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The day I left my wallet

It was supposed to be the perfect father/daughter day. Beautiful California sunshine, school holidays, and we were headed for Waterworld. After an hour drive, just as we pull into the parking lot to pay for parking, I realized I forgot to bring my wallet. Unfortunately not the first time I’ve done this, and normally a very frustrating experience causing me to be angry at myself – but luckily I’m a payments/tech geek and figured ‘Hey, I have Samsung Pay. No worries’. There was no way I was driving back, so to make this a good day, Samsung Pay would just simply have to do.

I had my doubts of course. I’ve had experiences where Samsung Pay flat out did not work, and I’ve had plenty of uncomfortable experiences with people behind me when I’ve been fumbling with the finger print reader, feeling the increasing annoyed expressions in my surroundings. But my day with only Samsung Pay gave me a good insight into the state of mobile wallets in general.

1. Design matters

Samsung Pay does really work most places (well, the machine at Waterworld that collects payments for lockers has a magnetic stripe inside the machine, so no, that did not work and I had to use the car as a locker which was inconvenient but ended up saving me $12, so….), but there are inherent flaws in the Samsung Galaxy S6 implementation. First, the finger print reader is less than stellar, and it may take several attempts for it to work. Second, it takes what seems like forever to retry a finger print read. In reality probably only 3-5 seconds, but there is no reason it should not be instant to retry.  This IS a problem, as delays lead to uncomfortable feelings about causing them, and that will kill adoption. The S8 has the fingerprint reader on the back side of the phone, which also has led to frustrations among users.

In comparison, I have used Apple Pay a lot, and the finger print reading nearly always works at the first try, and retry can be done in less than a second. I.e. my level of comfort is significantly higher. This matters.

2. Infrastructure needs to support the experience

I am glad I had my Samsung phone as I know at least it theoretically works everywhere. While Apple Pay does work nearly flawlessly – and is starting to be more convenient than pulling out my card – the lack of acceptance means simply I would never leave my house with just my iPhone.

But the mobile payment infrastructure flaws came blatantly obvious when I tried to pay for food at Waterworld. For some reason, the cash register is completely behind a wooden panel. So, in this case, I had to actually hand the phone to the cashier, whereupon I started hearing “That doesn’t work here”, and I reply “Yes, it does. This is not Apple Pay”. After back and forth 3 times, followed by 2 attempts by the cashier who held it too far from the magnetic reader, I went demonstratively behind the panel and held my phone to the reader, causing her face to be red of embarrassment – or possibly anger (and possibly slightly impressed that it did work).

My second attempt was much better when at another concession stand I was buying a slurpie for my daughter (No, not me. Seriously. Don’t touch the stuff. Except maybe a sip). The register was right there, and I got the beep within half a second of holding the phone up, bringing a huge surprised look and a smile to the cashier. I could not help myself and said “Hey, it’s a kind of magic”. Que Freddy Mercury.

The lesson though is that while the phone may work on most readers, unless the reader is close enough for you to reach over and do it, given a general lack of awareness of Samsung Pay, the act of paying is likely to be a painful affair where you either feel you are reaching over inappropriately or you end up in a semi-argument with a cashier that it really, really does work, you just held it wrong. Only the hard core nerdy payment geeks like me will endure such an experience for a second attempt, which means adoption of this may be a while out (possibly to a point where NFC or other more seamless methods are ubiquitous).

3. It needs to better than the present experience

For consumer behavior to change, you need a huge improvement over the existing experience. Taking my card out takes seconds, and generally works flawlessly. Ask yourself – will you feel good about leaving the house and only bringing your phone to pay? Most likely not. And this means mass adoption is not going to be there for some time. When paying with your phone means a) it works everywhere, b) it’s fast and without technical glitches, c) you get a better experience than paying with your card (like not having to sign, which helps for US which does not have chip/pin, AND you get some additional benefits like on the spot discounts etc, etc), only then will there truly be mass adoption. But will we all eventually leave without our wallets and feel good about it? Highly likely.

4. The future is already here

The Singapore VC firm Life.SREDA writes in their Money of the Future report: “Only geeks and early adopters use [Apple Pay, Samsung Pay, etc] frequently, as they are inclined to test new solutions or make themselves fashionable and advanced.” – while I am glad to admit I’m both a geek and early adopter, the Waterworld experience was hardly about me trying to be fashionable and advanced, and certainly, my points above need to be universally addressed for take-up to happen. When addressed, paying with your mobile will be the preferred choice for most.

One need only to go to China (and India) to understand that paying with your phone is now truly the de facto experience. But that is because the Chinese are way ahead in mobile payments infrastructure, and have also created a very good and simple user experience using QR and barcodes (similar to what you can see Starbucks is doing in the US). And this is not one of those “But yeah, it’s China, and it will never happen here” moment. This is not a repeat of the failure of DoCoMo services to go beyond Japan. The changes are fundamental, and they will eventually be everywhere.

Disclaimer: The views expressed on this post are mine and do not reflect the views of any clients or companies I am currently working for or have worked for.

Posted in The Business of Mobile.


Bay Area living: How long can this last?

There has always been a perception that New York is a very exclusive place.  Of course, when you stack 1.6m people in the tiny little area of Manhattan, and 8,4m in the city as a whole, it will cause some pricing pressure.  At an average cost of $3,692 for a 2 bedroom apartment though, New York is starting to look cheap to San Francisco’s $5,043.

Just how crazy is it that you need to make over $216,000 in salary for that to be affordable? Well, you need to be in the top 5% of income earners in the US – that’s how crazy it is.  And the fact is that most people in San Francisco cannot afford living there – by a long shot.

Just how big is the problem?  I’m sure everyone in SF just gets paid through the nose, which is why it does not matter? Well, let’s look at median house price compared to median income.  It’s largely believed that a ratio higher than 3 causes issues, i.e. when you have to pay 3 times your gross annual income for a house, it starts becoming painful.  How does San Francisco stack up here? It’s largely creeping towards 10x!

House price indicator (Source: The Economist)

In San Francisco, the price to buy or rent is 2-3 times higher than the US average. If you look at the recent growth, 7 figure house prices have gone from 19.6% to over 50% since 2012 (Btw, if you click the link, note that the top 3 cities are all in the Bay Area).

This means in general living in the Bay Area means you are screwed. People in your company in those other offices around the US likely experience significantly less financial stress and have a significantly higher disposable income.  Take into effect that California also has a state income tax, one wonders when you’ll start seeing armadas of U-Haul trucks.  Thank goodness there is one positive stat:

Sun in Burlingame

One cannot dismiss the fact that the Bay Area has a problem.  The un-affordability does not stop with housing. High cost of living drives up the prices for other goods and services as inhabitants struggle to survive. For instance, a nice 3 course meal in SF is 50% more expensive than say Austin, Texas – another tech hub. Of course you can cut down on dining, and you can stay less fit (which costs 60% more), but if you have kids for instance and need to send them to daycare, well then expect to pay through the nose.

If you think this just leads to self-selection and no issues in society, think again. Crime is on the rise in virtually every category, and in general, income inequality has been very closely linked to “unhappiness” or societal issues. The Bay Area is arguably the world’s most important hub for innovation in technology, but if nothing is done over the long term this advantage could disappear.  Will it be bad for innovation?  Probably not, as capital and talent can flock elsewhere even though the Bay area still has a lead on this:

VC investments

However, as international talent is highly sought to drive this innovation, as 60% of top 25 startups are funded by 1st or 2nd generation immigrants, the high cost of living combined with outdated immigration laws helps drive or keep talent overseas.  If you do not think this will have an impact on the Bay Area at some point you need to think again.

So what can be done? And is there any willingness to do anything?  Rent control may be one answer, but there are arguments it may not work. The other answer seems to be to increase supply and build more housing. San Francisco seems to be way behind on this front, where 40% of SF’s housing was built prior to 1940, and even the new units being built seem to appeal only to the very wealthy. So where will this end for the Bay Area, for entrepreneurs, for innovation? Will it be Tulsa, here we come?   Somehow doubt that, but only time will tell it seems…

Posted in Other.

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Why I miss Square’s order app

Sadly Square decided to shut it’s Order app. Apparently the app lead to “no new sales”. Excuse me? Well, I agree that any app/service/incentive should be targeted at the margin (i.e. bring new business), but surely, how can you prove that?  Using a sample size of one (me) I guarantee I went to Blue Bottle Coffee a lot more than usual, as standing in line there is a pure pain.

So let’s break down the value proposition of the app (yes, the article from 09 is still valid although used to analyze smartphone OS at the time). The benefits are abundantly clear:  Save time in ordering and getting your [whatever], and especially in Blue Bottle Coffee’s case, save a lot(!) of time. Also, it is of course convenient to have your card linked and pay as your GPS let’s the store know you are close. Brilliant.

So what about the cost side of the value proposition? Well, it’s a free app, so really a no brainer, right? Actually, not quite so, and it becomes apparent when you look at the design of the app:

Coffee order 1

Looks easy enough right? Just click the button and off you go? Well, first, finding the store was actually really cumbersome and not shown here. It would not be hard to use location and my purchase history to present relevant options right away. In fact, as soon as I open the app it should have asked me “Going to Blue Bottle?” and the answer would have been yes every time. So the ‘Cost of time’ to find the coffee shop (and the lack of other participating merchants) was certainly an issue.  But the big problem came at the experience when you pay. From the screen above it clearly shows the coffee cost $5 right, so when you click and order that is what you expect your bill to be. Not the case however:

what happens when you scroll...

Suddenly $5 has gone to $6, because the app automatically adds a tip. You could not remove it until you scrolled down – way past the Order button. Great for the Baristas, not so great for the users who (repeatedly) found out they paid more than they had expected. In this case, as I ended up doing this quite a few times until I realized what happened, the cost side of the value prop ended up being quite high.

So the concept of ordering ahead, based on your location and skipping lines is brilliant. But the execution by Square was poor in many aspects, and I suspect that is partially why the experiment was abandoned (of course, it was surprising how few of their merchant’s participated in this, so I’m sure there are other reasons).  Either way, someone like Yelp or others should jump on this, as they would likely do it right. Until then I’ll still go to Blue Bottle though. Perhaps just slightly less, and slightly more grumpy.

Disclaimer: The views expressed on this post are mine and do not reflect the views of any clients or companies I am currently working for or have worked for.

Posted in The Business of Mobile.

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