Tuesday, June 23, 2009

Zong, Boku, Obopay: The odd new sound of money

In the evolutionary timeline of exchange of goods and services, barter is the grandmommy of them all, followed by a variety of tokens such as seashells and pebbles and then gold and silver coins, followed by promissory notes, paper currency, bank checks and drafts and then credit cards -- the last, perhaps, being largely responsible for the recent recession. In the evolutionary process, we moved from material objects to informatory marks on sheets of paper and then digital data enshrined in plastic cards. Now, perhaps, it's time to do away with plastic altogether (thereby ending the long-standing tradition in US retail of asking the customer -- paper or plastic? The new answer is: neither). Your new smartphone (that's why it's smart) now becomes your means of effecting financial transactions.

There's Obopay, Boku, and Zong (continuing the tradition, started perhaps by Yahoo, of having silly names for internet companies). The Zong site asserts that there are more people with mobile phones than credit cards, so it makes sense to use those devices as a means for money transfer. Zong also says that people are more likely to buy using a phone number since the process is less painful, not requiring the usual information (address, expiration date, card number, etc.).

While all three are touted as means of purchasing goods and services, they seem to be focusing principally on the one-way transfer money to others rather than on two-way transactions (money one way, goods/services the other) since the latter part is really out of their control. As with services like PayPal (now owned by eBay), verification methods for the latter will emerge soon enough.

It used to be that you could either carry cash in your pocket, or resort to some sort of delayed/deferred payment method. Now, as long as everyone carries a mobile phone, it is no longer necessary to carry cash any more. Except, of course, for any charges that the mobile carriers would tack on -- which they will, with alacrity, since it is likely to explode into a major revenue source. I expect mobile carriers to initially behave greedily, taking a big cut, since gouging has been one of their well-established behavior-patterns. But given the convenience, these methods are likely to catch on across the socio-economic spectrum.

Mobile money may be the killer app that convinces the last holdouts to go for a cellphone. Certainly, mobile phone penetration, growing very rapidly in India and China, should see a spike with the introduction and use of MoMo (if I may coin a term).

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