Exclusive m-payments research conducted on behalf of VRL and sponsored by MasterCard indicates there is a long way to go before consumers are comfortable making transactions on mobile phones. EPI asked the opinions of industry experts on the findings. Will Cain looks at the results.
The payments industry is largely up-beat about the prospects for the development of m-payments, despite research showing consumers in Europe may not be ready for the technology yet.
EPI research, sponsored by MasterCard, showed only 27.2% of consumers in Spain, Italy, the UK and Germany were interested in their phone becoming a payments device (see opposite and Shining a light on m-payments).
Industry experts say it will take time for consumers to warm to the technology, particularly in developed markets where banking customers are already offered a variety of banking channels.
M-payments is one of the most dynamic and keenly-followed areas of development in the industry. Many banks in the US and UK are expected to introduce contactless and m-payments products this year and next.
As Luke Olbrich, head of debit at MasterCard Worldwide says, a more gradual approach, moving from standard cards to smart cards and contactless cards and then to mobile, looks the best way forward in more developed markets.
The EPI research indicates that blistering adoption rates seen from m-payments provider MPesa in Kenya is unlikely to be replicated across Europe, the US and the parts of Asia with more developed banking and payments infrastructures.
The success of m-payments in Africa has been based on the ability of m-payments to match an unmet demand for banking services of the country’s unbanked population. Mobile phones have enabled payment providers in the country to leapfrog investment in expensive, physical payments infrastructures and banking networks by leveraging the ubiquity of a device already in most people’s hands.
Current m-payments propositions in Europe, the US and Asia are too faddy and based on the idea that they are newer, faster and ‘cool’.
To gain widespread adoption, consumers need to see clearly why the function will make payments easier and more convenient.
Advanced, mobile-based rewards programmes represent one way to do this – a tactic pursued by the more successful players in Japan. Payments providers need to build these elements into their m-payments strategies if the products are ever to be more than just a ‘nice to have’.
David Sear, managing director, Travelex
Traditionally, the payments industry has dragged its feet when it comes to innovation and adapting to developments in technology, lifestyles and customer expectations.
This is reflected by the fact that only 27.2% of consumers in Spain, Italy, the UK and Germany surveyed are interested at present in their phone becoming a payments device.
I am absolutely confident this will change, but the rate of adoption will vary between markets and will largely follow the growth of m-commerce.
In Western markets, banks and payments institutions will need to adopt a flexible approach to mobile payments, focusing on consumer behaviours and uses of technology in their everyday lives.
In emerging markets the challenges and opportunities are somewhat different and the market is defined by the fact that the populations within these economies remain unbanked creating a huge demand for mobile technology as a payment mechanism.
Banks and payments institutions need to work together to tap into the huge potential and create a robust global payments infrastructure that supports mobile payments.
KPMG has forecast that the global mobile money transfer market will be worth $21bn by 2011.
While there seems to be a lag in western markets generally, all the indications are that we are on the cusp of a major opportunity in the market place, an opportunity which will no doubt be grasped by some of the more entrepreneurial banks and innovative players in this area.
The era of watching and waiting is coming to an end and we will see some definite moves by some players I am sure.
Phil Sorrell, product director, ARC Mobile, Temenos
We are seeing a growing trend in banks looking to either adopt or upgrade existing mobile channels. Banking and mobile technology has developed so far over recent years that mobile now represents a significant opportunity for banks to offer customers access to far more than the limited banking services that have generally been available to date.
Recent EPI research suggests the majority of consumers are not interested or don’t understand m-payments. Is this really surprising? Making a payment is not an emotive decision, and does the consumer recognise a need to use such a service?
Banks are right to invest in mobile channels. The success of mobile banking and m-payments will rest on the banks creating a greater need for consumers.
Banks have an opportunity to extend their value proposition and give consumers a new need in transacting using m-payments.
Mary Carol Harris, head of mobile, Visa Europe
According to ITU World Telecommunication/ICT Indicators Database, there were an estimated 4.6bn mobile phone subscriptions in existence at the end of 2009. Given the ubiquity of mobile handsets, their potential as a payments device is huge.
Most people who have a mobile phone take it with them wherever they go. Visa’s research indicates 33% of people would be less concerned about losing their wallet than losing their mobile, which shows just how strong the attachment is. This makes mobiles a natural and convenient device for payment.
Like any new technology, it will take some time before consumers understand the benefits of paying by mobile and often people need to see it in action before they are fully receptive.
However, the response has been overwhelmingly positive among those who have experienced mobile payments for themselves.
Luke Olbrich, head of debit, MasterCard
Dragging someone who makes 80% of their transactions in cash and moving them straight onto the mobile is something a lot of consumers simply aren’t ready for.
Having said that, there is certainly an opportunity for payment providers to benefit from a leapfrog in terms of this technology. It can be a cheaper way for banks to administer services and payments. We are seeing that in some central and eastern European countries. It is about building the habit, and once that is built I think the technology will develop nicely. When we did research on our display card, a recently launched debit card featuring a digital display, we asked whether people wanted to be able to access their balance via SMS. It is considered by most consumers as just too much.
They want their lives to be simplified, but sometimes you may be asking consumers to change their behaviour too far. There is certainly an audience for mobile payments today, but our research shows the majority of consumers are not quite ready for it. That is why we are pursuing both card-based ‘display card’ type solutions as well as mobile solutions.
There is a difference between making a card payment and actually having your phone behave like a primary payment card – and there are some distinctions there which are important.”
Robert Kirby, CEO, Spendvision
It surprises me that some people still think we will never buy, sell and do commerce using mobile devices. Remember, online banking, text messaging and even email were once considered idealistic concepts – look how far we’ve come today!
However, this disinclination is most likely down to a simple lack of understanding, and our basic fear of change. Without clear communication of the benefits of mobile payments, it is unsurprising that most consumers will opt for the familiar cash or card alternative.
From what I see, the biggest challenge for the industry will be to eliminate the perceived complexity and make the transition as easy as possible. Similarly, the problem facing the business world is that the rise of disparate mobile payments can make it harder to control costs.
However, successful companies of the future will embrace this change and thrive on the use of one software platform to manage payments – stripping away the layers of obsolete processes that hold back the efficiency of commerce.”
David Birch, director, Consult Hyperion
I am always suspicious about these kinds of surveys, since they are asking customers to project forward on the basis of the technology they already have. Research shows global mobile payments will grow from $68bn to $600bn by 2014.
So, there are certainly plenty of other people that think mobile payments are looking pretty good right now. If I were asked to point to one key reason why mobile payments will grow to the levels noted here in the face of (apparent) customer indifference noted above and in the EPI research, it is simply that the key development in payments technology is the ability of mobiles to receive payments, be it peer-to-peer or from banks, or refunds from retailers.
We need to understand that mobile phones aren’t going to just replace banks cards and cheques, they are going to replace cash. That makes all the difference.
Sanat Rao, vice-president and head of worldwide business development and alliances, Finacle, an Infosys company
The concept of mobile payments is not new. The recent EPI survey highlighted that consumers are reluctant to use mobile payments and reasons for this vary.
Unwillingness to commit to mobile payments is based on uncertainty around security. Mobile phones are not seen as robust enough to safeguard payments data for example; their susceptibility to theft is a real concern for consumer and corporate users alike. As such, although the idea of mobile payments is appealing, until users see a robust and secure example of mobile payment technology in action, this hesitancy will remain.
Having said this, there have been a number of new developments in mobile technology and as such, there has been a significant uptake in mobile banking as both consumers and corporate entities are using mobile devices to access their accounts and action payments on the go. This is viewed in a similar vein to internet banking, and more popular because security is still largely controlled by the banks.
However, to enhance security and encourage more consumer and corporate users into the fold, banks need to use more robust security measures, like multi-factor authentication techniques, before granting access to accounts; as well as more intuitive user interfaces which make the whole process easier.