million to securely send money to family members on remote islands), India (Eko is used to transfer funds), and other countries around the world. It is clear that “mobile money appears to be an example of melding private interest and the greater good” (Maurer 590). As evident throughout financial history, Maurer and Kauffman’s arguments validate the societal input at play in mobile payment evolution.
To more intrinsically understand the relationship between consumers and producers in the innovative process, we can examine the Porter Model. The Porter Model identifies mobile payments as the combination of all technologies that enable consumers to pursue online transactions and for producers to handle the back-end of those transactions (Dahlberg 166). Due to the payment chain in the Porter Model starting with a merchant provider and ending with the end-user, it may seem as though the producer is the most important, but the entire chain builds up to the consumer, proving to be the true core. The Porter Model identifies the importance of a network effect and that “the success of a mobile payment solution depends on the number of participants and the volume of transaction” (Dahlberg 8). Venmo, a quasi-social take on mobile payments (founded in 2009), perfectly exemplifies this network effect. Aside from the trends that millennials are carrying less cash over time and their recognition of customer desires, Venmo has employed the idea of a network effect to guide its success. Venmo has become so ubiquitous that “users themselves often do much of the customer acquisition…among many social groups, not having Venmo can become a real inconvenience” (HBS). Maurer analyzes this concept by positioning himself with the stance that while the network effect is driven by consumers, the gap between consumers and producers is non-existent (Maurer 591). In reality, I believe that the ideation of mobile payment platforms and the primary utilizers demonstrate that consumers are always the prominent party, not that there is no gap. It is evident that with less input, the rate of failure will increase due to the fact that consumers inevitably have the final say as to whether or not they utilize these services.
Historically, many are firm believers that technological evolution is a process by which there are more technical factors at play than anything else (Kauffman). While technological advancements certainly play a role in innovation, there is a cyclical nature to which key parties interact. Kauffman argues that “technological progress has been suggested as a primary factor that drives societal evolution (Morgan 1877, White 1949), and not just the evolution of narrower technology ecosystems” (Kauffman 374). It is clear that if there had been no mobile device adoption, mobile payments would cease to exist, however, I firmly believe that a cycle is at play. While technological progress drives societal evolution, it is the needs and desires of society that actually determine the technological progression. Technology acts as a system in this sense, and these two processes occur in tandem, building off of one another.
It is clear throughout the history of mobile payments and the overall process of innovation that the end-users play the most crucial role in the process of both creation and execution. To Kauffman, “technology innovation that happens at any level can affect the subsequent innovations across the other levels” (Kauffman 377). The beauty of this idea is that the ripple effect and the history of past technological innovations (all stepping-stones to efficiently changing the way humans interact with technology) play a massive role in the adoption of technology such as mobile banking. The ripple effect of seeing a company like PayPal be founded in the US plays an important role in highlighting how that influenced the creation of a platform like MPESA which definitively improves the lives of those in Kenya. In conclusion, the history of mobile payments is still being written, however, it is abundantly clear that the benefits of these platforms are both driven and directed by and at all of society.
Sources:
Dahlberg, Tomi. “Mobile Payment Market and Research — Past, Present and Future.” ResearchGate, Creative Commons Attribution, 2006
Rampton, John. “The Evolution of the Mobile Payment.” TechCrunch, TechCrunch, 17 June 2016
Past, present, and future of mobile payments research: A literature review (Dahlberg, Mallat, Ondrus, Zmijewska, February 4, 2007)
Barry, Andrea. “How Kenya Created the World’s Most Successful Mobile-Payments Service.” Technology and Operations Management, HBS, 10 Dec. 2015
“Kenya 2020 Crime & Safety Report.” OSAC
“Venmo: Rapidly Replacing Cash in the Pockets of Millenials.” Digital Innovation and Transformation, HBS, 2015
Competition, Cooperation, and Regulation: Understanding the evolution of the Mobile Payments Technology Ecosystem (Liu, Kauffman, Ma, March 2015)