American Marketer


Designer wallet of future will be virtual, but challenge is monetizing relationships

May 2, 2012

Scott Swartz is founder/CEO of MetraTech Corp.


By Scott Swartz

Here is a legitimate question: Will Generation Y ever know anything other than a mobile device as a means of purchasing?

The future of mobile payment systems is promising – or threatening – to revolutionize the way we buy goods and services, with early movers such as Google, ISIS, Square and PayPal already in the game and Apple about to reveal its plans.

Last year saw other major players gearing up globally, partnerships being forged and baseline technologies established.

This year looks like the big kick-off when the new technologies will take root. Especially if Apple joins the race, public interest will soar exponentially. Analysts predict the market will have a total value of $670 billion worldwide by 2015.

Card sharp
The key companies in mobile money will be payment firms such as American Express, Visa and MasterCard, rather than the transaction initiators because although technology giants are already aligned with credit card companies and banks for marketing purposes, consumers are more likely to be wooed directly by the banks or credit card companies with which they are already familiar.

So public take-up will, ultimately, rely on the ability of the latter to educate consumers in the new technology.

For all the optimism about take-up, though, the Web of relationships at the heart of this emerging commercial landscape will present a significant IT challenge to those involved in it.

This is because, unlike traditional methods of purchasing, mobile commerce is likely to be more complex and, by definition, multiparty and varied.

For instance, key drivers will include loyalty, voucher and bonus schemes to entice customers to “tap and pay” rather than flash the cash or take out a “flexible friend.”

All of this necessitates new demands on the billing and compensation IT systems that will monetize the changing world.

Almost certainly, those legacy systems optimized or designed for old-world service methods are not likely to be up to the job.

In many verticals, communications being just one obvious example, service providers who desperately want to become online retailers are already finding this out.

The key question they and others face is, “What are these new demands likely to be, and can they be easily addressed?”

ABB and flow
One answer to this question that is already coming to the fore is the adoption of an approach called Agreements-based Billing and Compensation (ABB), already tabbed by one leading analyst firm, Frost & Sullivan’s Stratecast, as likely to be a key to future success and a technology to watch.

The ABB approach is characterized by an ability to easily monetize the almost infinite array of often complex financial relationships common to next-generation services across multiple vertical industries.

In the mobile payments sphere, this involves handling a constantly changing set of agreements between carriers, mobile phone manufacturers, credit card companies, financial institutions and other players.

These agreements require billing and compensation functionality that is not adapted from legacy systems – usually an approach that at best amounts to a glorified but inefficient workaround – but rather, can be quickly built from core constructs to cope with the sort of fluid, personalized, multi-party transactions mentioned earlier.

Thus, Agreements-based Billing can support case-by-case and customer-by customer negotiations, and can dynamically set unique parameters for each, often complex agreement that might follow.

Let us look at an example.

In a mobile wallet scenario, multiple parties will be involved in the transaction path, including merchants, mobile service providers, payment system providers, credit card issuers, clearing banks and retailers.

The relationships between them are all founded on pre-defined terms and conditions, along with the associated financial definitions, for each part of the agreement. Ultimately, they determine who gets what from each sale.

Clearly, these relationships and their attendant agreements can be complex, especially when the agreement requirements are extensive, terms are interconnected within and across participants, and monetary measures flow in multiple directions.

It does not require an enormous leap of faith to see where monetization solutions designed for traditional two-party commerce are going to fall short.

THE REALITY IS that as business needs evolve today, incumbent solutions that do not incorporate the potential to address this sort of change in business models hinder system owners rather than enable success.

The flexibility to support such change is sorely needed as technology advances, market conditions are redefined, business relationships evolve and organizational structures are transformed. This is the world of Agreements-based Billing.

As such, the rapid evolution of mobile wallet validates the shift.

If today’s enterprises want to fully exploit the opportunity – or, equally likely, if they have no choice but to participate – something in their IT infrastructure will have to give.

As noted earlier, ABB’s head is already above the parapet.

Stratecast put it like this: “Future business success rests with an Agreements-based Billing strategy and the success of business in all industries depends on how quickly the end-to-end monetization and partner compensation processes can be addressed whenever business change occurs.”

The market may make sure that the mobile wallet arrives. Agreements-based billing will make sure it works.

Scott Swartz is founder/CEO of MetraTech Corp., Waltham, MA. Reach him at