The global economy is changing. For many consumers, the credit card crunch is crumbling their ability to buy things online.
In many countries outside the U.S., consumers do not have credit cards but rely instead on smart cards to swipe transactions directly through their banks.
Often, children too young for their own credit cards or bank accounts must rely on parents to complete their online transactions.
An estimated 75 percent of all online users around the globe lack credit cards — but 4 billion online users have a mobile phone.
For Paymo CEO Paul McGuire, that statistic sparked a light-bulb moment that illuminated a business plan he is hoping will revolutionize e-commerce payments.
McGuire and cofounder Margaret McKenzie invested their resources and experience in the payment and financial industries to launch Paymo, a global mobile payments network. McGuire handles the mobile and payments side of the business, while McKenzie deals with finance and banking matters.
Subscribers worldwide can pay their bills and buy from a growing list of merchants by sending a text message through their mobile phones. They can also click the Paymo icon on a Web site to add the purchased item to their phone bill.
This payment solution makes all mobile phone users potential customers — and that could be a strong incentive to merchants and service providers to join Paymo’s partner and reseller programs. In fact, Paymo, which launched two years ago, has been attracting some serious attention.
“The company is picking and choosing the right opportunity,” Ed Kountz, senior analyst for e-business and channel strategy at Forrester Research, told theE-Commerce Times.
However, “the challenge for Paymo is easier said than done. The mobile payment marketplace is a broad and complex ecosystem,” he added.
Still, “as structural changes occur, Paymo is well positioned,” said Kountz.
McGuire, a self-described “serial entrepreneur,” gained a solid grasp of the benefits and shortcomings of the online payment industry through several previous companies he started. He founded mBlox in2002 and served as president of corporate development until his departure in 2007.mBlox is a global mobile transaction network.
mBlox is a big aggregation businesses that connects handsets to carriers. Despite the company’s presence in several countries, McGuire saw a potential that could not be reached with mBlox and several other competitors.
These companies enabled their customers to pay bills by mobile phones, but each was a separate system that worked only in a variety of countries and had a reach to only 10 or 12 companies, he told the E-Commerce Times.
“My last year at mBlox, I was responsible for trying to buy or invest in existing networks around the world. I led the corporate development effort. I toured the world for two years, looking for mobile aggregates. … When I left mBlox, I took my Rolodex with me,” McGuire said.
It took him the next two years to build a network based on those relationships and to partner with 20 or 30 different companies around the world.
“No one service provided global access. That is what Paymo enables,” he noted.
The global network that Paymo assembled touches 50 markets with 1 million customers. The company expects to reach 2 billion consumers later this year, said McGuire.
The difference that Paymo brings to the mix over what mBlox and other competitors offer is localized services in each country that are language-specific. This has given Paymo a far more global reach than others, he explained.
“No one’s been able to reach literally billions of consumers. All these providers produced local coverage for a few markets. We are the world’s first truly global payment system,” McGuire claimed.
The key reason that other systems have not matched this capability is the sales dynamic, according to McGuire. To be successful, Paymo has to sell both sides of the transaction: consumers and merchants.
“We’ve managed to solve that problem. Since we have millions of users, the merchants came along,” he said.
McGuire’s familiarity with the international marketplace from his work starting up mBlox gave him a leg up with Paymo’s launch. He implemented some clever shortcuts with his latest startup.
mBlox had 300 employees. McGuire needed more hands on deck to forge local contacts and to connect directly with all the world’s carriers.
“I used a smarter way. With Paymo, we built upon what I call a ‘club network,’ with a small team at the center, and we leveraged relationships with the aggregates in all these smaller markets,” he explained.
McGuire accomplished that task with 30 workers based in offices in San Francisco, London and Singapore. More support comes from thousands of others connected through partnerships, but only the 30 main employees are paid by Paymo. The rest earn money through revenue produced on the payment network.
The main task McGuire had to complete was building out the payment network. To accomplish that, he had to work with partners and develop the local-language payment systems.
“That was the real challenge,” he said. “It took Visa 30 years to grow itscardholders. We started with the two years at mBlox and the two years since with Paymo.”
McGuire credits the localized system with the speed of the new company’s progress. One of the reasons Paymo has been successful is the company’s ability to work with the local partners to enhance the localization model.
One potential problem that McGuire has to avoid is Paymo’s limitations on expanding. The company’s initial launch targeted mainly services for game players and related users.
“Paymo is universal but limited in an ability to go outside his targetmarket,” said Tole Hart, research director for consumer services technology and service provider research at Gartner.
“People can’t use him to pay for typical consumer merchandise,” Hart told the E-Commerce Times. “He will have to expand, but right now, he has a clear field ahead of him with no competition.”
Despite that potential weakness, Paymo is in a good position with respect to competition, offered Kountz. He sees Paymo fitting in nicely to what he dubbed “the second coming” of mobile commerce payments.
“Things are changing,” he said. “The industry is getting a lot closer to where itneeds to be but is not there yet. The field has numerous players, but what Paymo offers is unique, because it is not just a localized service. Paymo is different and has a significant track record of experience.”
McGuire is content to continue growing Paymo in the short term with online companies, social networks and online games. In the long term, he foresees his company shifting to new technology that already exists in Europe and Asia.
“We think smart card technology is the way we will probably go,” he said. “Mobiledevices will have special chips in the phones for users to swipe cards.”
That meshes with Kountz’s analysis as well. He sees mobile devices that are becoming more sophisticated.
These more advanced mobile devices will usher in a shift in behavior, he predicted.
“Consumer practices are evolving. It will take several more years before real growth happens. The shift will come in the U.S. market as the progress moves forward,” Kountz concluded.
A number of names are trying to compete in the payments field, but so far, no 800-pound gorilla is capturing the market. That gives Paymo good positioning to move forward, according to Kountz.
“There isn’t a single player who has generated critical mass in mobile payments across multiple nations,” he said. “I think that is the challenge there.”
Two trends in the payment field are developing, said Kountz. One is thetop-down marketing-driven vision about how this is going to work. The other is nation-specific payment systems.
“Over the next couple of years, those two trends are going to come together. There is a lot of turnover in the market now,” he concluded.