Cell Phones evolving into Credit Cards

It is a well commented phenomenom, that time passes swiftly in the high tech world. If you look back only a few decades to the introduction of fax machines and portable cassette players, then consider the introduction of cell phones, email and MP3 devices, you quickly realize that it doesn't take very long for new shiny, cool gadgets to evolve into mainstream tools we can't live without.

With this in mind I've been pondering one of the next moves on the horizon -  our cell phones becoming our credit cards!  We're not quite at this point yet, but as time passes we are doing a lot of purchasing from our cell phones. Today we're buying ringtones and screensavers, and paying for parking and small ticket items such as vending machine purchases.  But going beyond micropayments, which have been around for some time, I can see a world where we will be using our cell phones to purchase things we'd normally take our credit cards out for.

The new generation service delivery vision of service providers is to expose their key capabilities such as Billing, Location and Authentication capabilities, to be used by third parties delivering services to the end users. If that happens as predicted, then users will not only be buying music downloads on their phones, but quite possibly buying the MP3 player also.

Consider this scenario:  You're watching a movie being streamed over IPTV by your communcations service provider. The characters in the movie are eating a pizza. A red button pops up on your screen, allowing you to click and order your own pizza. The order goes off to the pizza place, and because they have integrated with the communications companies location system, they know where to deliver the pizza.  But they'll also have integrated their systems with the communications companies billing and authentication systems, so so they know what kind of credit risk you are, and the cost of the pizza goes on the phone bill.  Your communications company gets a slice of the transaction-pardon the pun!-and the rest goes to the pizza restaurant, essentially making them a brand new type of communications content provider!

This could be a very attractive option for third party product and service providers as it removes the burden from them of discovering the purchaser's location, authenticating the purchasers ability to pay and the complex process of billing and collecting payment from the purchaser.  Credit card companies provide some of this capability but have no concept of the current location of the purchaser. 

Of course once this business model takes off, the implications become quite interesting. If all these charges are being driven onto a monthly phone bill, or a pre-payment card, then this bill may go from $100 a month to $500 a month because you'd just shifted a huge chunk of your purchases, which normally would have gone on your credit card, to your phone.  This starts us down the road of telecom companies looking very much like Visa, MasterCard or American Express. They would be providing some sort of debit and/or credit services. 

The other implication of this blurring of the lines between communications and finance is that communication companies are going to have to dramatically change the way they measure their success. When you have pizzas and other things showing up on your phone bill, not only will the bill skyrocket, but the fundamental payment model also changes.  At the moment, they are focused on average revenue per user (ARPU), however if  monthly revenue is going from $100 to $500 a month, how do you know that represents the sort of success you are seeking.

This is still years away, but the result of such a shift will either be competition or cooperation between communcations and finance. We may see the credit card companies acknowledging that there are some things the communications companies do better than them and some things they do better than the communications industry. In turn this can lead to joint ventures and mergers and acquisitions. And who knows, we may even have the CEO of one of the big credit card companies keynoting at one of our Management World events in 3 years.  That might sound fanciful, but consider that just a few months ago we had the CTO of Paramount Pictures delivering a keynote address at Management World 2008. That might have been a leap to think about just a couple of years ago!

As with any new technology, once the idea sinks in, the business models are in place and customers embrace it, there's no telling how far it can go.