Maybe one of the most heterogeneous area in Banking and IT is the Mobile Payments area. It is clear that this is a fast growing market, with new players claiming to be leaders or visionaries.
Different methods-different ways-same objectives:
- Mobile access to traditional payments:
- Very mature
- Merchants are allowed to use their smart devices as regular POS. (iSettle, Square, Rede).
- An alternative approach is including an NFC SIM to act as a regular NFC credit card, to be used in regular NFC POS (many pilot tests around the world)
- Ad hoc payments systems:
- Common on parking and public transportation systems. Usually the applications are intended exclusively for this purpose and tickets must be previously acquired and uploaded into the application by traditional methods (i.e. credit card).
- Peer to peer payment systems: allow to transfer money between individuals, based on their phone number. Most traditional approach in underdeveloped countries, mainly in Africa where most non cash payments are performed this way. In Europe, different Banks are also providing similar services either alone or under Banks associations, most recently Paym in UK.
- General purpose payment systems: direct competitors to traditional cards and banks business, as Paypal or Google Wallet. Banks are more recently promoting similar systems, as Zapp in UK.
- eCommerce and Loyalty systems allowing customers to use proprietary payments systems, including special promotions and discounts as well as points redemption.
Trying to foresee the future of these services is complex, as both technology and business models are evolving too fast to define a traditional 3 to 5 years forecast. Regardless of identifying the winner in this race, payment evolution will be affected by the following factors:
- Standards: although a mobile phone makes it easier to have different “cards” than a physical wallet, both individuals and merchants prefer to manage a limited number of contracts and applications. Small markets in terms of customers or merchants are not interesting for none of them. Size matters.
- Globalization: most initiatives at the moment are trying to be dominant in local markets. Bank’s proprietary systems, telecom and/or banks associations normally “play” at local market level. There is enough room for these players at the brick and mortar stores and local C2C, but business is becoming global.
- Flexibility: world is moving to mobile and to cloud paradigms. A solid payment system should not be restricted to NFC, BLE devices, but allow such devices to provide an enhanced user experience. Accessing the information from different devices and integrating wearable technology are also a must for mobile payment solutions success.
- Simplicity: mobile apps are and must be ergonomic and convenient. Transaction information must be captured by an easy way (NFC, BLE, QR) and validation process must be as simple and fast as security allows.
- Security: mobile payments are an emerging opportunity for fraud. Many users manipulate their devices (jailbreak, rooting) and according to Gartner, 75 percent of mobile security breaches will be the result of mobile application misconfiguration and misuse. Security must rely on solid systems, protected from possible device malware.
- Cost: customers are not used to pay fees when paying. Merchants are supporting all the cost, and this is a key factor for adoption.
One of the 10 top trends identified by Gartner for current year is related to Mobile apps and applications: “to snap together apps to create larger applications”. In term of mobile payments, providing an easy way to integrate payment “building blocks” in merchants POS and in customers applications would be a major improvement for merchants and customers experience, both for B2C and C2C.
Two main global players are approaching POS integration under much different ways: as Google Wallet partners with traditional cards brands for traditional payments, Paypal relies on its customer application and POS. POS allows payments both through Paypal or card. Paypal is also partnering with third party developers to provide applications integrating payments and creating some advanced features as PayPal Beacon.
As mobile devices become more widely used, its interest for both traditional and new players on payments is growing strongly. In the near future a battle between traditional players (banks and card brands) and new players (telecom and native digital payments systems) is open.
2014 will be an important year to follow the UK market, as two different local products (Paym and Zapp) will involve most banks in the country. How these two different products are accepted and compete with Paypal and related solutions in the different areas (P2P, ecommerce and traditional stores) will help to forecast if there is room for all stakeholders or some of them are going to win the battle.
NFC and globalization of traditional players’ mobile applications remain as pending issues to be addressed in years to come.
Openness of payments systems, including APIs, SDKs and apps building blocks, is allowing new mobile applications. The border between advanced POS including features for specific business and advanced applications including payment facilities is fuzzier than ever. Many general purpose customer applications are including facilities to pay both at stores or friends and family.