New media: technology, aesthetics, and power

For more than 50 years media theorists have written about and debated the liberalizing effects of new-media technologies. Today we are still debating whether new-media affords liberalization “to the masses”. The aesthetic dimension of 21st century media represents a paradigm shift in the way humans interact with the world around them, and this aesthetic dimension is the key in understanding how new-media liberalizes.

Hans Magnus Enzensberger argued, in 1970, that new-media have finally broken down the one-way stream of communication from broadcaster to receiver, and in so doing has abolished the class divisions of the ‘control’ of the mode of production. (Enzensberger, H. 1970) The division between the producer and the consumer had up till then reinforced the social division of class structures. This change, he argued, cannot merely be interpreted “in terms of trade unionism or liberalism”. A larger structural change had taken place that would eventually cause the decline of national sovereignty. But this change was not only a ‘liberalization’ of the working classes. Electronic media is pervasive, and by its nature it does not adhere to the needs of any class – “because of their progressive potential, the media are felt to be an immense threatening power…for the first time they present a basic challenge to bourgeois culture.” (Enzensberger, H. 1970)

Interestingly, the idea of producers on the one hand and consumers on the other, was to him “not inherent in the electronic media”. We only believe (or believed) so because the economic and administrative approaches to media made them so.

He describes the aesthetics of written literature and how Radio, film, and television have taken the same form: as a one-way monologue that “isolates the producer and reader.” However, the structure of electronic media is not one-way, it is two-way – “the structure (itself) demands interaction.” (Enzensberger, H. 1970) 

Let us assume and set aside the fact that all media require ‘audiences for profit’ in order to exist. Can the aesthetics of new-media that Enzensburger alludes to answer whether technology is a form of control over the masses, or a liberating force?

Alexander Galloway (2010) analyzes new-media in comparison to ‘old media’ from an aesthetic point of view. He argues, “The entire world is one of proximity…we have an innate desire that the world be brought near us.” (Galloway: 1) For this to happen we need to become passive viewers to allow media to bring us closer with content. In so doing we also have to let go of our presence whilst doing so. For example, we forget about our own presence when in a cinema. But, he argues, the computer does not have the same effect on us because it is a totally new form of medium entirely.

In our use of digital devices the image of man is not the object that is being brought closer to the audience. The computer is the object with which we interact – the computer is the object. “Man is the object of photography, painting, or cinema, and data is the object of the computer.” (Galloway: 2) In the use of digital media we project ourselves onto the world, instead of simply seeing the world through another lens (for example in photography). Thus the ways of engaging with a digital medium is limitless – for as long as we continue to recreate ourselves, we will continue to recreate how we use digital devices. Digital devices are not a ‘formal medium’.

And herein lies the answer. Because 21st century new-media is characterized by people projecting themselves onto digital media – participating in the medium – the medium itself is liberalizing. Power is defined as the ability to do something or act in a particular way. People have and will continue to have a choice in how they project themselves. Thus the ‘power’ of digital media is in the ‘hands of the masses’ and not in the hands of the owners of production. 

In this same vein, Marshall McLuhan’s Understanding Media (1964) provided a new perspective to the analysis of media and the way it relates with humans. One of his most ‘important’ observations was that The Medium is the message. It explores the nature of the medium not as a dissociated instrument but as an extension of human senses in a new technical form. He also describedMedia: Hot and Cold where he observes media in terms of the amount of participation required from the audience. Because the aesthetics of digital devices allow for and require users to interact with them they are a ‘cold media’. And our interaction, engagement, and participation is natural – we are naturally extending our human senses onto these media.

Howard Rheingold (2002. Smart mobs: The Next Social Revolution) takes this notion and extends it further. He predicted that technology in the hands of the masses would not only ‘liberalize’ us as individuals, but that digital devices would become a social instrument.

Through the liberation of the crowd the crowd becomes a kind of technology itself, as it generates expectations and circulates messages. This is because the technology of the crowd exists across temporal divides, so that people feel close whereas they physically might be not. The ‘mobile crowd’ is able to organize itself efficiently, its design enables the quick and pervasive spreading of messages, and if certain members or ‘pods’ leave the crowd, the structure continues to exist. By contrast, in a top-down structure if you shutdown top management the whole system crumbles.

Rheingold argued that Networked forms of social organization may be the newest major organizational form – after tribes, hierarchies, and markets. His main point is that the evolution of organizations have always disrupted – “when hierarchies replaced traditional, tribal, and consultative forms of organization, societies suddenly run according to rank were violent and bent on conquest, long before the hierarchical form matured through the institutionalization of states, empires, and professional administrative and bureaucratic systems.” (Rheingold, H. 2002) 

Rheingold predicted this in 2002 long before the mass adoption of social networks today. My point is that Rheingold’s prediction happened naturally because of the aesthetic nature of the digital medium. It was not something that was forced upon consumers or was ‘sold’ to them. People themselves choose to participate in social networks and networked forms of organization. And we can directly link this with the observations of Enzensburger, McLuhan and Galloway. Social media on digital devices is a two way medium – it allows for social participation and people choose to participate.

The notion that humans enjoy cooperating to each other’s benefit given the right conditions and payoff is difficult to refute. “Common pool resource management…is social arrangement to balance cooperation and self-interest.” (Rheingold, H. 2002) This ‘new social form’ is only now possible because of the combination of “computation, communication, reputation, and location awareness”. (Rheingold, H. 2002) A new reputation system can thus now be formed, as a new “Interaction Order” has been created from the “social and technological climate”.

Some might think such a claim is ‘techno-utopian’ and unrealistic. But we should remember that the mass adoption of new media is still a new phenomenon. Because media today is characterized by user participation, because such participation is natural, because we will continue to project ourselves onto new digital devices, and because this natural participation is continually evolving, we simply cannot ‘define’ new-media. As Galloway says, “the main difficulty is…that new media may be defined via a reference to a foundational set of formal qualities…if the computer were a formal medium, then perhaps our analysis of it could be too. But my position is that it is not.” (Galloway: 7)

Today the power of new-media is in the hands of those who choose to use it, and an attempt to predict the future of such a medium is futile. A true understanding of the future of new media simply requires a true understanding of the evolution of how people will naturally want to project themselves onto media. If anything, history shows us that “interaction orders” continually evolve. The aesthetics of new-media allow the evolution of human interaction to define its future. It is thus a liberalizing medium.

 Sources:

Enzensberger, H. Constituents of a Theory of the Media. New Left Review. 1970. 64: pp. 13-36

 

Galloway, R. 2010. The Anti-Language of New Media. Discourse. 2010: 32.3 pp. 276-284.

 

McLuhan, M. 1964. Understanding Media (The Extensions of Man). Gingko Press.

 

Rheingold, H. 2002. Smart mobs: The Next Social Revolution. Perseus Publishing.

 

In case you didn’t know, The internet surpasses national borders

But in a decentralized world where everyone is a distribution platform everything gets watered down. Remember that the internet is not your friend in business.
It is not inhabitated by national borders as it is a network.

The only way it cant spread across borders is if governments shut it down or put firewalls between nations. (in addition to blocking foregin exchange – e.g. poker)

The only way that is going to happen is if the freedom of information thing + democracy thing falls apart.

Seeking information and socialising is a natural instinct. It cannot be stopped or changed.
That is why social media is one of the only ways to get network effects in a decentralized world. (ironically social media goes against the grain of the internet.)

But social media relies on people communicating with each other. Which is problematic. It is not
a be all solution – definitely much less secure than owning a license and a satellite.

If you read Steve Job’s book for answers you are not going to be the next Steve Jobs

I’ll admit that I did.

But to prove my point I’ll ask one simple question:

Would Steve Jobs have read Steve Job’s autobiography?

I don’ think so. 

The real reason Facebook bought Instagram

As much as we wannabe digital strategists (me included) want to have the answer of why Facebook bought Instagram, the truth is we don’t know because we don’t have the information that Mark Zuckerberg does.

‘Pro’ analysts point to economies of scale (and talent), a consolidation of the social media market before the IPO, a strategic move to capture the mobile user (where FB is not that strong) as reasons for the facebook & instgram merger.

I’ve had a lot of thought around this and these reasons seem too simple. Whereas they are probably true what would make Instagram worth $1 billion? And why the sudden rush to buy them now right before the IPO? Something else was going on in Mark Zuckerberg’s head.

The fact that the board did not have any say in the matter flies in the face of the decision being strategic. It is doubtful that Mark Zuckerberg would make a “strategic business decision” concerning market consolidation and defensive strategies without board input. (they are there afterall for exactly these issues).

No, I think (obivously I don’t know, but I am willing to bet on it) that Mr. Zuckerberg bought Instagram for one simple reason. He was looking at the dasboard of the user activity on Facebook, and the amount of photos uploaded per user was decreasing. Instagram on the other hand was growing purely off the back of photo uploading. Thus, it was a no brainer. If Facebook photo uploading continued to decline the site could face a severe stagnation of activity, where all you see is if someone got engaged, updated their education, or listened to a song on spotify – not hugely inspiring and emotive content.

And let’s not forget that a large part of Facebook’s appeal is voyeurism. Without being able to be a fly on the wall to see who your ex is dating, Facebook becomes a lot more boring. 

 

The real death of SEO?

Now that Google is using data from all its services to make search better, where does this leave those companies that have specialized in SEO? A site can only be tweaked so much with underlying key words, and if Google uses data from your email and your Google docs, there is no way that a SEO can also reach that data. I agree that search will be better. The sites with the highest page rank will be those more relevant to you, and not those that have paid more money to beat the system. Having said that, this leaves marketers and site owners in a trcky situation: how much value can now really be attributed to SEO when it is not solely responsible for the page rank.. Tricky indeed. What is for sure is that Google is keeping everyone on their toes.

Why points for social or creativity won’t nail it

The idea behind giving people rewards for consuming content is simple and beautiful on the surface. But that’s where it stops – on the surface. Incentivizing a creative activity (consuming entertainmnent, relating to content, forming opinions around characters, etc. is creative) reduces that activity to pure reward. The people that use the service do so precisely because they want a reward, not because they want to form part of a conversation around the topic. By making content consumption into work (do something and you’ll get a reward) you are essentially limiting yourself to people that don’t want to form part of an experience for enjoyment. And like any game with rewards, its highly addictive for a limited amount of time, until the user gets bored and does not return. (or until there is a greater reward somewhere else).

Examples of companies (but there are many) that I have seen trying to do this is Viggle (points linked to rewards for watching TV) and insta.co.za (rewards for being social.) They have missed the point entirely. Social is user driven – the reward is already embedded in the action.

and P.S. going to be a bit snarky but I can’t help myself: do you really think you are ‘innovative’ by coming up with an idea like that? Do you really think ‘why don’t we give people points for sharing things. Wow, I’m a genius!’ If you call yourself an innovator for that I’d rather stick my head in the sand.

social media vs. e-commerce

It is very difficult to make a social site into an e-commerce site. People think: Amazon – a place to buy stuff; Facebook – a place to socialize. This is embedded in our psyche and is very difficult to change. Just because they have the users, does not mean that the users will do what the site ‘wants’ them to. If people think that Facebook’s long-term growth is going to come from commerce, then think again. Trying to sell something on Facebook is like haggling people through the fence of the playground. You might get some sales (and selling any amount of goods and services to 850 million people means huge revenues), but the core product of Facebook will be damaged in the long run.

This article agrees:

http://www.businessweek.com/news/2012-02-22/gamestop-to-j-c-penney-shut-facebook-stores-retail.html

Technology as power vs. technology as liberating force: the aesthetic dimension.

For more than 50 years media theorists have written about and debated the liberalizing effects of new-media technologies. Today we are still debating whether new-media affords liberalization “to the masses”. The aesthetic dimension of 21st century media represents a paradigm shift in the way humans interact with the world around them, and this aesthetic dimension is the key in understanding how new-media liberalizes.

Hans Magnus Enzensberger argued, in 1970, that new-media have finally broken down the one-way stream of communication from broadcaster to receiver, and in so doing has abolished the class divisions of the ‘control’ of the mode of production. (Enzensberger, H. 1970) The division between the producer and the consumer had up till then reinforced the social division of class structures. This change, he argued, cannot merely be interpreted “in terms of trade unionism or liberalism”. A larger structural change had taken place that would eventually cause the decline of national sovereignty. But this change was not only a ‘liberalization’ of the working classes. Electronic media is pervasive, and by its nature it does not adhere to the needs of any class – “because of their progressive potential, the media are felt to be an immense threatening power…for the first time they present a basic challenge to bourgeois culture.” (Enzensberger, H. 1970)

Interestingly, the idea of producers on the one hand and consumers on the other, was to him “not inherent in the electronic media”. We only believe (or believed) so because the economic and administrative approaches to media made them so.

He describes the aesthetics of written literature and how Radio, film, and television have taken the same form: as a one-way monologue that “isolates the producer and reader.” However, the structure of electronic media is not one-way, it is two-way – “the structure (itself) demands interaction.” (Enzensberger, H. 1970)

Let us assume and set aside the fact that all media require ‘audiences for profit’ in order to exist. Can the aesthetics of new-media that Enzensburger alludes to answer whether technology is a form of control over the masses, or a liberating force?

Alexander Galloway (2010) analyzes new-media in comparison to ‘old media’ from an aesthetic point of view. He argues, “The entire world is one of proximity…we have an innate desire that the world be brought near us.” (Galloway: 1) For this to happen we need to become passive viewers to allow media to bring us closer with content. In so doing we also have to let go of our presence whilst doing so. For example, we forget about our own presence when in a cinema. But, he argues, the computer does not have the same effect on us because it is a totally new form of medium entirely.

In our use of digital devices the image of man is not the object that is being brought closer to the audience. The computer is the object with which we interact – the computer is the object. “Man is the object of photography, painting, or cinema, and data is the object of the computer.” (Galloway: 2) In the use of digital media we project ourselves onto the world, instead of simply seeing the world through another lens (for example in photography). Thus the ways of engaging with a digital medium is limitless – for as long as we continue to recreate ourselves, we will continue to recreate how we use digital devices. Digital devices are not a ‘formal medium’.

And herein lies the answer. Because 21st century new-media is characterized by people projecting themselves onto digital media – participating in the medium – the medium itself is liberalizing. Power is defined as the ability to do something or act in a particular way. People have and will continue to have a choice in how they project themselves. Thus the ‘power’ of digital media is in the ‘hands of the masses’ and not in the hands of the owners of production.

In this same vein, Marshall McLuhan’s Understanding Media (1964) provided a new perspective to the analysis of media and the way it relates with humans. One of his most ‘important’ observations was that The Medium is the message. It explores the nature of the medium not as a dissociated instrument but as an extension of human senses in a new technical form. He also describedMedia: Hot and Cold where he observes media in terms of the amount of participation required from the audience. Because the aesthetics of digital devices allow for and require users to interact with them they are a ‘cold media’. And our interaction, engagement, and participation is natural – we are naturally extending our human senses onto these media.

Howard Rheingold (2002. Smart mobs: The Next Social Revolution) takes this notion and extends it further. He predicted that technology in the hands of the masses would not only ‘liberalize’ us as individuals, but that digital devices would become a social instrument.

Through the liberation of the crowd the crowd becomes a kind of technology itself, as it generates expectations and circulates messages. This is because the technology of the crowd exists across temporal divides, so that people feel close whereas they physically might be not. The ‘mobile crowd’ is able to organize itself efficiently, its design enables the quick and pervasive spreading of messages, and if certain members or ‘pods’ leave the crowd, the structure continues to exist. By contrast, in a top-down structure if you shutdown top management the whole system crumbles.

Rheingold argued that Networked forms of social organization may be the newest major organizational form – after tribes, hierarchies, and markets. His main point is that the evolution of organizations have always disrupted – “when hierarchies replaced traditional, tribal, and consultative forms of organization, societies suddenly run according to rank were violent and bent on conquest, long before the hierarchical form matured through the institutionalization of states, empires, and professional administrative and bureaucratic systems.” (Rheingold, H. 2002)

Rheingold predicted this in 2002 long before the mass adoption of social networks today. My point is that Rheingold’s prediction happened naturally because of the aesthetic nature of the digital medium. It was not something that was forced upon consumers or was ‘sold’ to them. People themselves choose to participate in social networks and networked forms of organization. And we can directly link this with the observations of Enzensburger, McLuhan and Galloway. Social media on digital devices is a two way medium – it allows for social participation and people choose to participate.

The notion that humans enjoy cooperating to each other’s benefit given the right conditions and payoff is difficult to refute. “Common pool resource management…is social arrangement to balance cooperation and self-interest.” (Rheingold, H. 2002) This ‘new social form’ is only now possible because of the combination of “computation, communication, reputation, and location awareness”. (Rheingold, H. 2002) A new reputation system can thus now be formed, as a new “Interaction Order” has been created from the “social and technological climate”.

Some might think such a claim is ‘techno-utopian’ and unrealistic. But we should remember that the mass adoption of new media is still a new phenomenon. Because media today is characterized by user participation, because such participation is natural, because we will continue to project ourselves onto new digital devices, and because this natural participation is continually evolving, we simply cannot ‘define’ new-media. As Galloway says, “the main difficulty is…that new media may be defined via a reference to a foundational set of formal qualities…if the computer were a formal medium, then perhaps our analysis of it could be too. But my position is that it is not.” (Galloway: 7)

Today the power of new-media is in the hands of those who choose to use it, and an attempt to predict the future of such a medium is futile. A true understanding of the future of new media simply requires a true understanding of the evolution of how people will naturally want to project themselves onto media. If anything, history shows us that “interaction orders” continually evolve. The aesthetics of new-media allow the evolution of human interaction to define its future. It is thus a liberalizing medium.

 

 

 

Sources:

Enzensberger, H. Constituents of a Theory of the Media. New Left Review. 1970. 64: pp. 13-36

Galloway, R. 2010. The Anti-Language of New Media. Discourse. 2010: 32.3 pp. 276-284.

McLuhan, M. 1964. Understanding Media (The Extensions of Man). Gingko Press.

Rheingold, H. 2002. Smart mobs: The Next Social Revolution. Perseus Publishing.

 

The adoption of mobile payment technology: its prospects and its ramifications

 

Abstract

 

This paper addresses the current issues in the adoption of mobile payment technology from a business, technological, consumer adoption, and theoretical point of view. The aim of this paper is to shed light on the various aspects that impact the prospects of this industry, and to serve as a foundation for understanding and predicting the impact of mobile payment technology on society.

 

Introduction to m-payment and NFC technology

 

Mobile commerce is the natural successor to electronic commerce. “A mobile payment or m-payment may be defined, for our purposes, as any payment where a mobile device is used to initiate, authorize and confirm an exchange of financial value in return for goods and services (Au and Kauffman in Carr: 1) Mobile payments provide new and unforeseen ways of convenience in commerce. They are becoming complements to cash, cheques, credit cards and debit cards, and have the potential to replace them.

 

GSM, or Global System for Mobile Communications, is a cellular phone protocol that is popular in many parts of the world. It is characterized by the use of a sim (subscriber identity module) card. There are two ways to classify different m-payment solutions: Type of payment and the technology used, and the two are used in various combinations.

 

The type of payment itself can be classified according to three different models: Bank account based, Credit card based, and Telecommunication-company billing based. (Lim. 2007. In Carr: 1) A Bank account based payment is linked to a mobile number through collaboration between telecommunication companies and banks; in a credit card based payment the mobile phone number is linked to the credit card number (This solution is obviously heavily dependent on the number of credit cards in the country); and Telecommunication-Company based M-payments are charged to the phone bills of the customer. (Carr: 2) Thus different types of payments all ‘go through’ telecommunications operators because payments are linked to a user’s mobile phone number.

 

The choice of technology affects how m-payments are implemented. M-payments depend on the way a mobile phone can send or receive information and also ‘where’ the technology resides on the phone. These are SMS, USSD, WAP/GPRS, and more recently, NFC.

 

SMS (Short message service) can be used to receive a status of one’s account (informational purpose), or it can be used to transmit payment instructions (transactional purpose). (Carr: 4) USSD – Unstructured Supplementary Services Delivery – is a session oriented transaction technology, and it has faster turnaround times for interactive applications than SMS. (Carr: 4) WAP/GPRS is a mobile data service that allows mobile phones to access the Internet.

 

The choice of technology used is also dependent on ‘where’ the mobile-payment technology ‘resides’. This can be either within the operating system of the mobile phone or on the sim-card (The sim card is a smart card in the form of a small chip with processing power and memory.) However, Near Field Communication (NFC) uses an advanced form of sim card technology. NFC is “the fusion of a contactless smartcard and a mobile phone.” (Carr: 4) The smart card is contactless because it uses radio frequencies to send and receive information. The contactless smartcard is known as RFID – Radio-Frequency Identification, and refers to small electronic devices that consist of a small chip and an antenna.

 

Thus NFC technology does not reside in the phone, but uses another type of smart card. The RFID device serves the same purpose as a bar code or a magnetic strip on the back of a credit card or ATM card; it provides a unique identifier for that object. And, just as a bar code or magnetic strip must be scanned to get the information, the RFID device must be scanned to retrieve the identifying information.

 

The GSM Association (made up of mobile operators) is targeting mobile users with a common global approach – push forward the use of NFC technology. They want the mobile payment application to reside on the smart card, because the ‘application service provider’ then has to work together with the telecommunications operator to get the technology to end users. Thus, some phones have dual chip slots – one for a payment chip and one for a sim chip. (Carr: 5)

 

A mobile wallet is a payment application that resides on the phone – it is software. (e.g. Google wallet) It contains details of the user’s bank account or credit card information. It is called a wallet because several debit or credit card instruments can be stored in a single ‘wallet’. (Carr: 5)

 

The ecosystem of m-commerce:

 

Several mobile payment companies have failed, and mobile payments cannot yet claim to be successful. The m-commerce industry is complex and fiercely contested, and its makeup hampers the progress of the industry. Different stakeholders, often with conflicting incentives and non-cohesive technology standards are: consumers, merchants, mobile network operators, mobile device manufacturers, financial institutions and banks, software and technology providers, and government.

 

Each transaction requires both parties to be registered with the m-payment application service provider (with their respective bank accounts) and that both of them have valid digital certificates. (See below) Given this, as well as the above introduction, we can see that the ecosystem of m-commerce is complex. The following diagram adapted from Carr (2007) illustrates this:

 

Security Issues

 

Furthermore, security issues are still a major concern. Wireless public key infrastructure (WPKI) and digital certificates are required. WPKI is a solution because national public key infrastructure is independent of financial institutions, mobile network operators and mobile-payment application service providers (Hassinen, Hypponen and Trichina in Carr: 7) Public key infrastructure uses sim cards to list each user in a publicly available directory. A Certification Authority manages the directory and issues digital certificates. The user can then sign the messages digitally. (Carr: 7

 

Standards

 

The industry is fragmented and does not have cohesive technology standards. A continued rise in local and fragmented versions of m-payments will hold back the value to be drawn from the industry. (Carr: 10) Because standards formation is a process of negotiation, first movers see this as an opportunity to get ahead of competitors in order to dictate their standards on the market. This battle over standards is currently happening between industries as well as between firms within the same industry.

 

Is there a market?

 

Mobile payments still lack the “status” of cash transactions. M-payments still have to be backed by the issuer’s promise to pay and are thus only an extension of card-based transactions. For all its fanfare, there is one simple question to assess the future of mobile payments – will a person prefer to pay someone with a card, or cash, or a cell-phone? In many countries, especially in Africa, bankcards are not widespread and users are “mobile first” users. (People have learnt to use the a mobile phone before a computer and are more comfortable with a mobile phone that many developed nations) This certainly provides an opportunity because people do not have to make a decision between cards, cash or phones, but only between cash or phone-systems.

 

Thus, Mobile payment technology will play different roles in developed and developing economies. North America and Western Europe have an established payment structure “based on ATMs, branches, credit cards, e-payments, peer-to-peer payments and e-retail purchases.” (Patel: 3) However, in Africa and South Asia where cash is central to financial transactions and people do not live close to banking infrastructure, mobile payments are seen as a threat to financial institutions. Nokia is an example of a technology company making a strategic decision to enter the m-payment market via Nokia Money. Such ventures have far greater potential in emerging markets such as Africa and South Asia where the mobile carrier is seen as a threat as it “will be the consumer-facing entity for financial transactions”. From a strategic-business point of view this certainly signals that m-payments will become pervasive, because the user can be directly targeted for the service. (Patel: 2)

 

In 2009, Nokia claimed that there were 4 billion mobile phone users in the world and only 1.6 billion bank accounts; and the Global System for Mobile Communications Association projects that the ‘unbanked-with-phones’ population will nearly double by 2012. (Patel: 2) Whilst international organizations such as the World Bank’s Consultative Group to Assist the Poor are involved in the mission to give the poor access to financial services, this industry is actually attracting large interest because it currently represents $5 billion in direct revenue potential (and growing). Also, if we consider a country like India – one of the fastest growing economies in the world but where 84% of households are unbanked – the promotion of mobile money is a no-brainer from a business perspective.

 

Technology Acceptance Model:

 

There is however, still little empirical evidence as to the value mobile payments systems provide to their users, or the willingness of users to switch from their current payment instruments (i.e. cash or card) to new mobile payment instructions. In the developing world we have seen examples of how such new options have found great favor among consumers. M-PESA, an sms-based mobile-money-transfer service launched by telecommunications company Safaricom (part of Vodafone) in 2007, has achieved great success in Kenya. By 2009 the service had over 8 million subscribers in a country with only 15 million mobile subscribers. “M-PESA was the first product of its kind to be introduced in Kenya and is generally viewed as a successful implementation that should be used as a model for other developing countries” (IFC: 2) .However, what has lead to this adoption from a user’s perspective?

 

The original Technology Acceptance Model (Davis: 1989) has been widely applied to research the use of information systems, and is based on two criteria: Perceived usefulness – “the degree to which a person believes that using a particular system would enhance his or her job performance”; and perceived ease of use ­– “the degree to which a person believes that using a particular system would be free of effort.” (Dahlberg, Mallat, and Oorni: 4)

 

In 1992, a Motivation Model was introduced by to explain extrinsic motivation (personal gain) and intrinsic motivation (perceived enjoyment). And in 2003, Dahlberg, Mallat, and Oorni proposed an even further advanced TAM model – The trust-enhanced TAM.

 

By using qualitative focus groups to explain the adoption of mobile payments, they realized that “four trust-related factors affect consumer intentions either directly or through perceived ease of use and perceived usefulness.” (Dahlberg, Mallat, and Oorni: 2003) These four trust factors thus have to be added to any model of a user’s willingness to adopt mobile payments. They are: Calculative based trust – a trust factor calculated by assessing the costs and benefits for opportunistic behavior on the part of the seller (a consumer’s assessment of whether it is beneficial or possible for the seller to behave opportunistically); Institution-based structural assurance – the degree to which the consumer believes that consumer protection is in place (e.g. legal recourse); Institution-based situational normality – trustworthiness of the seller based on a commonality of the seller’s brand and or web (or mobile) presence; and knowledge-based familiarity based on the user’s prior experience with that seller.

 

The addition of trust factors for mobile payments is justified by Dahlberg, Mallat, and Oorni: “mobile payment systems…are more difficult for consumers to grasp and relatively sparse user interfaces provide fewer cues regarding the reliability of the payment system. Thus, more emphasis is likely placed on the reputation of the actors.”

 

Having said this, they also introduce a broader and important qualitative aspect – a user’s disposition to trust technology in the first place, and the user’s attitudinal construct towards new and untried technological phenomena.

 

Which raises an important point often overlooked by businesspeople and technologists. What is the long-term impact of these new technological phenomena? If the World Bank is promoting mobile payments as a solution for the poor to access financial markets, what is the broader benefit, if any, of this new technology?

 

Mobile payments and consumptive effects

 

Economic models of human decision making assume that as rational agents, consumers are aware of the absolute cost of a good and their amount of overall financial resources available for the consumption of that good – they therefore use both sets of information when making purchase decisions. Carey, et al. (2007) refute this assumption and argue that consumer decisions are “highly sensitive to the size of the resource account that just happens to be cognitively accessible at the time of judgment…Large resource accounts – such as the total amount of money in one’s bank account – are likely to make an individual unit of consumption appear subjectively smaller by comparison, and therefore increase the likelihood of consumption compared with small resource accounts – such as the total amount of money in one’s wallet.” (Carey, et al: 2) To put it succinctly, they show that  – “the smaller the resulting fraction of the absolute cost of an expense over the resource account that is thought of at the time of judgment, the smaller the subjective cost of that expense’s consumption, and the more likely one is to consume it.” (Carey, et al: 2)

 

This shows that the term ‘wallet’ is a brand-name attempt at the extension of the image of a physical wallet – one that implies that the user has direct control over which items to use in the wallet. However, because the medium for purchase in mobile payments is an electronic device, the relationship with the idea of a “wallet” has actually changed. “Research on consumption across different transaction-mediums demonstrates that people spend more for the same items when paying with credit cards than when paying with cash.” (Carey, et al: 2) Mobile payments represent a further extension of this phenomenon, because the m-payment mechanism is attempting to be even more efficient. By enabling a service that allows seamless access to all available accounts, but by calling the new service a ‘wallet’, consumers are more inclined to spend.

 

Conclusion

 

The business case certainly exists for the adoption of mobile payments. Whereas the industry is currently complex and fragmented, technological standards through negotiation are required for mobile payments to become a large and sustainable industry. Near Field Communication technology – should mobile payments become pervasive – holds unprecedented transactional possibilities. However, regulatory authorities and consumers themselves should be aware of the effect of new payment technology on consumer spending habits. Security and privacy issues –consumer ‘trust’ – still remain a large hurdle for the industry to overcome. Users should also be aware of the increasing reliance of institutions to use systemic ways of tracking a user’s purchase decisions. (Ito, Okabe, and Anderson: 11) Mobile technology has the potential to alienate consumers that are aware of the tracking of their payments via electronic technology. Only when the benefits of convenience outweigh these issues will m-payment technology become a pervasive medium for exchange.

 

Sources:

 

Carey, et al. 2007. Unfixed Resources: Perceived Costs, Consumption, and the Accessible Account Effect. Journal of Consumer Research. Vol. 34

 

Dahlberg, T. Mallat, N,  & Oornie, A. 2003. Trust Enhanced Technology Acceptance Model – consumer acceptance of mobile payment solutions: tentative evidence. Stockholm Mobility Roundtable.

 

Carr, M. 2007. Mobile Payment Systems and Services: An Introduction. Institute for Development and Research in Banking Technology.

 

Davis et al. 1989. User Acceptance of Computer Technology: A comparison of two theoretical models. Management Science. Vol. 35 (8).

 

International Finance Corporation. 2009. M-money channel distribution case:  Safaricom M-Pesa.

 

Ito, Okabe, and Anderson. 2007. Portable objects in Three Global Cities: The Personalization of Urban Places.

 

Patel, K. 2009. How mobile technology is changing banking’s future. Advertising Age. Vol. 80(31) p10.


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