In my work on eCommerce, several times I had dreamed up having cashless transactions enabled at lower costs. The dream is coming alive.
I am excited to read about the cashless systems in China – NYTimes: … cash is rapidly becoming obsolete. In India, applications like Bharat Interface for Money (BHIM), PayTM, etc., are set to transform the country in new ways. With China and India going cashless there is a tremendous revolution in the making. Not to mention there are bitcoins and related cyber currencies in the making too.
Cashless transactions mean many different things to different people.
Ever since our hunter gatherers moved out to live in a civilized world, there was a quest for medium of transaction. Starting then and even now there are barter trading systems; some are inefficient and very local. In contrast the paper currency (or coin currency) was a revolution that transformed societies and created more organized civilizations (not to mention more wars). Now in the 21st century we are close to witness another revolution – the cashless society.
About twelve years back, in 2005, I visited Japan for the first time. I was impressed with the suica card that was very prevalent for metro transportation around Tokyo. The convenience stores at the train stations also accepted the card which made local travel very convenient. I made it a point to visit the electronic neighborhood at Akhihabara in Tokyo. And I was impressed with the 100s of phones (most of these were feature phones and NTT / DoCoMo specific phones). Still several phones were equipped with facility to use the suica card natively from the phone. Japan was living the dream of cashless society on the move. In that same trip I visited China, Hong Kong, and India.
Coming back to my US team (then at Microsoft), we started an incubation project to explore what it takes to build a simple wallet system to enable the currency transaction. There were several challenges – business, technology, and investment resources. From a business perspective Microsoft was in the license software business which meant there was no easy path to create and sell intensely transaction oriented systems. On technology front creating worldwide systems (now called the cloud) was still a massive challenge. Not to mention there was no iPhone and hence the smart phone revolution had not arrived yet. Finally from an investment resource perspective, my team was to focus on enabling internal businesses to sell to consumers (MSN, Xbox Live, Office Live, etc.) and we were just starting on enterprise subscriptions (what became Office 365, Dynamics Live, Ads, etc.). We made a very minor dent in exploring but never got past that. Neither did I realize that I can step out of Microsoft and do something on my own. Lesson learned.
In 2010, Microsoft was deeply hurting in the mobile business. iPhone just completed its 3rd birthday. Android was in its toddler years and starting to grow massively. AWS was in 4th year. Technology landscape had evolved to easily enable mobile and cloud offerings to be built. I wrote an internal memo “Towards leadership in Mobile through Mobile Payments” and secured a tiny investment to restart a wallet initiative. My pitch was simple: Microsoft and the phone leadership team has to do something dramatic to enter the market (besides baseline phone software quality and user experience). Mobile Payments can provide such an entry. The Vice President in-charge of Mobile division agreed, and I was off running a small team building NFC-based wallet and trials inside the company. Yes, there were lots of challenges related to user experience, security, scale, etc. We had plans to tackle these one after another.
Three things showed up in that journey making it harder to move forward well. NFC technology was not particularly ready and cost of distribution of NFC readers was likely higher. Social acceptance in the US market was expected to be hard – because the incentives were misaligned with the interests of banks and credit card companies, who have a lot at stake. Third there was a long term commitment and investment required inside Microsoft which was hard to come by because priorities were not well aligned. As a result, after a year of the developing the software and internal limited trials, we shut down the wallet initiative yet again. Again, I was wedded to operate within Microsoft and did not look outside. Lesson learned.
Externally there were a few things happening around the world. Advancement in smartphones and growth of in-game transactions meant Tencent in China has grown their business in pre-paid card and in-game mobile purchases, preparing them for a cashless transaction world. Early stage investments were pouring into India and entrepreneurs were tackling tough problems in an independent startup situation. I advocated for trying the mobile payments outside US market, however Microsoft’s internal software priority was to sell in USA first. Net-net, we have to be opportunistic about markets instead of expecting a big ocean liner like Microsoft to shift.
And in 2014, Apple introduced Apple Pay, a simple payment mechanism from the phone that also leveraged the touch ID. Apple Pay has been convenient for iOS users. Various payment options have become available in Android phones as well. We are still using the local currencies and one has to convert when we go into other countries. However transactions have become simpler.
I keenly follow the trends in Mobile payments market. I am eager and excited about the changes happening towards cashless payments. Need has been high in markets like China and India to reduce the wads of cash carried around. Also favorable regulation and lower penetration of credit cards also helped as lot. Finally simplicity in experiences, like printed QR code on paper to boot strap a merchant’s acceptance of payments, have been useful too.
We will witness continued transformation of payments systems. One of my mentors told me in 2005, changing payments can take two decades. I was unwilling to accept. Now thinking back, I agree with him. The changes are well underway and are likely accelerating. Still it will be 2030s by the time the payment transformation reaches almost full penetration. Exciting times are ahead of us.
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