'2010 Will Be Tipping Point For Cashless Payment Technologies'

Which will be the new technologies that will change the face of emerging markets in 2010? In the second part of this conversation with Manish Bahl, Custom Research Manager, Springboard Research, Biztech2.com tries to get some answers.

What will be the role of mobile devices and applications in overcoming the digital divide in emerging markets?

The number of smartphones, netbooks and other innovative mobile devices shipping will continue to soar in 2010, particularly in high growth markets like China and India. The combination of increased supply of mobile devices and pent-up demand for lower cost (but highly capable) alternatives to PCs and laptops will drive uptake across the region, particularly as the availability of mobile applications grows dramatically throughout the year.

Following are the factors that will help mobile devices to bridge the digital divide in emerging markets in a significant way in 2010:

• The proliferation of an array of increasingly versatile and powerful mobile devices – often subsidised by service contracts acting as financing – in the hands of the less affluent.

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• A rapid expansion in the number and quality of mobile Web-based applications that do not require the power or size of the desktop form factor.

• Massive investments in wireless (and wired) broadband infrastructure across the region making high-speed Internet access more accessible and affordable.

• Emerging market governments directing billions of dollars of investment toward increasing IT adoption in rural areas.

• Improved connectivity between an array of digital devices, which will help mobile devices act as a hub between a multitude of digitally-enabled products.

• A generational shift whereby the large numbers of young citizens in emerging countries have grown up with mobile devices and require no training on how to use them, which will address the skills issue, which has been an impediment in past years.

We believe that where PCs have failed to reach mainstream adoption in emerging markets over the past 15 years, mobile devices will succeed. We also believe that the opening-up of these portions of the market will serve as a boost for growth of the PC industry as new segments of the market develop.

What is the importance of innovative new payment technologies especially in a country like India? Why do you think they will pick up in 2010?

We predict 2010 will be a tipping point for innovative new cashless payment technologies gaining acceptance around the region, including India. A particularly hot area, in our view, will be in the mobile payment market, with developments such as Nokia’s recent $70 million investment in Obopay signaling the opportunity leading mobile communications firms see in this arena. The Square mobile payment service, recently unveiled by Twitter creator Jack Dorsey, is another example, with its goal to make credit card payments via smartphones commonplace.

I believe debit cart payment service from mobile will gain momentum in the years to come. On an average, the debit to credit card ratio in India is 4:1, which highlights the potential in the debit card segment for mobile payments. There is a mass market to transact through a bank account and through any channel today. Nevertheless, around 80-90 percent of transactions in India are still done in cash and cheque so there is a need for IT vendors to work together with banks in India, to ensure that expectations from mobile payment systems are realistic and they take advantage of what such a system can offer as a broad tool to reduce banks’ operational expenditure.

A recent Springboard report said, ‘Online developer platforms and communities are the new ecosystem battleground & epicentre of application innovation’. Please explain.

We expect platform convergence to accelerate in 2010 and the neat market segments between technologies and competitors that have existed for over a decade to blur further. We believe the next major domino to fall in this series of events is a tighter marriage between IBM and Juniper, if not an outright acquisition. Platform convergence will have far-reaching effects on industry competition, skills, and enterprise platform roadmaps.

The traditional distinctions between hardware, software and services will be redefined in the years to come. Moreover, the function of each particular computing device will become less distinct and well-defined. As this process unfolds, new markets will emerge and the competitive framework of the IT industry is likely to be shaken.

IT vendors have long battled for software developer mindshare in universities, enterprises and within the ranks of their ISV, SI and VAR go-to-market partners. The traditional model depended on evangelising the merits of a particular platform, technology or language and ensuring an adequate army of developers had the skills to develop the solutions required to meet customer needs.

Although as important as ever to the success of vendors, the ability of leading technology firms to influence developers through traditional means is rapidly disappearing. Traditional models are quickly giving way to online developer platforms leveraging the network effect and simplifying application development, hosting and provisioning. These progressive developer communities are increasingly viral, self-governing, self-sufficient, entrepreneurial and often anti-establishment. The success of Apple’s iPhone Apps or the emergence of new platforms such as Salesforce.com’s AppExchange illustrates the power of this new paradigm.

This ‘creative destruction’ of the software industry allow small developers the ability to reach potentially massive markets of customers immediately and provide software at much lower costs. Similar to the ’network effect’ that helps power Facebook and LinkedIn, the power is in the network of people or ‘community’ and being able to reach it easily and inexpensively.

We expect to see this new ecosystem of application developers (and entrepreneurs) become a far more vibrant and dynamic source of application innovation. The solution providers able to foster and support these developer communities – rather than direct or govern them – will gain a critical competitive advantage over those tied to monolithic historical models.