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I came across an article yesterday on GigaOm – Dreams of mobile payments lead telco to try banking – notifying us that Rogers, a Canadian mobile carrier, has filed to become a bank.
It makes sense, as we see various iterations of mobile wallets coming into existence, and carriers looking for a new revenue stream. Of course, it’s yet to be seen if ‘ease and convenience’ will be enough of an impetus for consumers to make the switch from the physical medium of paper and plastic to a virtual form that may still seem foreign or less secure.
This does bring me back to a question posed earlier this year about the potential of Facebook becoming a bank. I’m reminded of an interview we conducted for the Future of Facebook Project with JP Rangaswami, the chief scientist at salesforce.com and Venture Partner at Anthemis Group, who said:
“Facebook is the new new telco. It is the natural logical extension of what telcos were. I don’t think of it as anything more than taking the concept of what a telephone company used to be and drive it forward.”
He went on to describe what he meant by that, saying that essentially Facebook had brought the 5 basic components of a telco into a 21st century context. These components were:
1. a population of people you put in a directory
2. ways of reducing search costs by grouping people alphabetically/functionally/regionally/etc
3. a number of ways of communicating between people (1-to-1, groups, audio, mail, text)
4. ways to change details associated with those people, via updates to the raw data of what people are doing
5. scheduling
So now you have a ‘social network’ that operates on the basic model of a telco, with the added functionality of mapping and extracting value from the social graph, and building open APIs across a developer platform to expose the graph to other services.
So where does the potential of becoming a bank come in?
As Rangaswami pointed out, we’re making the move to smart mobile devices, and we have the capacity to link the SIM card with one aspect of authentication. We have Facebook Connect. We have near field communication that enables us to transfer virtual value out into the real world. We have virtual currencies that can be implemented across any number of community contexts – local, regional, by industry, etc. And we’re not just talking about Facebook Credits or digitized money, but any number of complementary currencies used by particular groups to enable more frictionless transactions.
Facebook then also has the potential to draw in the unbanked or the underbanked around the world, where the entire infrastructure of having physical money and a place to store it can be leapfrogged in place of a virtual system and marketplace.
I still haven’t really wrapped my head around the big picture… curious to see how it will unfold and how mobile carriers are going to convince consumers they can be trusted as financial institutions.
What does this mean for banks? Do they get disintermediated?
emergent by design 
Rogers wants to offer a credit card, so they can get their customers in debt and charge high interest rates. ie: tax the user, especially the dumber ones.
If they have any plans to release a mobile payment platform, it’s still a secret and would be most out of character for the backwards telco industry we have in Canada.
Sometimes an application to become a bank, is just an application to become a bigger asshole. 🙂
This is an interesting concept to ponder. What would happen to the banks? Probably the only ones who would care are the rich people that own the banks – and they will do whatever they can to not let it happen. I am not familiar with the Canadian companies you speak about so I am not sure about Scott’s comment above. Anyway, there are still people on the outskirts of technology who thing the internet and technology own and rules us, but I think it is the opposite. The changes come from the demands of the users. We should be careful what we wish for.
This recent study on the hurdles faced by near field communication (NFC, or using RFID chips in phones to do things like make contactless payment) http://www.nfctimes.com/news/mobile-nfc-facing-hurdles-opportunities-say-analysts suggests that
“…Operators have largely given up the idea of taking a cut of merchant-transaction fees for mobile-NFC payment. There are a few markets where telcos still plan to try to earn transaction fee, however.
Most operators are planning to charge rental fees for NFC applications secured on their SIM cards. And some operators have been talking about trying to earn fees from mobile-coupon redemption and through co-branding agreements with banks or other financial institutions.”
So with mobile payments a certainty (in some form or other), it seems Rogers is trying to creatively ensure their cut of future transactions.
Rogers happens to be my carrier, so I’m looking forward to the rollout of whatever they have to offer (whether I decide to use it or not). Canadians are remarkably accepting of digital currencies, having basically abandoned cash in the 90’s (at least around here).
You need to consider the regulatory context. Rogers have to apply for banking licence, even though they have no intention of taking deposits, because there’s no other construct for running payment systems. The European telcos are not apply for banking licences, instead they are applying for Payment Institution (PI) licences.
Why would anyone want to be a bank? (Unless it’s to get some kind of government handout).
what is the function of a bank? and what do the offer that isn’t slowly being replaced by other systems that don’t require that intermediary?
i get that rogers wants to be able to enable payments and perhaps take a small cut of those transactions. at the same time though, there are companies emerging that want to enable peer to peer and merchant payments, and drive the transaction cost to zero. so i wonder how that will play out. it probably will boil down to some combination of convenience, simplicity and trust for the consumer.
Nice piece.. Very possible. Brazil, Kenya, India all using mobile phones to transfer “virtual” and real money from person to person. Its great technology and really saves on time and allows for reaching out to new markets at a fraction of the cost.
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