MASTERCARD SAYS MOBILE IS THE BIG PLAY Ed McLaughlin, Chief Emerging Payments Officer at Mastercard, describes MasterPass as his company’s “Big Play” for the next generation of payment technology. Worldwide purchase volume over mobile devices will exceed $1 trillion by 2017, according to IDC Financial Insights. Mobile is set to become the “next big thing” in payments but the solutions need to be led by customers not technology. The current mobile payment market is fragmented between multiple providers (the Big 4 being Paypal, Google, Mastercard and Square).

1. MVENTUR MEMO Q1 2013: PAYMENTS
MOBILE PAYMENTS WILL BE WON AND LOST AT THE RETAIL
FRONTLINE
by Graham Brown, MVentur
MASTERCARD SAYS MOBILE IS THE BIG PLAY
Ed McLaughlin, Chief Emerging Payments Officer at Mastercard,
describes MasterPass as his company’s “Big Play” for the next
generation of payment technology.
Worldwide purchase volume over mobile devices will exceed $1 trillion
by 2017, according to IDC Financial Insights. Mobile is set to become
the “next big thing” in payments but the solutions need to be led by
customers not technology.
The current mobile payment market is fragmented between multiple
providers (the Big 4 being Paypal, Google, Mastercard and Square).

2. Providers need to focus less on impressing their technology on the
market and more on winning the decisive youth market.
Why Youth?
1) Build on the Youth Beachhead
Young people are already using mobile payments more than others:
39% of millennials use mobile payment services compared to 31% (Gen
X) and 18% (boomers) (source Deloitte).
2) Leverage Youth Influence
William Gibson, the author who first coined the term “cyberspace” once
wrote, “the future is already out there, it’s just not evenly distributed”.
This maxim holds true with technology and the youth market today. The
trickle-up of usage starting with youth is a common trait of technology
adoption (examples being Facebook, SMS and digital music). If you
want to know how adults will be paying for goods tomorrow, look at what
youth are doing today.
Youth influence in mobile payments is a 3 way process
* Youth influence each other: 65% of youth bought or used technology
based on what their peers, not what ad agencies or brands said.
* Youth influence adults: youth were key to the wider adoption of SMS,
Facebook and BBM within the adult market. Often older children would
educate their parents on usage.
* Youth grow up: Loyalty to payment methods and technologies begins
at a young age. The habits formed in early teenage years transfer into
adulthood.
3) Youth absorb the risk of new product development
Internet author Clay Shirky described the wealth of excess innovation in
the internet as its “cognitive surplus”. The success of many technologies
owes a lot to the cognitive surplus of the youth market.
Before mobile operators began monetizing SMS (a technology widely
disregarded by the industry due to its limited form factor) youth were
experimenting and adapting the format. From these early usage
scenarios, the industry was able to develop effective charging models.
More recently, youth have led the mobile video chat trend. Our research
shows that young people discovered video chat apps like Oovoo which

3. then gained popularity through word of mouth. Mobile providers can
leverage this established user base without engaging in high-risk
experimentation and product launches with the higher spending adult
market.
RESEARCH: IDENTIFY NEED GAPS
People want to pay for their purchase, not pay with mobile.
The telecoms and payment industry advocates a “push” approach - new
technology followed by user education. However, Industry jargon, like
NFC, QR codes and digital wallets means little to people who pay for
items they purchase everyday. New technology provides people with
more payment options but does not necessarily address their underlying
issues or motivations. Mobile payments, especially in mature markets,
has yet to figure out what consumer problem it is trying to solve.
“The NFC payments debate will slowly die in 2013. Is tapping a phone
on a terminal any easier than swiping a credit card? I don't think so – it's
not solving a real consumer problem and it's not providing additional
value to encourage me (or anyone else for that matter) to change my
behavior," Paypal's President David Marcus wrote on the company
website in December.
Successful mobile payments systems like M-Pesa were first built on
solid ethnographic insights. In Uganda, Nokia found young migrants
were disenfranchised from the financial system because they were
excluded from traditional payment mechanisms (e.g. bank accounts).
Migrants began using mobile airtime to transfer money back to their
families long before the industry pushed a solution onto the market.
Ethnography helps providers identify where innovation opportunities
exist by revealing the market “pull”.
In developed markets, existing research is based on the old paradigms
of retail experience. But retail is changing fast and ethnographic
research will help identify the second market “pull”.
"There will be more change in how consumers shop and pay in the next
three years than there has been in the last 20," Ebay CEO Donahoe
said. "Mobile is at the very center of that."
Research needs to go beyond the traditional approach of polling youth
preferences for technologies and start understanding the motivations
behind usage. Consumer ethnography of young smartphone owners in

4. the US and Western Europe will reveal pain points and need gaps.
Building on these insights, payment providers like Mastercard and
PayPal can innovate with young customers to address the “pull” of
current market shortfalls.
MARKETING: LEVERAGE FRONTLINE TO BUILD TRUST IN MOBILE
PAYMENTS
Mobile payment providers need to drive numbers at the Frontline.
Data on global payment usage in the Mobile Youth Report shows youth
tend to use whatever payment technology is most widely available, as
opposed to the best solution. Youth pick mobile payment methods they
can access. In Kenya youth prefer using SMS (73%) to make payments
while PayPal is the dominant tool in Germany (53%) (source Mobile
Youth report 2013). The key to success is getting large numbers of
youth on board.
Trust is a major stumbling block that prevents more customers from
adopting mobile payments. Trust is not something that can be bought
through expensive media buys and high-profile celebrity endorsement,
it’s earned through customer interaction at the Frontline.
Starbucks demonstrates the importance of Frontline engagement in
mobile payment adoption. As with Apple, the brand experience and
customer trust occurs at the daily touchpoint, not in advertising
collateral. Just as Apple’s Genius crew are key to driving in-store sales,
the relationship between young customer and barista is key to the
success of new payment systems.
Starbucks leverages its existing customer Frontline to facilitate the
adoption of mobile payments. 7 million customers use their mobile
payment apps, translating into 2.1 million mobile payment transactions
each week. 20 percent of card transactions at Starbucks locations were
conducted using the mobile app (source Starbucks).
Where mobile payment providers are working to push technology,
Starbucks is focused on improving the retail experience. The payment
technology isn’t the end, but a means to facilitate that end. Mobile
payment providers need to develop a better understanding of the retail
experience at the Frontline and look at how they can integrate offerings
with existing loyalty programs and employees.

5. Providers need to focus on integrating and building on technology youth
already have access rather than providing new solutions they have to
learn from scratch.

6. About MVentur
MVentur is the world’s first youth mobile consultancy.
We have 2 roles:
1) Advisor to our clients
We oversee marketing plans, act on advisory panels and consult our
clients. Find out more about our consultancy work.
2) Commercial think tank for the mobile industry
We promote progressive marketing ideas that help mobile companies go
beyond advertising. Read more about our youth mobile opinion pieces.
www.MVentur.com