KPMG’s 2011 Mobile
Payments Global Survey garnered responses from almost 1,000
executives in the financial services, technology,
telecommunications and retail industries in order to identify the
mobile payments adoption barriers and opportunities. Louise
Naughton reports
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Companies across a diverse range of
industries and regions are carefully watching the mobile payments
opportunity. While many are already heavily invested in mobile
payments strategies, there is still a nagging uncertainty as to
when it will hit the mainstream, and precisely what form it will
take.
KPMG’s 2011 Mobile Payments
Global Survey has gathered research from almost 1,000
executives in the financial services, technology,
telecommunications and retail industries in order to identify the
adoption barriers and opportunities that lie in mobile
payments.
The majority of companies surveyed
by KPMG have a mobile payments strategy in place – 58% – and
outnumber those who do not by two to one. What’s more, half of
these already have a mobile payments offering in the market
today.
The report has found telecom
providers to be the most likely to have a strategy in place,
followed closely by financial services companies.
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By GlobalDataKPMG believes retailers are being
too slow off the mark and urges them to move more aggressively to
incorporate mobile payments into their customers’ complete commerce
experience in order to catch up and capitalise on the rich
opportunity they are being presented with.
Richard Mader, executive director
of the association for retail technology standards (ARTS) for the
National Retail Federation (NRF), agrees with KPMG and claims the
involvement of retailers in the evolvement of mobile payments is
critical to the technology’s success.
“Retailers need to get involved in
this emerging process to guide the development,” Mader says.
“I believe alternative mobile
payments provide retailers with the opportunity to introduce new
conveniences for their customers while creating competition with
traditional debit and credit providers that can lower
service/interchange charges.”
Further to that, new payment
processors like BilltoMobile, FaceCash, Isis and PayPal need
guidance from retailers to create the best practices and processes
for both retailers and consumers.
“If retailers do not lead the
development of mobile payments, the initial implementations of the
technology will have a rocky road to success and consumer
adoption,” Mader says.
Retailer support
required
It is not simply about a retailer’s
willingness to break into the mobile space that delays the tipping
point of the technology.
Mader says it became evident three
years ago that some mobile payment providers were not aware of the
high security requirement and complexity of integrating payment
processing to retailer POS applications.
To order to ease this integration,
ARTS has been working on projects to define the data interfaces
between payment processes and the devices around it, allowing them
to communicate in a standard method.
It is argued an ARTS XML standard –
the first truly global standard covering integration of payment
systems into the retail IT landscape – will provide significant
benefits to retailers.
The ARTS XML Payments Charter,
issued in October 2009 says: “By isolating payments business logic
and technologies into separate and more focused subsystems,
retailers can minimise the ‘system envelope’ that requires
extremely high levels of security and therefore minimise the impact
of supporting regulations like PCI-DSS.”
“At the same time, retailers gain
flexibility to adapt to the constantly evolving payments
technologies and regulations, while adapting POS business logic
independently.”
While 9% of those companies
surveyed told KPMG they see no impact from mobile payments in the
foreseeable future, more than 70% believe mobile payments to be
very important today or will be important in the future.
Companies are in agreement the
technology is in its infancy and three-quarters claim solutions
will hit the mainstream within two to four years. Less than 10% of
respondents say mobile payments are currently mainstream – a belief
held regardless of country or region.
Banking industry
predictions
Financial services companies have
come out as being more conservative in their time estimates of the
mobile payments explosion when compared to telecom, retail and
technology companies.
Laura Chambers, senior director of
PayPal Mobile, told KPMG m-payments are mainstream today.
“We have seen tremendous growth
over the past few years,” Chambers said.
“”Three years ago we did about $25m
of payment volume via mobile. Two years ago that was $141m and last
year it was $750m. This year we expect to do over $3bn.
“That growth is coming from broader
adoption in the consumer base and it’s moving very quickly into a
mainstream consumer audience doing mobile payments.
“Increasing smartphone penetration
is one driver but people trying the service out and becoming
familiar and comfortable with the process is key.”
Convenience and ease of use are
touted as the most compelling attributes of a successful mobile
payments strategy, and unsurprisingly they came top once again in
KPMG’s survey with an 81% and 73% respective share of the
responses.
Consumer
concerns
Consumer concerns surrounding
mobile payments are very evident from KPMG’s report. Security and
privacy are consistently said to be of utmost concern for consumers
and the payments industry when developing and launching new payment
technologies.
There was no doubt among KPMG
respondents as to what the ultimate barrier for widespread adoption
of mobile payments with 71% agreeing with their peers. Only 26% of
respondents cited the complexity of the m-payments game to be a
concern. KPMG claims this low percentage indicates overconfidence
in the benefits mobile payments will bring.
It is KPMG’s view that mobile
wallets provide the most exciting and promising payment
opportunities within the mobile payments arena.
“M-wallets provide the momentum to
move beyond payments to participate in the entire chain of mobile
commerce – from brand awareness to consideration, followed by after
sales, loyalty and care,” said the report.
However, the majority of survey
respondents (61%) claimed it was still too early to predict the
success of mobile wallets and instead chose to throw their weight
behind mobile banking and specialist online systems as the forms in
which mobile payments would thrive and gain traction in their
respective markets.
As payment is the most ubiquitous
and powerful way to reinforce a financial institution’s brand,
Richard Crone, founder of consultancy firm Crone Consulting,
believes the mobile wallet will magnify both the risks and
opportunities in mobile payments thanks to the technology allowing
the payment branding point to become an interactive process. As
such, Crone claims mobile wallets will play a pivotal role in
financial services.
However, he warns that, as mobile
wallets can open up more than a singular funded account for
payment, financial institutions need to aggressively work to define
both their ‘protect’ and ‘extend’ strategies for mobile wallets and
mobile payments in particular.
Contactless
concerns
Contactless stood out as the least
favourable mobile payments form factor among retailers.
In comparison to the full set of
respondents, retailers were just as likely to deem contactless
systems as mainstream today but were more than 10% less likely to
say contactless card solutions will gain traction in their
respective markets.
KPMG puts this down to the cost
involved with upgrading point-of-sale terminals to include the
technology. This view may be a simplification of what is a very
thorny and complex issue for retailers. As contactless and NFC
technologies are in their infancy and haven’t caught on with the
mass market as yet, consumer demand is unknown and there is a lot
of confusion surrounding the fees for such transactions.
Card schemes and banks have to
educate and communicate further with retailers if they are to
change their contactless perceptions.
While PayPal’s Chambers believes
there are some “great, seamless payment experiences” that NFC can
drive, she claims it is fundamentally “just a
technology”.
She argues ‘tapping’ a card or
mobile against a contactless reader is seen as being “less easy”
than swiping a payment card as it requires consumers learning a new
payment behaviour.
“NFC is interesting, but in
payments the winning solution will need to address the end-to-end
consumer experience and the value across that experience in order
to incentivise consumers to change their behaviour,” says
Chambers.
According to the KPMG report,
alternative mobile payments solutions such as PayPal represent a
highly disruptive threat to the incumbent financial services
players.
“If consumers embrace PayPal
transactions at the point-of-sale via a mobile wallet, funded
directly through a bank account and transferred via ACH, the result
would be disastrous not only for credit card networks like
MasterCard, but also issuers and merchant acquiring banks,” said
the report.
“Not only in lost revenue from
existing transactions, but also the revenue these companies hope to
gain in displacing cash.”
Creating a
niche
Crone says the big issue for
financial institutions is that new intermediaries are trying to
“wedge themselves” between them and their customers.
As such, he believes, “mobile
wallets controlled by non-bank, third party intermediaries threaten
to supersede the service relationship with the payment
relationship”.
Financial institutions have a
choice when evaluating their strategic options for mobile wallets:
to aggregate or be aggregated. Crone fears some banks may be too
slow to mobilise and in doing so be at the risk of being aggregated
by third party intermediaries.
“There is a strategic tipping point
affecting banks’ mobile platform decision centred on addressing the
‘control’, ‘time-to-market’, and ‘future-proof’ trifecta of their
cross-channel self-service plans,” says Crone.
“This is not to say that
third-party intermediaries won’t also play a role, but the savvy
banks we have worked with have come to understand that they will
need to control their own mobile payment offering if they are to
preserve and grow their hard-won customer relationships.”
The complexity of the mobile
payments space means alliances and co-operation between financial
service companies, operators, technology companies and retailers is
a key path to succeed in such a dynamic market.
KPMG’s report notes that
partnerships such as the one Google has struck with Sprint, Citi,
MasterCard and First Data are emblematic of what it will take to
succeed and establish dominance.
