Which mobile payment model and technology will prevail? The debate rages on with no end in sight. Empower your customers to do it any way they choose, and respond flexibly to emerging consumer demands without engaging in guesswork or waiting for the dust to settle. This series explores the new normal and how you can maintain and gain wallet share by empowering your customers through the mobile payments revolution.

Take an Open Approach to Mobile Payments: 3 Lessons from the Past

Over the past two decades, the internet has shown us that consumer taste is more varied than we ever imagined.  In a world of endless options, today’s consumers want and expect choices beyond what they purchase. How they shop and consume entertainment, where they access information, and who they entrust with their data is all a matter of preference.  For this reason, winning the mobile wallet war won’t be done by controlling and guarding your wallet’s ecosystem, but by putting consumer choice ahead of protectionism.

In the 1990s and early 2000s, companies employed a variety of measures to protect old business models from emerging internet trends. Walled gardens emerged as an ill-fated way to protect revenue. Today’s walled gardens take a new shape designed to tightly control the customer experience and lock customers into a predetermined set of products, services and content. This has worked for companies like Apple who have managed to provide an outstanding experience in the entertainment sphere. But when it comes to their money, consumers might not be so willing to relinquish control.

There are a few lessons to be learned from the early days of the internet, when 56k dial-up was blazing, up-to-the-minute news was still a novelty and Giga Pets were all the rage.  Check out these 3 examples of defensive blunders – and be sure not to take a page out of their playbooks:

1. America On Line

At the height of its popularity in 2002, AOL had over 35 million subscribers paying for not only dial-up internet access, but also access to email, instant messaging, security software and other services.  As similar services became available from competing companies at no charge, AOL followed suit in 2006, offering these services for free to anyone with a broadband connection.

Consumers met the change with a ‘too little, too late’ attitude.  AOL was unsuccessful at transitioning its remaining dial-up subscribers to broadband.  As of June 2012, the company had just 3.3 million subscribers, 3 million of whom are still dialup subscribers, an industry in obvious permanent decline.

Financial institutions resistant to offer online banking experienced a similar plight.  Online banking was an experiment in the ‘80s and an alternative in the ‘90s.  Today, financial institutions without an online channel can’t compete, and those that dragged their feet in the early days lost customers as a result.  Merchants that don’t get mobile payment-ready now could face the same fate.

2. The New York Times

In 2005, The New York Times experimented with a service called TimesSelect that blocked content from users who didn’t pay the $49.95 annual or $7.95 monthly subscription fee.  The service granted access to the work of its columnists and to the newspaper’s archives.   Two years to the day after TimesSelect’s genesis, the service ended when the newspaper found their projections for paid subscriber growth were low compared to the growth of online advertising.

More readers were coming to the site from search engines and links on other sites than directly to NYTimes.com. These indirect readers represented an opportunity for more page views and increased advertising revenue.  In addition to opening the entire site to all readers, The Times also opened access to its archives from 1851 to 1922 and 1987 onward.

Likewise, keeping mobile wallet programs open to a range of participants may offer indirect business opportunities to bolster customer engagement.  In addition, deploying open-access contactless technology at the point of sale can help merchants stay ahead of the curve and better anticipate consumer demand.

3. The Music Industry

For decades, the music industry was able to charge high prices – and maintain high profits – for every disc sold.  As file sharing started impacting the industry, its leaders didn’t recognize the internet’s value as a new, efficient way to distribute music, and failed to invest in and develop new technologies.  Rather, the industry attacked Napster and other file sharing sites for copyright infringement.  It took the innovations of technology companies providing legal means of downloading music to open the industry’s eyes to a now obvious fact: consumers would buy music online if it were easy to do so.

The music industry made a critical mistake by protecting ‘business as usual’.  Adhering to old methodologies can prevent businesses from getting leaner, smarter, faster, and competitive in the new, choice-driven economy. Capitalizing on new technologies early will help prepare companies to keep pace with emerging industry standards.

Walled gardens don't work. In order to see wide adoption, mobile wallets must present clear value – and that value lies in the ability to put choice at consumers’ fingertips.  With the flexibility to support a variety of products, the mobile wallet becomes a platform on which consumers can add app-like modules for their favorite merchants, banks, credit accounts and more.  Support for various transaction-facilitating technologies, such as NFC, SMS, cloud and QR codes broadens the appeal – and the likelihood of wide adoption.

Even with broad adoption of mobile payments, cards will remain the quintessential credential for years to come. Visit Datacard Edge next week when we’ll talk about combining plastic cards and mobile payments for the ultimate customer experience.

How have protectionist measures impacted your experience as a consumer? Tell us about it with a comment!

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