The process of transitioning between mobile app ecosystems can be excruciating. In many cases, these ecosystems were explicitly designed to limit interoperability and portability. Messaging services are one of the greatest challenges along with payments, cloud storage, apps and wearables which also limit user portability between platforms.
There are many different mobile ecosystems available today, with varying approaches to user data. Ultimately, Moor Insights & Strategy believes that openness and interoperability enable competition and consumer choice, which drives the industry forward towards better products and consumer experiences.
In this brief, the first in a two-part series, we’ll examine the different approaches—how they limit consumer choice and the ability to move freely between ecosystems, and how this affects others. We’ll also explore possible solutions to what we perceive to be the most significant industry pain points.
Right now, there are three tiers of messaging services on mobile devices. The first level, the base layer, is short message service, which everyone knows as SMS. This is compatible across all smartphones and ecosystems. However, it’s also the least feature-rich, making it the most likely to lose the context of a messaging interaction. SMS messages are mostly limited to a certain number of text characters (160). SMS is also the least secure messaging service. Many types of hacking attacks occur via SMS. Multimedia messaging service (MMS) is an extension of SMS, for non-text communications such as images, videos, or group chats. Multimedia messages (MMS) are also limited in quality and the user’s ability to interact with messages.
One level above this is rich communication services (RCS). This global standard for messaging has recently become prevalent across most Android devices, though it’s yet to be adopted by Apple in its iMessage app. RCS enables read receipts, nearly instantaneous messaging (usually SMS has a slight delay), the ability to react and see reactions to messages and the sharing of higher quality images, videos and link sharing. Currently, the most prominent app that supports RCS is Google’s Messenger app. Others, like China’s three biggest carriers, have adopted RCS, calling it 5G Messaging and adding additional security features.
The third tier is messaging apps that integrate the capabilities of SMS and RCS, often supporting both on Android. These include apps like Signal, WhatsApp and Facebook Messenger. Typically, these apps are cross-platform and designed to allow users to communicate with each other irrespective of hardware or mobile ecosystem. Some chat apps geared towards productivity, such as Slack, Discord or Microsoft Teams, focus, first and foremost, on their PC-based experience, while still investing enough to enable a frictionless mobile experience. However, a relatively small group of apps, like Apple’s iMessage and the now defunct BlackBerry Messenger (BBM), were designed to keep users within a closed ecosystem. BBM was still a powerful lock-in during the early iPhone days, for those who can remember.
iMessage is Apple’s in-house app for all forms of messaging between Apple devices. Apple invested considerably to make iMessage one of the best messaging experiences for iPhone users. Additionally, Apple prioritizes iMessage within its ecosystem, building in incentives to use it over other messaging apps. This often results in iPhone users preferring to communicate with other iPhone users over Android users. It has also spurred headlines such as ‘Why Apple’s iMessage is Winning: Teens Dread the Green Text Bubble’. Android phones cannot support Apple’s iMessage, which creates friction in countries with a larger iPhone install base (such as the US). There can also be social implications for those making the switch from Android to iOS.
Group chats are a common way for families and friends to communicate. However, the addition of an Android user to a chat with iPhone users can break the messaging experience. This blue bubble/green bubble issue has been documented repeatedly over the years. A common issue occurs when an iOS user switches to Android using the same phone number. If the phone number is still associated with iMessage in another user’s iPhone, it might not receive messages from group chats. Many people would unknowingly miss out on important messages from friends. Affected users often have to visit Apple’s support page to deregister their phone number from Apple’s iMessage service—yet another barrier to switching for many users.
Apple claims that iMessage is necessary to maintain the company’s high security level. A simple solution could be moving users to RCS, instead of SMS, once they leave the iOS ecosystem. An open standard RCS would be much more secure than SMS. Google and many carriers have already improved RCS to fix one of their most significant pain points. Historically, Android users received a text message every time an iPhone user reacted to a message (thumbs up, heart, etc.) instead of receiving the reaction. Apple recently implemented a fix that enables Google Messages to semi-successfully translate these interactions.
We believe that the industry should adopt RCS as the first tier of messaging services to eliminate SMS and the many problems that come with it—especially now that data connectivity is so ubiquitous. SMS continues to be a vector for scams and viruses. If policy makers were to mandate RCS adoption, it would give users more freedom of choice as well as the added security benefits. The European Commission and/or Parliament may be the best place for that kind of regulation to start (see the proposed Digital Markets Act). Alternatively, the FCC or FTC could mandate it to increase security and competition among messaging apps. The last path would be for operators to mandate RCS support on the iPhone, which may come in places like China before North America where the rift is at its greatest.
There are three major mobile payment systems: Apple Pay, Google Pay and Samsung Pay. These are complemented by mobile-to-mobile payment systems, like Venmo and Cash App in the US and Alipay and WeChat Pay in Asia. All these systems, except for two, are available across all platforms. Apple Pay is only available on Apple devices and is integrated deeply into iOS as the default payment method for NFC and online purchases. Similarly, Samsung Pay is only compatible with Samsung devices. However, none of the payment platforms mentioned here allow users to pay each other from one system to another. They are not based on any sort of common payment technology that would allow for trans-payment system transactions.
One of Apple’s newest products is the Apple Card, which Apple created with Goldman Sachs to offer advanced credit card features to its customers. Currently, the digital version of the Apple Card is only available on Apple Wallet. The Apple Card earns 1% back on all purchases made with the physical card as opposed to 2% earned with the digital Apple Card inside of the Apple Wallet. Google Pay is available on both Android and iOS devices, allowing virtually any other card to be loaded into it. However, it appears that Google’s new strategy is to split Google Pay from Google Wallet to open up Google Wallet to more third parties and make it more friendly for transit cards, proofs of vaccination, tickets to events, forms of government ID and even car keys. However, Google Wallet will become an Android only experience while Google Pay remains platform agnostic.
Another challenge for the Apple Card: managing the card requires an Apple ID and an Apple phone to manage and make payments in the first year of use. As of 2020, Apple does have a website to allow for non-iPhone management of the Apple card, but this is mainly to make payments on credit card bills and manage customer service. There is still no way to use this card on any other device as a form of payment, which significantly reduces its utility if a user were ever to leave iOS or the Apple Ecosystem. Additionally, Apple provides special financing and bonus cashback on Apple product purchases made with the Apple Card, further incentivizing users to immerse themselves in Apple’s ecosystem of hardware and services.
Apple and Google aren’t the only smartphone companies with a wallet for their own devices. Samsung Pay’s most significant differentiator in the past was that it enabled virtual credit card swiping without the use of a physical card or an NFC terminal. This feature eventually become relatively niche as NFC became more prevalent. Now, Samsung Pay is now mostly redundant since it lacks any significant features beyond what Google Pay offers.
Samsung does not have a credit card service like Apple, but it does offer third-party services through SoFi to encourage more digital banking. There have been attempts to make payment services more inherently cross-platform with digital wallets like Softcard, which was created by the three big US carriers to unify payments between them. Softcard was eventually discontinued and Google absorbed its IP for use inside Google Pay.
Other mobile payment services, like Zelle, were initially created as a solution by the major US big banks to compete with apps like Venmo from Paypal and the Cash App from Square for peer-to-peer payments. However, Zelle has mostly taken a backseat to the apps it intended to replace. Venmo and the Cash App remain the most popular way for users to pay one another, though they remain infrequent for retail and online transactions. That’s where services like PayPal dominate, which also happens to be the parent company of Venmo.
There is a mixture of different approaches to mobile payments in the mobile space with very little to no interoperability between payment systems. This lack of interoperability has driven the existence of apps like Venmo and Cash App to make it easier for users from different mobile ecosystems to pay one another, but ultimately, they become their own walled gardens as there is no way to pay users from these apps without them having accounts on these apps. Zelle is the only app that directly sends money from one bank account to another, but it also doesn’t have as much traction for smaller mobile payments between friends and family. There should be broader standards and more open ecosystems to enable cross-platform and cross-ecosystem payments with added security to ensure that fraud and scams are reduced as well. The current system works, but it only works if you subscribe to using a specific application and so do all your friends and family.
When it comes to messaging and payment apps, it is clear there is still a lot of room for industry improvement on interoperability and portability. Messaging and payment apps affect consumer behaviors and those behaviors become self-perpetuating outcomes. Increased openness and cross-platform compatibility could give consumers added security and allow them to choose devices based on capabilities or design, instead of whether it runs the ‘right’ messaging app or payments. It would also do much to promote competition. All of this considered, I believe we could soon see governments begin to mandate openness across platforms for all kinds of services, including messaging and payments.
Stay tuned for Part 2, in which we’ll delve into other areas where the mobile experience could benefit from increased consumer portability and choice.
Disclosure: My firm, Moor Insights & Strategy, like all research and analyst firms, provides or has provided research, analysis, advising, and/or consulting to many high-tech companies in the industry. I do not hold any equity positions with any companies cited in this column.