From his lofty post, Ahmad has a unique view of the mobile payments market. He is responsible for developing and implementing Discover Network’s strategy for emerging markets and initiatives, including mobile payments and services, decoupled debit and RFID/NFC payments.  In plain English, Ahmad has to develop products and programs to build Discover’s revenue and profitability in prepaid. His belief in the power of mobile payments is strong and, he believes, for good reason. He shared his thoughts with TPP. Be forewarned, Ahmad is passionate about prepaid and emerging payments.

GR: Why are you so enthusiastic about the mobile phone as a payment device?

FA: The mobile phone is probably the most promising technology that we’ve seen in many, many, many years. If you look at the progress of the Internet, and the adoption rate for the Internet, the mobile phone is already outpacing it by quite a large percentage. There are three and a half billion people globally with a mobile phone today. At least 85-90% of the U.S. population has a mobile phone. That kind of adoption of any device, any technology, is really unheard of. The fact is that this is a device that has captivated not just a nation, but the world. This is a very personal device that you always have with you. It makes it a very unique opportunity.  What we do with it will either make or break the payments aspect. That is still to be decided.

GR: I’ve heard it said that people are more likely to leave home without their wallet than without their cell phone.

FA: I would say that is true; it actually happened to me. An even more compelling anecdote, is that if somebody loses their wallet, they don’t realize that for 24 hours, but if they lose their mobile phone, they realize that in 17 minutes. That’s how close people are to their mobile phones.

GR:  Very true!

FA: The truism about mobile phones is that this is the first time we have an ability to communicate with our customers in a two-way fashion. Every other device in the past  radio, TV, store advertising, print  has been one way. Either we tell the consumer something, or the consumer calls in and tells us something. The mobile phone really allows you to have a two-way conversation with your customers. 

GR: What is Discover’s strategy for mobile payments?

FA: At Discover, we follow three guiding principles on how to treat mobile payments. The first guiding principle is that a mobile phone is not the same as a payment card. A payment card has one purpose, and one utility. Whenever you reach for your payment card, you are about to make a payment. When you reach for your mobile phone, you are about to do one of 10,000 different things.

GR:  If it’s an iPhone!

FA:  <laughs> Yes. Or, if you are teenager, you are reaching for it 150 times a day texting somebody. A mobile phone is a very personal communication servicing and administrative device, unlike a card that has only one purpose. That is a key differentiator, because if all you do is take the functionality that exists on a very dumb device like a payment card and put it in a mobile phone, you have left a lot of the benefits out.

GR: OK.

FA: The second guiding principle is that mobile payments are not the goal, they are the enabler. Nobody leaves their home, thinking ‘I am going to go make some payments today.’ People leave their homes because they want to buy something or go do their daily activities. In the course of those activities, they will interact with some commerce, they might buy something, or acquire some services. Therefore, mobile commerce and mobile services should be the key drivers of mobile, and payments should be a seamless enabler in order to acquire those products and services.

GR:  And, the last principle?

FA:  That this whole mobile movement goes way beyond the mobile phone. There are advances in mobile technology, but they are not about how to put a chip in a phone.  We can do that; it is really about a broader infrastructure that needs to be changed if we are to fulfill the goal of making this a really high level device and how to use it to make people’s lives better. For that, a larger infrastructure change and shift needs to happen. My general view on any new technology is that it has to bring new value and an added value proposition to the consumer. There is no point in investing in technology for the sake of technology.  We can invent the coolest gizmo that doesn’t add any value to anybody. Some people may be mad about it, but nobody will have a recurring benefit from it. Most things we do are to build loyalty. That has been the Discover heritage over the years, and mobile is no different. We want to bring enough value to this new device and channel that we have available to build that customer loyalty by providing a true user value proposition.

These three guiding principles force us to make sure that we are not just using technology for technology’s sake, but, in fact, building a true consumer value proposition that we can work with our partners to deploy and deliver. Then, our partners will also benefit from them in the same way.

GR: How do you build that value for the consumer?

FA: Let’s look at the first piece I mentioned. It is not the same as a payment card; it is something a little bit different. If you look at the evolution of phones and devices and how things are changing, there is more and more functionality being built into those devices. So, if you incorporate a mobile wallet, you might add in price comparison tools.

You are standing at a Best Buy, and you take a picture of an item or its SKU. You can press a key and it will compare prices across many stores for that same item to get an idea of how good of a deal you are getting at that store. That provides some value proposition.

GR: Sounds interesting. What are some other examples?

FA: I am walking by, I see a billboard or an advertisement for a concert. That ticket can get downloaded automatically into a mobile phone. People say that there are three ways of mobile, SMS or texting, an application base and WAP. I think there is a fourth channel, by far the biggest, which is voice. If I am calling someone from a mobile phone, I am still mobile, just using the voice channel.

If I am calling to ask for an ATM location, that probably means I am out in a car somewhere, and I have a need to fulfill. Other than just telling them where the ATM location is, I may be able to text that location, and directions to that location to their mobile device. I may also give them some other benefits available in that location.

GR: So, this is the way to build value for the consumer?

FA: It is by understanding the different kinds of services and goods that people acquire through their mobile device. There are some things that bring value and convenience that are more of a recurring, remote perspective. I might pay my bills using my mobile phone, sign up for a gym membership and activate it using my mobile phone. Then, there is a proximity perspective. I am talking on my mobile phone, trying to board a bus. Can I just use my phone, tap the reader on the bus and pay my fare and move on, without having to disrupt what I was doing?

They both have different needs. One requires physical hardware, the physical device, to connect and speak with a reader. One simply requires an easy way to activate a remote payment using my phone. If I take today’s technology and apply it to the second situation, it is a very bad experience. For example, if you go online, you have to login using a username and password. They have rules for the passwords  you have include a special character, capital letters and a number, and it has to be at least 8 digits long. Makes a lot of sense in the online space, but if I give you an old Samsung phone, and tell you to type all that in. . .

GR: <laughs>

FA: Watch people go through that experience; it is very frustrating. So, you can’t just take something that exists and slap it onto a smaller screen and say, ‘there you go.” Bad experience. We are looking at different kinds of commerce and how to make payments very seamless. If it is a remote payment, it should be a one button, one click method to pay. If it is a proximity payment, we either have to have an RFID or an NFC chip that will allow you to make a payment.

GR:  Does that have to be included in the phone in the manufacturing process?

FA: That is one way. That is the simplest, easiest way, but it is also the longest term way to do it. We have contactless stickers that can be affixed on your phone. That gives you the functionality, but is not the sexiest thing in the world because it doesn’t talk to your phone, but it works. If you want a true NFC experience, you can put an NFC chip in a memory card and plug that memory card into your phone and now your phone is a payment device. The ultimate goal is that all phones come with NFC, but until that happens over the next 5 to 10 years, we have other ways to get similar benefits.

GR: What is the benefit to the retailer for adding mobile payments?

FA: What are the problems the retailer is faced with today? One is that they need to reduce their expenses. Can they either make things more efficient, cheaper or better by using a mobile device? Let’s say I was a retailer that was going to send out 10 million flyers or direct mail pieces to promote a new product, new goods, new services, new timing, new store, or whatever I want to promote. I will get, what, a .1% response? Let’s say I get a whopping 1% response, so I get 100,000 people who are now interested, and they come into the store. I have accomplished something, but at a cost of 10 million the cost of each piece.

What if I can do the exact same things, over the phone, at a time when I know the customer is either in the mood for shopping, or right outside your store? If can do that, you may only need to send out 200,000 messages to get the exact same result, at no cost. There is a real cost savings component if merchants figure out how they want to advertise and shift their marketing and offer strategy to target these consumers.

GR:  So, how do you go about creating those strategies?

FA: That takes a bit of thinking, but financial services companies like Discover and different retailers are talking about it. We are figuring out how to have our customer information and the merchant offers, and bring them together to make marketing more efficient.

The second thing is that merchants want to build sales today.  We know we are an offer-centric society, motivated by sales coupons. The way we use mobile phones today is to sign up for text messages. So, at 2 AM, I get a text message that we are having a sale. I can’t really act on it, so it is not a great experience.  You are only taunting me that there is a sale. What if I could do that when I know you are in the mood for shopping, or when we know you are outside the store? How do we make different kinds of offers and generate incremental spend when the customer is receptive? There are ways we can generate those things using the technology and information that has always been there, but we never had a real-time communications device. The mobile phone is just that. Work needs to be done, yes, but the potential is like nothing else that has ever existed before.



Farhan Ahmad is Director of Emerging Markets and Strategic Business Development, Discover.  Visit Discover online at www.discovernetwork.com.