Bustle Bit Business

Who wants $29B a year?

The ubiquity of cell phones has not gone unnoticed by anybody, even the stodgy old banker down at your local branch (though he merely finds his daughter’s monthly texting charges aggravating).  Even the most primitive of modern cell phones is a small computer with wireless data capabilities.  With cell phone penetration nearing 80% in the United States, and emerging nations adopting cellular as their first telecommunications infrastructure, soon a cell phone will be owned and operated by every homo sapiens and a few lower order mammals as well (cats will not deign to dial themselves … that’s what they keep humans for).

nfcThus, folks who earn a dime from financing a dollar are interested in using any technology to speed payments.  In our fast paced modern world, waiting behind someone using an ATM card at Starbucks seems like an incredible waste of time.  Hence the rapid move by nearly everyone to engineer Near Field Communication (NFC) payment systems.  The credit card companies want to, because they know NFC will eat away at their earnings ($39B between American Express, MasterCard and Visa alone last year).  Apple, Google and Nokia want a slice of that too, though instead of the industry standard 2.16%, Apple will likely demand 30% of each transaction.

The math is compelling.

A little more than half of the world’s nearly seven billion people live in industrialized areas, and most have cell phones or are too old/young to enjoy being annoyed at every hour of the day and night.  Shortly, 80% of these 3.4 billion industrialized people will have a handset, just like the U.S.  Assuming that the average Joe, Jane or Jinjing makes a mere three small transactions each day, and that a single penny was collected for financially facilitating (and expediting) those transactions, there is about $29B to be made by implementing cell phone based payment systems.  Much more money is at stake when we get realistic about the number and size of each transaction and the service fee collected for them

That’s not chump change, not even to Eric Schmidt.

Hence every handset and mobile OS maker is racing to engineer, certify and deploy NFC, which allows a payment to be made simply by putting a cell phone near a cash register and authorizing the transaction.  No card to swipe, no PIN to enter, no slip to sign, no change to be given back.  It is a win-win for everyone involved, which is why each technology and financial business wants first-mover advantage in order to keep everyone else from succeeding.

Which is why Android, again, is an interesting marketing lesson.

Unlike Apple (where the OS, hardware and overlording is supplied by one vendor) or Nokia (where the dismal duo of them and Microsoft are way behind), Android is growing virus-like by design.  Google wanted fast, wide and deep Android penetration (fast as in “roll out a new cell phone design tomorrow”, wide as in “every vendor in every country” and deep as in “every possible cell phone price point”).  This is why a mobile OS that was unknown two years ago is now out-shipping all others.  Hence, Google is best positioned to leverage mass adoption of an operating system (on which they make no money) for services, including payment services.

An oft repeated marketing lesson at Marketing Memos is that ubiquity brings tangent rewards.  Google could have cloned the Microsoft model and charged per-instance licenses for Android, and it would have been as popular as toe fungus.  Instead, Google worked long, hard and gave away Android in order to make money later, in advertising, in impulse sales and in NFC enabled payments.

Technology exists to achieve something.  The computer, OS and word process I use was purchased in order to communicate to you.  Android was developed and disseminated in order to earn $29B later.


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